Start-ups and incubators

The rise of start-ups, entrepreneurs and small businesses has led to more demand in flexible working space, business services and business communities providing support to each other. Incubators are yet another form of support for your early stage start-up, and as with all forms of help, they can be very selective about the types of businesses they will help. The idea is not new in the business world, and incubators have been in existence for a good 50 years or so. Start-ups such as Airbnb and Dropbox used incubator type arrangements and have gone onto great success, so they can be a valuable source in the early stages of your business.

What is an incubator?

Put simply, an incubator is an organisation that helps start-ups by providing services such as management training or office space. The services that each offer will vary so it’s worth doing your research to find out if an incubator would suit your needs. Some incubators put a time-limit on how long a company can stay in the space, but one to two years is fairly typical.

Incubators vary, but most exist to help a start-up determine if a business concept is viable. Types of incubators include start-up incubators (usually free), business incubators (usually a small fee or membership for services), technology incubators (tech firms) and business accelerators (more established start-ups).

You can get private incubators run by companies or government agency or university backed incubators. Incubators can be competitive — often lots of people want to use their services.

What benefits can you get?

Depending on who this is, you can get the following support:

Affordable space: rent, particularly in big cities, can often be incredibly expensive

Resources: access to useful equipment- telephones, internet and photocopiers are often incredibly useful to a business and can be expensive

Access to expertise: the incubator may have connections with large pools of venture capital and finance that could be useful for your business to expand. They may also provide mentoring services

Networking and a community: sharing space with similar minded individuals can be invaluable- you can talk through issues and learn from their successes and mistakes

Credibility: you may find that being “linked” to an incubator gives your business some credibility when talking with investors

So, what’s the cost?

Often, incubators provide their services in exchange for an equity stake in the business. You need to consider whether you are happy to give up some equity, and how much. Sometimes, incubators will charge a fee for their services.

How do I find an incubator?

If you think an incubator might be right for your business, it is worth spending some time doing research to work out which incubator you want to apply to.

- Has the incubator got any past success stories?

- Has it helped business’ similar to yours?

- Do they want a formal business plan? a prototype? a pitch?

They are all different and will be looking for different things — so it’s worth tailoring your business idea to what the incubator is looking for.

If you want to know more about how you decide what’s best for you or to talk through what you need, please get in touch with us — Trowers’ start-up team. We have also produced a series of fact sheets to help start-ups, so click here to access our online resources.

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Trowers & Hamlins LLP has taken all reasonable precautions to ensure that information contained in this document is accurate, but stresses that the content is not intended to be legally comprehensive. Trowers & Hamlins LLP recommends that no action be taken on matters covered in this document without taking full legal advice.

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