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Finding a business incubator --
and getting in
By Jennie
L. Phipps • Bankrate.com
Your business's first challenge may be convincing
the incubator to admit you. Incubators are so popular that getting
in -- even if you have a great idea -- is no slam-dunk.
It took David Wheeler, vice president and chief
technology officer of InfoGlide,
a software company that expects to make $4 million this year, three
years to persuade the officials at the Austin
Technology Incubator to let him in. The Texas incubator didn't
accept him into the fold until he had already gotten venture capital
on his own.
First step: Find your
new home
So how do you find the right incubator? And once you've found it,
how do you persuade them that you're an entrepreneur with potential?
Sally Hayhow, director of publications for the
National
Business Incubator Association, says start by looking at incubators
that operate in his area of interest. Forty percent concentrate
on service businesses, 23 percent on light manufacturing, 22 percent
on technology and 7 percent on basic research. The remaining 8 percent
support diverse businesses and industries. Nearly all the incubators
in the country are members of the NBIA and are listed in the organization's
indexed database.
Hayhow suggests that entrepreneurs look at several
possibilities. While it's not mandatory that you live near the incubator
-- there are some virtual ones and others that will take you on
from afar -- it's more likely that you'll find a successful match
if the incubator thinks you're going to be a long-term resident
of the sponsoring community. After all, one purpose of an incubator
is to increase area employment. If your business isn't likely to
grow in a way that will provide jobs, it will be more difficult
to find an incubator willing to house you.
Some things to consider
- Make initial contact by asking for information.
Find out if the incubator is accepting new tenants in your kind
of business. Examine the organization's criteria and application
procedures.
- Ask what it costs to locate within the incubator.
Make sure that you understand exactly what you'll be paying for
and what services you'll get for your money. Besides rent, some
incubators have a fee for services. Some incubators are profit-making.
Some take equity percentages; some take a percentage of sales.
- If things still look promising, make an appointment
to meet the director and visit the incubator for at least a day.
Spend some time with the people who operate companies there. Ask
them what they get from the incubator and how satisfied they are
with it. Ask the incubator officials to identify their success
stories and call those entrepreneurs for references.
- Take a hard look at the credentials of the
director and the board. Are these people who have had success
in your area of enterprise? How often are they around? Are they
successfully helping tenants obtain money? Don't be shy about
asking questions about sources of financing. How are the rest
of the tenants doing at the difficult job of finding money? If
the incubator can solve that problem, often the rest of the issues
pale. If there's going to be an equity partnership involved, what
will be the terms?
- Consider the facility. Is it well-funded
or likely to collapse under its own weight? Does it have what
you need now and what you think you might need three years from
now? Are organizers flexible about changing your space allocation
and giving you room to grow? What are the outs if your situation
changes or your business goes south?
Finally, consider the intangibles. Is the organization
friendly? Does it have people who can help with the business you're
in? Do you like these people? Does the director seem like the kind
of person from whom you'd like to get advice?
Your next job is persuading the incubator to
let you in. The key is a good business plan. While a few incubators
will help you write this plan, most will expect you to have it in
hand when you apply.
David Skevington, who has started two businesses
in a Troy, N.Y., incubator, suggests writing a traditional business
plan that underscores your venture's potential for future employee
growth. Point out your funding sources. While incubators aren't
like banks, they remain averse to taking on a company that clearly
can't pay the rent.
In short, he says, the plan has to prove that
"you're not going to fall flat on your face."
Jennie L. Phipps is a freelance
writer based in Michigan
To comment on this story, please e-mail the
Bankrate.com
editors
-- Posted: June 7, 1999
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