Startup culture has been on the rise in recent years and shows no signs of slowing down. We’re seeing businesses pop out at every corner and many individuals leaving their 9-to-5 jobs to go down the entrepreneurial path. While startups have been as a trend that would pass in due time, many companies have emerged to become key players in their respective industries. In fact, we are seeing a shift in startups taking over big corporations in the business landscape.
While founding a startup sounds like a rewarding feat, how do you go about embarking on this entrepreneurial journey without any prior experience at all?
This is where incubators come in.
What Are Incubators?
Incubators are organisations that aim to help startup owners grow and flourish by providing various resources including mentorship, expertise, funding, as well as equipment. Past alumni have described it as a “business boot camp”, where you get the chance to be around fellow entrepreneurs and business owners who are in a similar industry as you.
The process of joining an incubator typically starts with the application. Upon being accepted, you’ll be guided through a specific programme over a period of time, which will ultimately upgrade your skills and knowledge of your niche industry.
Incubators vs. Accelerators
Most startup founders and entrepreneurs have the idea that incubators and accelerators generally function in the same way and are terms that can be used interchangeably. While they do have multiple similarities, both still have different frameworks and are quite distinct in nature.
Incubators help entrepreneurs churn out business ideas from scratch or build on an existing concept that they already have. They are more focused on developing a viable and sustainable business model and company at large, hence using the term “incubator”. The framework operates on a more flexible timeframe as well.
On the other hand, accelerators are quite the opposite. Startup accelerators make companies go through a rigorous and immersive education that runs for a fixed period of time, most lasting only a few months. Instead of helping companies start their business from scratch, this scheme is designed for entrepreneurs who already have existing companies and want to focus on expediting the growth of their business.
So if you’re starting out in the startup industry and need that extra push, incubators are the way to go. But if you are already run a startup and are looking to scale your business growth, accelerators may be worth considering.
But how do you decide if your company is suitable for this route? In this article, we’ll focus solely on incubators and explore the various pros and cons that can help you make an informed decision.
3 Pros of Joining Startup Incubators
1. Access to Funding and Resources
One of the first and most common reasons why entrepreneurs consider joining incubators is the ability to gain access to capital and resources. This comes in many different forms including exposure to a network of investors, incubator self-funds, demo days, and introduction to venture capitalists and government grants. Some incubators and VCs just like Antler also provide allowance to members of their cohort.
Besides funding, a variety of professional resources ranging from business tools, software, equipment and even office space will also be at your disposal. With both of these factors, it’s only a matter of time before your business idea materialises and becomes a reality.
2. Experienced Framework
Incubator programmes function on a very specific framework that has been proven to be effective from the number of exits we’ve seen in the last few years. Think of it as a subject syllabus in school. Teachers formulate a specific and effective lesson plan, which is then used to teach their students with the goal to equip them with the relevant knowledge and skills.
In the same way, incubators teach you all that you need from building your startup from scratch, validating your concept, testing your business idea, and everything else in between.
3. World-Class Mentorship and Networking Opportunities
Being associated with industry game-changers opens up a door for endless networking opportunities. Most, if not all, incubator firms have a strong network of partners, which can be useful for you and your business in the long run.
There are also heaps of potential for building possible alliances and meaningful partnerships between fellow entrepreneurs, which cultivates an inspiring environment to grow and feed off of each other’s energy and ideas. Apart from being under the wings of world-class mentors, incubator programmes can also match you with a like-minded and ideal co-founder that can support you in all aspects of your business.
3 Cons of Joining Startup Incubator
1. Equity Stake Negotiations
The demand for equity ownership in the incubation industry is rather standard and nothing out of the ordinary. When your business finally takes off, these organisations would want a piece of the pie as well. How equity stake works are that a part of your company will be owned by the organisation in exchange for providing capital to grow your business.
The percentage of the business owned will depend largely on the agreement between the startup founders and the incubators. However, most entrepreneurs are already aware of this from the get-go and view it simply as taking a smaller piece of a larger pie.
2. Varying Standards Among Incubators
Globally, there are thousands of incubators for startups to tap into and this number is only expected to grow in due time. But because of the influx in incubator programmes available in the market, there is bound to be varying standards between the different firms.
This could be the case for programmes with no industry-specific focus. With entrepreneurs coming from different backgrounds and startups across all sectors coming into the market, a good fit for someone may not necessarily translate in the same way for others.
3. Growth-oriented industry
If you are looking to impact a specific sector in the market with your product or service, it would make sense to join a startup incubator. But if you’re running a simple lifestyle business, this may not be an ideal path for you.
Since the incubation industry is rooted in growth, companies who are just looking to make a sale or are simply side hustle projects don’t necessarily fit the criteria of such programmes. The incubator or VC business model is all about making the ‘one big success,’ which makes them push for growth at all costs. Unfortunately, this isn’t something that all business owners strive to achieve.
Is it really worth joining a startup incubator?
When deciding to join an incubator programme, consider all the pros and cons involved and whether your company will grow from this opportunity. From our point of view, having graduated from Y-Combinator has brought about nothing but opportunities and learnings that we continue to employ in the way that we run our Aspire today.
To get started on your search, we’ve created a list of the top 10 startup incubators in Singapore and the rest of the world to help you arrive at a well-rounded decision.
Frequently Asked Questions
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