Why You Should Consider a Startup Incubator

No matter what you hear, starting and running a successful company – even a web-based company – is tough to do. Sure, anyone can throw up a couple of web pages and call it a “business.” But it takes a lot of knowledge and insights to create a sustainable business. If you don’t want to take years out of your life learning from your mistakes, then a startup incubator – and all their benefits –  just might be for you.

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What is a Startup Incubator?

A Startup Incubator is a seed-stage investment program where entrepreneurs can take their ideas, and in exchange for a percentage of their company (usually around 6%), they can get mentorship, collaboration, and support to help create and launch their companies. And they get a small amount of money (around $20,000) to help with some expenses.

What Startup Incubators Can Help With

Beyond the mentorship and knowledge, the main startup incubators typically assist with operational and functional tasks so the entrepreneurs can focus on building and launching their products. These tasks include:

• Legal: IP, Financing, Term Sheets
• Product: Design, UX, Development, Platforms, SEO
• Marketing: Distribution, SEO, SEM, Viral, Social Network Applications
• Back-end: Architectures, Hosting, Storage, Platforms, Scaling
• Administrative:  Payroll, Benefits, Accounting, Licenses, Taxes

Connections, Connections, Connections

Knowledge is great. Having a decent workspace is helpful. And collaborating with like-minded peers over a game of pong is cool too. But perhaps nothing is more valuable than the network of advisors, alumni, investors, and media access. If you’ve ever had to work hard to get the attention of the press, or get a room full of investors to give you 3 minutes of uninterrupted time, you’ll understand the value that startup incubators provide with their “demo day” at the end of their programs. This is your one shot to pitch to the hyper-connected crowd that can launch your product into stardom seemingly overnight. Or not.

Reading Between the Lines

Incubators are a great idea, but they might not be for everyone. From the list of companies that some incubators have worked with, here’s a couple or things that caught my eye:

• Need to be part of a team. No solo founders need apply.
• No gray hair allowed. Simple as that. Even Y Combinator asks their applicants if they are over 40. And I heard Paul Graham admit in a video interview that he doesn’t want the over 40 crowd (I’m paraphrasing).
• I’m not so sure about how great the idea has to be – some of the ideas seem really far fetched. But like most investors, there’s a large value placed on the entrepreneurs themselves. In other words, the idea might not be the best, but if they like the entrepreneurs, then that might be all that matters.

Is it Worth the 6% Equity?

I hear this question many times in forums… “6% for $20,000 is a rip off”… “how can 3 founders survive on $15,000 for 3 months?” But that’s thinking about it the wrong way.  Try to think of it as sort of an advanced entrepreneurship degree. So if you think about it that way, then ask yourself “how much did you get paid to go to college?” Nothing? Ok. Well, in these programs, you’ll be getting paid, and you’ll be getting knowledge, resources, and insights that would be hard to get anywhere else. And instead of dragging out the education over 2 years or more, you’ll get it all in 3 months.

Bottom Line

Yeah, go for it and apply. Check out this list for 4 Great Startup Incubators in the U.S.

Questions for readers: Startup incubators sound great. What are your thoughts or concerns with these programs for entrepreneurs?