Stage: pre-incorporation until Seed/series A
Pros: Low cost offices with great networking opportunities due to colocation with multiple startups.
Cons: Usually limited territorial scope and embedded in regional industrial network.
Look for: Community, Industry expertise, and Investor network
Incubators are a typology of services offered to new-born companies since the end of the 1950: the first business incubation center in fact it is said that opened back in 1959 at the Batavia Industrial Center in New York state.
<aside> 💡 Generally speaking, incubators are organizations providing a package of services designed to shield the start-ups from the external market forces.
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The package of activities offered, referred to as the incubation activities, aim at helping start-ups to commercialize new products and services while simultaneously protecting the company from the external environment, increasing therefore their likelihood of survival and subsequent growth while containing the potential cost of its failure.
These activities might vary among incubators, but three major groups of activities have been identified.
Even though the incubator might be labelled in different ways, its main focus is on producing self-sustaining start-ups. With the shift toward value-added services, incubators since the 90’S started their transition toward the role of active knowledge intermediaries.
From this statement it follows that the sources of value generated for incubated start-ups nowadays are tightly linked with the incubator personnel capabilities of brokerage and knowledge intermediation.
With the shift toward value-added services outlined in the previous paragraph, incubators since the 90’S started their transition toward the role of active knowledge intermediaries. From this statement it follows that the sources of value generated for incubated start-ups nowadays are tightly linked with the incubator personnel capabilities of brokerage and knowledge intermediation.
Incubators are able to access a great variety of external knowledge regarding the industries in which they are operating, therefore while start-ups are admitted into their programs, some degree of credibility to their ideas is built. Moreover, through the continuous monitoring of activities performed by the start-ups, incubator personnel could support start-ups by helping them in the diagnosing of business needs (both internal and from potential clients), enabling a faster learning process and a more effective identification of possible solutions to problems. This set of activities are carried out to reduce both start-ups' knowledge gap and financial resource gap, providing introductions and networking opportunities with relevant industry actors and investors.
Extensive research has been performed also to identify critical success factors of incubation activities, some identifying them with factors internal to the incubator organization - like the quality of the services provided by the management team - while others focused more on external (or locus-related) ones like community and entrepreneurial support, the general level of entrepreneurial education of the region and the link with university and academia. Focusing of the services supplied by the management team, it must be noted that while operational and support services are easy to provide, the network opportunities created and the business consultancy provided could be highly differentiating elements able to influence and enhance most of the key success factors of the incubation process.
<aside> 💡 This fact led the researchers at identifying the quality of the management team itself as a viable measure of incubation effectiveness.
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Taking into account what previously said about the role of incubators as intermediaries and the fact that success of the initiative largely depends on the managerial abilities of organizers to deliver value-enhancing services, it can be concluded that a considerable part of managerial time should be therefore focused on designing interactions among and within incubatees and the overall industrial community of reference.
Following these concepts and building on the Situated Learning Theory (SLT), that states that the learning and the development of competencies take place inside communities of practices and therefore that what eventually really matters for learning is the creation of an environment that enable empowering and productive learning within the community, the researchers have identified three different influencing factors and the relative roles that managers should fulfill while trying to create these favorable conditions for incubatees.