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What is a business incubator and how do they work?

Did you know that the business incubator concept has been around since the 1950s? Many today assume it is restricted to tech startups, but that is not at all the case.

business incubator

business incubator

What is a business incubator?

When I think of the word incubator, it instantly takes me back to my 11th grade biology class, staring at cells growing over a period of time in a petri dish. That theme holds somewhat true with business incubators in that host companies provide the optimal environment and needed resources for up-and-coming businesses to flourish and find their way in the marketplace.

Harking back to the 1950s when a New York hardware manager opened the doors to a warehouse and rented out space to various businesses, – including a winery and chicken processor – business incubators have been in existence for quite some time, their main goal being to promote growth.

Business incubators: 1950s to today

Modern day incubators still operate similar to their 50s era counterparts in that they often gather multiple businesses in a shared space and provide them with counsel, a temporary site for their business and in some cases, financial assistance for an equity stake. Businesses participating in these programs benefit from learning from an industry leader that can explain the ins-and-outs of the market after years of experience, and can also build a network with both the host company, and other peer businesses that are participating as well.

Additionally, the rent and potential costs associated with going through the program are much less than if a new business were to go it alone; this cost buffer allows companies to focus on aggressive growth and setting a stake in the marketplace early in its existence – a make or break time for new companies – without worrying so much about business costs.

The benefits are widespread

But the incubatees aren’t the only party to benefit from these programs. The organizing businesses and universities that serve as incubators are also able to build a strong network filled with game-changing entrepreneurs, and become privy to emerging trends that can help them innovate their own product, service offerings and business models. With approximately 1,200 business incubators in the U.S. alone, and thousands across the globe, this space is definitely expected to keep growing.

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Destiny Bennett is a journalist who has earned double communications' degrees in Journalism and Public Relations, as well as a certification in Business from The University of Texas at Austin. She has written stories for AustinWoman Magazine as well as various University of Texas publications and enjoys the art of telling a story. Her interests include finance, technology, social media...and watching HGTV religiously.


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