You have a great business idea and you want to implement it. But how will you kick-start your way into the market? How much have you planned? The amount of planning that goes into opening a business is humongous. The challenges that will come across your way will mostly be unusual.
Problems faced by incubators
The key areas where a startup faces problems would be:
Planning – This includes building business models that will contain value proposition (the products and services that create value for your customers), customer segments, distribution channels, cost-structure and employee-work culture etc.
Money – This can be shortage of seed funding required to start a business. Infrequent flow of payments might also lead to losing early vendor opportunities. There is always an expected financial crisis or shortage in the initial term as there is a gap between earnings and spendings.
Market – The company needs to do a thorough market research and must have a complete idea of the market they are getting into including the competitor information and pricing.
Marketing- Creating a marketing strategy that identifies target market, potential customers and providing engaging advertisements and being spot on at this requires support.
Resources – Like office space, equipments and manpower etc., also needs to be taken care of.
How do Business Incubators come into the scene?
Business Incubators, which have been around since the 1950’s, are organizations that help startups tackle these issues. Incubators help in nurturing the development of a company, ensure that they survive and accelerate growth. They usually try to identify innovations for economic development and encourage more entrepreneurs. The main focus is upon providing the company with the essential resources, support and services like capital funding, physical space, access to mentors and networking connections. The mentors usually have a prior experience in the related field thus helping the company in any niche specialization. Incubators basically shape your ideas into a prototype and gather all resources to implement them. These incubators are usually funded by academic institutions, economic development organizations, Government entities and for-profit entities. There are also Virtual Incubators who offers online advice and services to businesses working from different geographies and remote locations.
These incubators, in return, take ownership of a percentage of the company or equity, say, 10% or 15% of the stock.
How do you get in?
Now, when there are a billion ideas floating around to be implemented, how do incubators choose which company to fund?
They try to assess the potential of the business idea – a market which requires a product where a customer is willing to pay for it and a company which addresses these kind of requirements with high-quality products.
Since the success rate to failure is two to one in any incubator, the selection process is rigorous and the company’s ideas will be evaluated by a screening committee. These committees always look for ideas that are practical, sustainable and feasible.
New wave of incubators in Hyderabad
The startup incubator industry has been growing at an accelerated pace after the success of many peers. There are also very popular success stories of companies like Dropbox, Reddit etc., backed by the leading Y Combinator which encourages startups to trust in an incubator.
In Hyderabad, the major players, apart from the angel investors, are TiE, IIIT, Wadhwani Centre of Entrepreneurship Development by the Indian School of Business, BitChemy Ventures, LifeScience Incubator at IKP Knowledge Park who are encouraging bright entrepreneurs to come forward and implement their idea. BitChemy Ventures, a tech-based incubator-cum-seed-fund which was launched in 2013, has been making quite a splash with it’s investment of $6M in 3 startups – 3LOQ LABS, Cafyne Inc and Altiux Innovations.
These incubators are a great chance for aspiring startups to make some impact. So, if you are a startup looking for an incubator, then what do you have to look for?
1. Choose, not an incubator that offers you services of cheap rent or take low percentage of equity, but one that specializes in the area you want to set your business in because this is where you can get plenty of related expert advice.
2. Analyze the seed capital available.
3. Find out the range of services they offer that you require for your organization.
4. Check the credibility of the incubator and their previous successes.
Working with a business incubator not only gets you access to quality resources and expert advice but also saves you from committing costly mistakes, thereby improving your success rate.