Commercial Incubators

Commercial incubators are programs offered to guide and accelerate the development of new businesses, and are especially notable for their success rate—the overwhelming majority of individuals (the heads of the businesses) who graduate from an incubator program remain in business careers—and for their focus on start-up companies. In contrast with incubators, the Small Business Development Centers run by the U.S. Small Business Administration (SBA) are required to offer help to any small business asking for it, and work with businesses at any point [Page 101]in their development. Incubators are smaller in scope—typically less than 30,000 small businesses participate in an incubator program every year—and participants must apply and be approved. The incubator program typically lasts two to four years. Acceptance into an incubator program is contingent on being able to present feasible business ideas, backed by a clear and definite business plan. Once accepted, the business will usually operate its offices out of the incubator's facility, where administrative support services are shared. Many incubators also serve “affiliate clients” who operate home-based businesses or companies that already have their own facilities, and who are served only by the consultation services and resources offered by the incubator.

The most common incubator services provided include financial help—not in the form of loans from the incubator itself, but assistance in applying for bank loans and navigating the world of finance, access to angel investors and venture capitalists, help with learning the accounting techniques and other financial knowledge necessary to running a sound business (as well as a “reality check” with regard to the financial aspects of the business plan, price-setting, and so on). They may also provide services that include business management training programs, and a basic education on business etiquette, intellectual property concerns (how to register a trademark, patentability issues), relevant regulations, marketing and advertising, professionalism and presentation, and technology transfers. Some incubators may match a nanotech start-up with a mentor, someone who has already had experience in the field. Though most commercial incubators work with businesses from across all industries, there are many incubators that specialize in one or two sectors. Tech sector incubators account for a plurality of these, and there are a number of incubators that work specifically with nanotech companies, because of the special concerns there.

The funding for an incubator can come from a variety of sources, including government economic development organizations and academic institutions. It can be in the interest of a state or city government to help fund an incubator because it will encourage business activity in their area; the states of New York and New Jersey have been active in courting the nanotech sector. Federal funding is not typically available except to get an incubator program up and running. Operational fees are paid through rents charged to the businesses being served and other sources. Since the dotcom boom, there have been a growing number of “private incubators”—for-profit companies which shepherd tech start-ups through the first few years of life in return for either equity (stock in the company) or a cash payout later. The bursting of the dotcom bubble cut the number of private incubators in half, but about 100 of the 1,500 or so incubators operating in the United States operate on a for-profit basis.

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