Innovation Depot was once a Nineteen Forties-era Sears division retailer. Totally renovated in 2007, the fashionable, 140,000-square-foot (13,006-square-meter) glass and concrete facility in downtown Birmingham, Alabama, is now house to 99 know-how firms specializing in every part from cellular software program improvement to microbial testing kits [sources: Innovation Depot, Strauss].
Nevertheless it is not an organization or perhaps a for-profit enterprise, and it is not only a cool workplace constructing in Birmingham’s hip "Entrepreneurial District." Innovation Depot is what’s referred to as a tech incubator, a company that helps the event of latest enterprise concepts by offering mentorship, enterprise providers and funding connections to younger tech firms.
There are greater than 1,250 enterprise incubators in america (up from 12 in 1980), and about 37 p.c focus particularly on growing know-how firms [source: NBIA]. Tech incubators are available in all sizes and shapes and enterprise fashions.
Innovation Depot, for instance, is a nonprofit group created by a partnership between the College of Alabama at Birmingham (UAB) and the larger Birmingham enterprise group to advertise the native tech financial system [source: Innovation Depot]. Thirty-two p.c of American incubators are sponsored by schools and universities and 25 p.c by financial improvement organizations. Simply 4 p.c are sponsored by for-profit entities [source: NBIA].
The concept of an incubator feels like one thing solid within the dot-com increase of the late Nineteen Nineties, however the enterprise incubator idea dates all the way in which again to 1959, when the Batavia Industrial Middle was created in upstate New York [source: NBIA].
In 2015, greater than 7,000 enterprise incubators function worldwide, some in shiny Silicon Valley industrial parks, some on school campuses, and others in growing nations [source: NBIA].
So how does a enterprise be a part of an incubator and what providers do they provide?
Contents
- The Tech Incubator Course of
- Varieties of Tech Incubators
- Tech Incubators vs. Tech Accelerators
The Tech Incubator Course of
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President Barack Obama makes an announcement on the enhancing financial system on the start-up tech incubator 1776 in Washington, D.C. in 2014.
© Martin Simon/CP/AdMedia/AdMedia/Corbis
Let’s use the instance of Innovation Depot in Birmingham, Alabama, to assist us higher perceive the tech incubator course of and why an organization would wish to use one.
Step one to becoming a member of a tech incubator like Innovation Depot is to use on-line. In 2014, the incubator housed 99 completely different firms. Twenty-three of these firms had been new in 2014, and people fortunate firms had been chosen from 122 candidates [source: Innovation Depot]. Competitors is fierce on the most profitable incubators — admission to Innovation Depot is predicated on the power of the applicant’s marketing strategy and an in-person interview.
Admitted firms transfer into workplaces inside Innovation Depot, that are leased by the month. In 2014, the constructing held almost 700 staff [source: Innovation Depot]. Along with providing the traditional workplace facilities like convention rooms, WiFi, copiers, kitchens and (after all) ping-pong tables, Innovation Depot devotes a portion of its second-floor actual property to cutting-edge "moist labs," the place biotech firms can analysis and develop new services. Members pay lease for his or her workplace house, which offers most of Innovation Depot’s income.
As soon as contained in the incubator, Innovation Depot gives a set of custom-made providers for rising firms, a lot of them offered by different firms within the incubator. As an example you will have an awesome product concept, however you need assistance growing a advertising plan. Fortunate for you, there are a half-dozen strategic advertising and branding corporations proper inside Innovation Depot.
The identical is true for different business-critical providers like accounting, public relations, mental property safety, payroll administration, distribution logistics and customized software program improvement. Not solely are all of those firms bodily shut, however they’re co-members of the tight-knit Innovation Depot group. This is likely one of the greatest benefits of working inside an incubator, prompt entry to like-minded entrepreneurs providing useful providers. There are additionally on-site enterprise coaches to assist with technique and planning.
To foster this sense of group and improve the incubator expertise, Innovation Depot hosts common community-wide occasions. There are the normal mixers and comfortable hours, but additionally "hackathons" and twice-monthly seminars on strategic subjects in startup improvement and administration [source: Innovation Depot]. Innovation Depot additionally hosts common, weekly "Depot Join" mixers only for member startup firms as a option to foster tradition and collaboration among the many entrepreneurs.
And let’s not neglect about funding. Tech firms want capital to gas progress and innovation. The board of administrators at an incubator just like the Innovation Depot contains regional enterprise leaders representing banks, funding funds, financial improvement businesses and extra sources of potential enterprise capital. In 2014, Innovation Depot firms raised $20 million, with 87 p.c coming from enterprise capital corporations and angel buyers [source: Innovation Depot].
Varieties of Tech Incubators
It isn’t an accident that Innovation Depot is simply a block from the UAB campus. Faculties and universities are among the most ardent backers of rising know-how. Main analysis universities have the luxurious of easy accessibility to sensible younger minds, a prepared provide of research-focused college, and a great deal of costly toys like engineering labs and supercomputers on which to check the most effective concepts. Because of bulging endowments, additionally they have a number of cash to spend money on promising concepts.
Along with internet hosting conventional startup residencies on campus, university-based incubators additionally throw wildly common startup competitions. The Rice Alliance for Expertise and Entrepreneurship at Rice College in Texas hosts an annual Enterprise Plan Competitors that provides away almost $1.5 million in startup funding to graduate-level entrepreneurs, with greater than $500,000 going to the first-place staff [source: Rice Alliance].
Established tech firms and firms even have a vested curiosity in supporting high-tech entrepreneurship and innovation. Bigger tech firms usually purchase up smaller, nimbler startups which have developed a game-changing new product or course of.
To make sure a gradual provide of latest concepts, these firms would possibly spend money on the creation of latest incubators like Matter in Chicago. The nonprofit health-technology incubator acquired $4.4 million in personal funding from 20 Chicago-area firms in 2014, together with a number of giant pharmaceutical firms [source: Carpenter].
Idealab, arguably probably the most well-known tech incubator, has a totally completely different enterprise mannequin. The California-based incubator is a personal, for-profit firm based in 1996 by serial entrepreneur Invoice Gross. In contrast to most incubators, which settle for purposes from established startups, Idealab generates its personal enterprise concepts after which recruits in-house groups to develop them into viable startups [source: Idealab].
As you analysis tech incubators on-line, you would possibly discover that some are known as accelerators and vice versa. It is true that some incubators have grow to be accelerators, or provide these providers however the two entities are fairly completely different.
Incubators All over the place
The enterprise incubator mannequin has proved so profitable for tech firms that many different industries are getting in on the act. Throughout the U.S., you will discover trend incubators, meals incubators in shared industrial kitchens, design incubators for client merchandise, and even farming incubators [source: Bortolot].
Tech Incubators vs. Tech Accelerators
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Tech incubators are worldwide. Nairobi, Kenya’s innovation hub, iHub, is a component open group workspace, half vector for buyers and VCs and half incubator.
© Guillaume Bonn/Corbis
Tech incubators are an effective way for fledgling tech firms to develop their marketing strategy and join with buyers. However there’s additionally one thing known as a tech accelerator. In each tech incubators and tech accelerators, small groups of founders are mentored by skilled tech entrepreneurs and supplied with crucial providers.
The phrases "incubator" and "accelerator" are sometimes used interchangeably, however the two enterprise improvement fashions are literally considerably completely different.
Let’s begin with the shoppers served by incubators and accelerators. An necessary attribute of tech incubators is that they’re open to firms in all phases of progress and improvement, from the earliest-stage concepts to established firms trying to rebrand or develop a brand new services or products.
For instance, one of many greatest success tales at Innovation Depot is Atlas RFID Options, a longtime firm that moved its workplaces there after taking a success throughout the Nice Recession. With the assistance of Innovation Depot’s in-house authorized and accounting assets, plus its connections to buyers, Atlas RFID Options re-emerged stronger than ever, boosting income from $200,000 in 2007 to $7.2 million in 2012 [source: NBIA].
Tech accelerators, however, goal solely the earliest stage firms, usually nothing greater than a pair of sensible 20-somethings with a brilliant concept. Y Combinator, some of the profitable tech accelerators, places extra weight on the expertise of the founders than the precise concept, which it expects will change significantly throughout the accelerator course of. You additionally do not want a marketing strategy to use to Y Combinator.
The subsequent large distinction is the size of the event course of. In an incubator, member firms count on to spend a number of years with the group and deal with the house like a everlasting workplace. With most tech accelerator applications, potential members compete for a restricted quantity of residencies that final solely three to 5 months.
The ultimate, and maybe most necessary distinction between tech incubators and tech accelerators is the general mission of the group. Incubators are largely nonprofit ventures with a purpose of kick-starting innovation within the regional financial system. Incubators not often present upfront seed cash to member firms, and so they do not take a proportion of income earned by firms they assist to launch.
Accelerators, however, are sometimes for-profit companies based by groups of enterprise capitalists and angel buyers. They award $100,000 or extra upfront to founders in change for an fairness stake — between 6 to 10 p.c — of their firms [source: TechStars].
That mentioned, there are many examples of hybrid incubators/accelerators. There are three-month accelerator applications run by nonprofit universities. Some incubators award cash upfront. And sure firms that started off as incubators switched to an accelerator mannequin, all including to the confusion. In truth, Innovation Depot is launching an in-house accelerator program with the purpose of offering funding to individuals in key sectors.
