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Ask these 8 questions BEFORE selecting a business incubator

Post By: Greg Bullock
October 6, 2015, 9:52 PM

Questions to ask before choosing an incubator

Startups should select a business incubator or accelerator with the same diligence that they would choose a co-founder, especially given the fact that they will have to live with them (literally!) for a significant period of time. But with the prevalence of numerous programs - the International Business Innovation Association (INBIA) estimates more than 7,000 worldwide - it can be a tall order differentiating between them. Here are the questions you should ask before making your decision:

Is it the right fit for my business?

Examine the resources, industry segments, mentorship opportunities, and overall mission of the incubation program; overlay your own gaps and needs to determine how it might be able to help advance your business. Explore the physical space available as well to glean not only whether it will suffice for your company as is but also if it will support growth in the future.

What is the cost of joining the program?

Some incubators have rent structures, others have generic program fees, and yet more have equity based models that exchange ownership in your company for capital funding. You must analyze the total cost of joining a business incubator in order to gauge whether or not you can afford to do so.

What is its record of client success to date?

This question speaks to overall traction of the program resources for its startup clientele. Has the incubator had any major wins in terms of company growth, job creation, economic impact? How many companies does it support currently and how many to date? What is the survival rate of graduate businesses? You may want to ask “insiders” around your entrepreneurial ecosystem to gauge external perceptions as well.

What does it look for in a potential client?

Incubators have their own criteria for choosing member companies. As much as it should fit your company, you also need be right for their organization. You aren’t likely to have optimal success and benefits from the program if they want high-job-producing bioscience companies and you are a solo entrepreneur developing an app. That does not immediately count you out, but it is certainly worth addressing.

What is the application and/or selection process?

Is there a required pitch presentation or sit-down interview in order to join? What paperwork needs to be completed? What is the acceptance rate for applicant companies? These are all questions that will help you follow the step-by-step process to apply for a particular incubator. Don’t be afraid to ask for very specific details that can help you be successful in being the most attractive candidate for acceptance and help formulate a well-rehearsed incubator pitch that distinguishes your company from other applicants.

What are the ongoing program requirements and graduation criteria?

You must know what it requires to stay in the program - from ongoing traction metrics (i.e. sales/revenue goals, job creation, etc.) to interpersonal assessments (i.e. entrepreneur coachability) to incubator guidelines (i.e. mandatory meetings). It also is important to review graduation or exit requirements so that your company is not surprised if/when you reach a certain milestone that precipitates it.

How much ownership, if any, will the incubator have in my startup?

This is a critical question that helps entrepreneurs understand what ownership they may or may not give up in their business. This does not just include percentage equity for investment; it also includes questions of intellectual property and ultimately who “owns” the idea (for instance - some university programs have very specific rules on IP and tech transfer). Again, assess it based on the goals and needs for your startup.

Will it help me grow AFTER I graduate?

Although this should not necessarily be a deciding factor, it still is an impactful one because you want to know that there is still a support network available to your company after you exit the program. A good incubator will likely have an “alumni” group with specific resources available to those companies, including the facilitation of expansion efforts in the local community as well as additional connection opportunities that can keep your business growing. Y Combinator touts its extensive alumni network and how it facilitates connections between graduate companies.

Want to learn about available incubators for Phoenix startups? Download our Phoenix Incubator Resource Guide!

Arizona Incubator Resource Guide

Topics: Business Incubators