Why Incubation?

Why Incubation?

Business Incubation Defined

Business incubation is a program designed to recruit, select and support early-stage entrepreneurial companies for the purpose of accelerating their growth, creating employment and aiding economic development. Entrepreneurial companies that are nurtured through their initial development when they are the most vulnerable have a greater likelihood of turning their ideas into viable businesses.

Business incubators provide an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts. Starting a business is a daunting task. Most entrepreneurs know every detail of their product or service but may lack the skills or access to resources needed to start a business. Incubators promote innovation and create jobs by providing emerging companies with business support services and resources tailored to young firms to increase their chances of success.

Proven Track Record for Success

Since Joseph Mancuso opened the first business incubator in 1959 in a Batavia, New York, warehouse, the concept has expanded.

The U.S. National Business Incubation Association estimates that in 2005 alone, North American incubators assisted more than 27,000 start-up companies that provided full-time employment for more than 100,000 workers and generated annual revenue of more than $17 billion.

NBIA also points to research showing that every dollar of public funds devoted to an incubator generates approximately $30 in local tax revenue. Member incubators have reported that 87 percent of all firms that have graduated from their incubators are still in business, while 84 percent remained in the incubator’s community.

Researchers for the U.S. Economic Development Administration found that business incubators are the most effective means of creating jobs – more effective than roads and bridges, industrial parks, commercial buildings, and sewer and water projects.

Global Applications

infoDev, a global development program housed at the World Bank, has found that incubators can be important change agents in the innovation and entrepreneurship eco-system of developing countries. For banks, incubators offer a way of reducing risks to investing in SMEs. For policy-makers and regulators, they provide first-hand feedback on what is needed to stimulate SME start-up and growth. For universities, they offer opportunities to commercialize research and expose student entrepreneurs to the real world of business.