Three college students had a dream — a vision for a green, eco-friendly moving company. The Tennessee State University students believed in their vision for the Green Truck Moving Company enough to get it started, ponying up $1,000 each.
But they lacked business know-how, office space and capital. So a year later, the trio — Clinton Gray, Derrick Moore and Emmanuel Reed — tapped the services of the Nashville Business Incubator Center, part of TSU’s Center for Entrepreneurship and Economic Development. The incubator provides businesses with mentors, consultants, networking opportunities, an office, connections to investors, and access to a revolving loan fund.
Today, five years after entering the Nashville incubator program, the Green Truck Moving Company is thriving, with 40 employees and annual revenue of $1.6 million.
“We wouldn’t be halfway where we are today if it wasn’t for the incubation center,” Clinton Gray, director of marketing, told the Tennessee Board of Regents. “Starting a business isn’t easy, which is why access to business experts and affordable office space that the incubator program offers is so vital.”
So what are business incubator programs and how do they work?
Incubators are designed to foster start-up companies — to nurture them along with the help of business expertise, connections to investors and other funding sources, as well as office space and other resources. Most are nonprofits, often run by municipal organizations or universities as a way to spark economic development. In return for their help, incubators often ask for an equity share in the business or else may charge fees for services.
The National Business Incubation Association estimates there are about 7,000 incubators worldwide. It represents 2,100 of them in 60 countries, with 75% of those in the U.S. The vast majority (93%) of business incubators in North America are nonprofits, says the NBIA.
What do you need to know about working with incubators? Some tips:
1. Find incubators that might work for you
The NBIA provides a searchable database of its member incubators. Or look for incubators by checking with state and local business development groups, or a university’s business department. Trade associations may also track incubators that are designed to serve specific market niches. Symantec, for example, just announced a new incubator aimed at cybersecurity start-ups.
2. Check out incubators before applying
Things to look for, advises the NBIA, include track record — how well and how long the program has been in operation — and qualifications of the staff and managers.
3. Consider whether the program offers the services you need
Is it money? Advice? Expertise? Technical resources?
Mike Schroll, founder of the Startup.SC incubator, tells Inc. that if you are considering an incubator program, you should talk to its alums — companies that have graduated from the program — to see how it helped their businesses. He also suggests you review a program’s location and curriculum to see if it’s a good match for you.
4. Perfect your pitch
Keep in mind that competition to get into most incubator programs can be fierce, with thousands applying for open slots. “The application process is grueling,” warns Peter Gasca in Entrepreneur.
To maximize your chances of winning a place in a program, you must hone your business pitch, effectively communicating not just your immediate needs, but also how your business can succeed in the long term. To this end, says Schroll, you should have your founding team together first, before pitching. Think Shark Tank — you will need to convince potential investors and mentors that you are worth their while. But if you can accomplish this, the rewards can be significant, giving your fledgling business greater odds of success.