U.S. Incubators . . .

From an article by Pete Horner in the November/December 1999 issue of TechLinks - Georgia's Technology Sourcebook, www.techlinks.net.

As a high-tech entrepreneur or manager sifts through the list of business incubators . . . it's important to keep in mind that no two incubators are the same. Each develops its own unique model based on its particular goals, assets and areas of expertise, and then it typically refines those models as it moves forward.

Having said that, lets make a couple of generalities:

• Public, nonprofit business incubators are generally focused on economic development and accept start-ups into the program based on their potential to create jobs and expand the tax base in a targeted area. Nonprofits don't invest in start-ups, but they often hook a client or tenant up with a third-party funding source. Nonprofits generally charge a monthly fee (rent) for their services and office space. They don't take equity positions.

• Private, for-profit business incubators are designed to make money . . . for their clients and themselves. They tend to be more specialized, based on the founder's area of expertise. In exchange for mentoring, office space and capital (provided either directly or through a third party), the for-profits will generally take an equity stake in the start-up. The big payoff for everyone occurs when the start-up is bought or goes public. Again, the faster the better.

• Public, nonprofit business incubators generally play by stricter ground rules than do for-profits because they have to ultimately answer to their governmental sources of funding. For example, the nonprofits may place limits on the gross revenue of the start-up, the number of employees it can have or the length of time it can stay in the incubator. For-profits, on the other hand, play by their own ground rules; if the deal makes sense, they do it. They generally have more flexibility and can move faster in making the deal than their nonprofit counterparts. . . .

Beyond the generalities, business incubators are as different as the people who run them. They differ in their leadership, their core ideologies and goals, their level of involvement with the client, their services and their fee structures. Among the high-tech specialists (which include virtually all of the privateers and many of the nonprofits as well), some entertain proposals from telecommunications, multimedia or biotech enterprises; others won't even talk to a start-up unless it has the "e-word" (as in e-commerce) plastered all over its business plan. Some prefer to get in real early during the idea-on-a-napkin stage; others want to see some serious effort (and money) put forth by the entrepreneur before they jump on the bandwagon. Some offer a "full service" operation complete with office, phones and fax; others concentrate on the money, marketing and mentoring aspects of the relationship and skip the bricks-and-mortar all together. Some encourage clients to stay in the incubator as long as they like; others hustle them out the door as soon as the start-up is strong enough to fly on its own.