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Startup incubator pros and cons

on August 02, 2012

Starting your company with a business incubator can have advantages and disadvantages. Jay Adelson, founder and chairman of Revision3, talks about points to consider when deciding whether to go this route.

With a startup incubator, Adelson says, you get access to the talent the incubator has to offer in addition to some dollars. “My favorite incubators…are the ones that are extremely tuned to a specific market,” he says. While some incubators offer more general assistance, that may not be the best option for your life sciences company. “Look for an incubator that actually brings resources that are very specific to your interests,” he advises.

When considering using a startup incubator, entrepreneurs should consider the incubator’s financial structure as well. Adelson estimates that incubators usually take 10 to 15 percent of a company as part of the investment deal. Entrepreneurs need to be sure they are comfortable with giving away part of the business. Some incubators may even take full ownership of a company, he says.

Using an incubator often leads a company to a Series A funding round and can increase a startup’s chances of closing the round, Adelson says. However, it can be rewarding to grow a company on your own, without the help of a startup incubator. “Really great product is usually what leads to success,” he says.

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