The concept of incubation is here to stay

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Critics have likened incubators to those who sold picks and shovels to the gold diggers - they often got wealthy at the expense of those who panned for the gold.

Despite the negative publicity incubators have received, the concept of incubation and business acceleration has merit, and firms incorporating best practices can excel. So says a new report* from IDC.

“Incubators and business accelerators are being viewed as just another fad. Many of them have failed at their original business, which begs the question as to why they would be successful guiding other start-ups,” said Meredith Whalen, director of IDC’s eIncubators and Accelerators research program.

“Unfortunately, the market has focused on extreme examples, and has ignored the value that business incubation and acceleration can bring to new companies,” said Whalen.

Nicole Weber, senior analyst of IDC’s eIncubators and Accelerators research program, added, “Today’s incubators provide rapid access to often hard-to-obtain resources. They also lend best practices from their experience and access to a network of contacts.”

According to the report, companies that succeed in providing incubation services will be those that develop repeatable business processes and manage their risk.

“Just like any other people-intensive business, incubators and accelerators need to focus on ways to capture the unique processes associated with each company’s incubation, and to repeat these across all portfolio companies in all incubator facilities,” Weber advised.

When it comes to managing risk, IDC advises companies providing incubation services to diversify their revenue streams and their partnerships.

“The risk of incubators is that many of them have tied their revenue streams directly to the stock market,” Weber said. “As we have seen recently, a downturn in the stock market can erode incubators’ future profits. Incubators that draw upon other revenue streams or those that charge for some of their incubation services will buffer themselves from these downturns.”

IDC notes how incubators can minimize their risk through partnerships with Fortune 500 organizations. Sprint and eCompanies, and Dow Chemicals and campsix are such examples.

* ‘Incubators and Business Accelerators: IDC’s Competitive Analysis of the Market’

IDC

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