6 Pros and Cons of Joining an Incubator for Entrepreneurs

A business incubator is a program that can assist entrepreneurs in coming up with a repeatable, scalable and sustainable business model. This is done through the provision of services such as management training, marketing assistance and office spaces. Today, many entrepreneurs in Singapore turn to these incubators for resources, mentorship and support. However, despite the backing that an incubator can provide entrepreneurs, it is important to first weigh its pros and cons before making a decision.

Joining an Incubator – What You Should Consider

Pro: Services and Facilities

One of the perks of working with an incubator is gaining access to its services and facilities. This can include assistance in setting up corporate legal structures and shareholder agreements as well as office spaces and reception desks. Remember to check whether or not their rate for using office spaces is at or below the market value. Inquire as to what other types of services you can get within the incubator. Often times, you can also get support services such as promotion and media coverage, which can help your startup company gain exposure.

Con: Limitations in Corporate Structure

An incubator will usually try to keep the companies that they invest in to be as similar as possible in terms of corporate structure. Compared to bootstrapping, joining certain incubators can limit your choices of venue for lawsuits, vesting, taxation and even residence.

Pro: Mentorship and Quality Advice

Incubators are typically run by successful and wealthy entrepreneurs. By joining an incubator, you can have access to a network of seasoned mentors who can guide your business through veteran advice.

Aside from quality advice from successful entrepreneurs, you can also gain access to a wide network of diverse people. You can get a lot of opportunities to contact the successful alumni of the incubator, and ask them to share their experiences with you. When choosing an incubator, factor in how much time various partners within the incubator allot for mentorship.

Con: Equity Stake Negotiations

A business incubator is a business itself. The benefit an incubator gains from supporting start-up companies is equity stake. This means that the incubator will become a shareholder or a holder of a convertible note to your business. This may range from 2 to 10% of the stocks of the company. The negotiation for this percentage may become a bit complicated and off-putting to some entrepreneurs.

Pro: Support Network

An incubator promotes an inspiring environment in which you and your respected peers can exchange ideas and provide constructive criticisms for each other’s products and demos. The program also opens up opportunities for collaboration and other business arrangements.

Con: Incubator Responsibilities

As a part of a support group, you also have to fulfil your role within the dynamics. This may mean allotting some time for additional responsibilities to the incubator. Take into consideration how much time and effort you have to spend working with any third party when deciding whether or not to join an incubator.

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