Business incubator

What it means

A business incubator is an organisation that gives young companies cheap space, mentoring, advice and contacts during their first years. Its aim is to help startups and new businesses survive the riskiest period and stand on their own feet.

Unlike an accelerator, which runs intensively for a few months and often in exchange for equity, an incubator works over a longer period, usually one to three years, and generally takes no equity. The company pays subsidised rent and service fees.

Incubators are often run by universities, cities, regional development agencies or private organisations, and some are funded from public sources and EU funds. Besides space, they offer access to a community, investors and experts.

How it works in practice

Typical services include offices or coworking space, meeting rooms, help with the business plan, accounting and legal questions, workshops and mentoring by experienced entrepreneurs. Technology firms may also get access to labs or equipment.

Admission is through a selection process in which the company presents its idea, team and plan. Innovation, growth potential and team readiness are assessed, and some incubators specialise in sectors such as IT, healthcare or the creative industries.

An incubator can help with first contacts with investors such as business angels or with preparing grant applications. The lean startup method and rapid testing of ideas with customers are standard parts of programmes.

What to watch out for

Subsidised rent or publicly funded services may constitute state aid, often under the de minimis regime with a limit over a set period. The company should know what aid it has received, as this affects eligibility for further support.

An incubator does not replace the company's own work and sales. Businesses that rely only on support and cheap space without validating demand often fold when the programme ends, so they should aim for their own revenue from the start.