What is a Startup Incubator? Everything You Need to Know

Small businesses play a vital role when it comes to GDP and employment. At the same time, they have a very high failure rate in the initial phase, ranging from 50 to 95%. To change that, startup incubators have built the capacity needed for entrepreneurs and innovators to survive and grow. The roots of business incubators date back to the 1950s and have grown to over 7000 incubator programs worldwide. - Authors: Jona Hauch, Max Zheng

Main takeaways

• A startup incubator is a program that helps very early-stage startups increase their chances of success by providing guidance, advisory, skills building, mentorship, facilities, and networking opportunities for collaborations and funding.

• The goal of a startup incubator is to help create a stable foundation on which to build a startup, including defining a strong business model, creating a minimum viable product (MVP), and achieving product-market fit.

• Startup incubators can be initiated by different types of organizations and can focus on different business sectors.

• Before participating in a startup incubator program, startups should carefully research and compare different programs. The advantages and disadvantages should also be known and taken into account.

What is a startup incubator?

A startup incubator is a program that provides early-stage startups with capacities that increase their chances of success. This may include guidance, advisory, skills building, mentorship, facilities, and networking opportunities for collaborations and funding. Often this starts with the basics of the ideation phase, continues with the planning and validating phase, and ends with the execution phase of a startup. A startup incubator could be seen as a sparring partner to provide you with a work environment that is highly supportive making it much easier for the founder to focus on the core business model and goals.

Startup incubators are often associated with universities, strategic ecosystems, or successful entrepreneurs. However, they can be established by any type of organization, both public and private. There are incubators for a variety of industries, with most focused on tech startups.

What are the elements of a startup incubator program?

Startup incubators train and guide you through your early stages. Starting from the help of business basics, like the idea and concept validation, over strengthening your business model and creating your minimum viable product, to helping you set up your company in order to ultimately see early signs of product-market fit. Apart from training and mentoring, this might also include cheap or free working space. Even more, you often receive marketing, commercialization, and accounting assistance, and to some extent, cheap or free legal advice.

Common services provided by startup incubator programs:

• Training to learn things like business basics, presentation skills, higher education resources, comprehensive business training programs, startup mindset
• Help with your individual questions and problems
• Assistance related to marketing, commercialization, accounting, finance, and legal counsel like intellectual property and regulatory compliance
• Networking opportunities to exchange with experienced startup experts, create strategic partnerships, and with other entrepreneurs
• Access to (follow-on) funding like bank loans, state funds, angel investors, and venture capitalists
• Some incubators have additional cash to make follow-on investments themselves

The basic idea is to help you create a stable foundation for your startup. Usually, in the end of a startup incubator program, the startup would pitch their business model at an event where the founder has the chance to attract attention from potential investors. 

To make startups succeed, startup incubators help you to focus on these milestones:

1. Defining a strong business model
2. Creating a minimum viable product (MVP)
3. Business registration
4. Pre-seed funding
5. Product-market fit

As soon as the needed milestones are reached, the startup is ready to focus on one thing: scaling.

Figure 1: Which startup phases are covered by startup incubator programs.

In case you want to know more about startup accelerator programs, read our article here: Startup Accelerator Program - everything you need to know

Types of startup incubator programs

A wide variety of startup incubators have developed. They can be initiated by different kinds of organizations, public or private, virtual or in-person, free or paid, and focused on different business sectors. Some important types of incubators are listed here:

Types of organizations

1. Academic institutions
2. Venture capital firms
3. For-profit corporations
4. Non-profit corporations

Common business sectors

1. Technology
2. Social business
3. Ecommerce
4. Health care
5. Food industry

Within each business sector can be found niche programs, being even more focused on topics like artificial intelligence, x-reality, and blockchain technology.

Advantages and disadvantages of startup incubator programs

The advantages and opportunities offered by a startup incubator generally outweigh the disadvantages. Especially if you don't have too much experience with founding a startup. Considering the required time and commitment to join and participate in an incubator, you should carefully select the right program for you and your business. You definitely don't want to waste valuable time and effort participating in a program that won't benefit you. Important points to consider include the incubator's industry and location focus, team, culture, advisors, and past participants. To get a better idea, you can visit the website, contact the startup incubator, talk to former participants, and finally compare different options. To get the most out of participating in the incubator, it can be helpful to define clear goals and expectations for the program.

When should you join a startup incubator?

Startup incubator programs focus on early-stage ideas, typically you do not need to have a registered business. To participate in an incubator program, you must go through an application process. Within the application process, the requirements can vary, so you should choose one that fits your stage.

There are 3 different types of typical application requirements:

1. Apply with or without an idea, with or without a team. These programs include the full ideation phase, where ideas are developed or refined.
2. Apply with a basic idea or problem you want to solve. The first step with these programs is to help you refine your idea, if necessary.
3. Apply with a full business plan. These programs skip the ideation phase and start directly with the conception phase, helping you fine-tune your business model.

If you don't have a co-founder or team yet, it is usually not a problem, the incubator might help you find one. Depending on the incubator terms, you might need to commit full-time, part-time, or even hybrid. Generally, incubators’ terms are very different, so you might want to check that out as soon as possible.

Startup incubation in Web3

The Web3 sector continues to grow and blockchain technology is gaining traction. With this ongoing trend, more and more incubators are starting to focus their services on Web3. Since the entire Web3 sector is still in its early stages, the likelihood of failure for startups can be significantly higher. Furthermore, the legal situation is not always clear, as new regulations are introduced now and again. Therefore, the guidance, networking, and legal support provided by incubators can be particularly helpful in comparatively new and fast-growing industries.

An example of a Web3 startup incubator program

To start your journey by evaluating different startup incubator programs, we would like to share a first example.

The BFG Superstars program is a 3-month startup incubator offered twice per year starting in March and September respectively. The Blockchain Founders Group will provide mentorship, financial support, and support from top-tier experts for next-generation business models related to Web3, Crypto, DeFi, NFTs, DAOs, IoT, Bitcoin Lightning, CO2 Compensation, Metaverse, Gaming, and Privacy.

As part of the BFG Superstars program, you are compensated for your time and brain power with 2,000 EUR flat per month on a full-time basis to help you kick-start your venture. Moreover, participants can join from anywhere in the world since the program is conducted remotely only. It is possible to join alone or as a team, with, or without an idea.

At the end of the program, you have the chance to receive financial support of up to 70.000 € for 6-10% of your startup's equity, depending on your pitch and the business model.

We have an exceptionally strong team, advisors, and network within the Web3 sector that will help to jump-start your venture.

BFG Superstars is looking for entrepreneurs who have:

• Leadership skills: a passionate leader who influences with a sense of empathy. Age, background, or gender don't matter to us!
• Hands-on mentality: someone who is not afraid to fail but rather tries and learns from the iterations.
• Growth potential: someone who could become a CEO/CTO or a great leader with the motivation to learn and grow.
• Team player skills: a person who can collaborate, listen and communicate with the team for the sake of solving a problem.
• Blockchain knowledge: understand blockchain systems such as smart contracts, wallets, and different protocols at least on an intermediate level.
• Flexibility: BFG believes in the effectiveness of remote work and operates fully digital. We expect participants to be equally flexible and understand digital collaboration.
• Media exposure or tech: we believe in people who either excel in technical understanding or are willing to understand marketing, sales, and media exposure.
• Ambition: consistency and perseverance are key in entrepreneurship. Learn, grow, and build an impactful company together with BFG.

What are you waiting for? Apply now! Check out our team, advisors, and more information.  

About Blockchain Founders Group

Blockchain Founders Group (BFG) is the driving force behind web3 innovation. As a company builder, we bring together a team of blockchain visionaries, experienced entrepreneurs, and industry experts, all committed to nurturing emerging talent. Our BFG acceleration programs serve as your springboard for launching blockchain startups, transforming concepts into reality in just 2-3 months. Each cohort develops 5-8 unique web3 ideas, and selected projects will be financially supported with 70,000 - 100,000 EUR, along with access to our extensive network. Join us in shaping the future of web3!

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Contact: Max Zheng, Director of Investments, max.zheng@blockchain-founders.io