Business incubator boom not all it’s cracked up to be

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Launching a startup is getting cheaper and has led to a torrent of would-be entrepreneurs all out to build the next big app or website. Business incubators can pick and choose who they’d like to support, but are they actually doing their job?

Business incubators are programs designed to support the development of entrepreneurs. They’re created to provide business support resources and services that will increase the likelihood of startups staying in business. Recently, many such incubators have been launched and according to Francisco Dao, founder of The Killer Pitch and 50Kings, entrepreneurs should be wary.

Dao states that while there are obviously legitimate programs like Y-Combinator and TechStars, there are many smaller incubators who lack value. The figures he cites certainly seem to support his opinion: According to a 2011 study by Aziz Gilani for the Kauffman Fellows Program, 44% of seed accelerators, a type of incubator, had never seen a company raise an institutional round of financing.

 The main problem it seems are incubators going for quantity over quality. Dao gives the example of one company in the U.S who claims they will graduate over a hundred startups annually. With those numbers he asks just how much guidance could each team actually be receiving?

So what advice can he offer entrepreneurs? Dao says that if you’re considering an incubator; consider what you’re getting for your equity. Ask yourself if the program will really help your company or if you’re just becoming another name on their wall of supposedly successful graduates.

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