Thinking

 

 

With extremely low barriers to entry, a higher degree of social acceptance, and the proper cultural conditions, more and more people are throwing their hats in the ring and giving tech entrepreneurship a shot. However, this time around it’s not just the entrepreneurs taking a risk. Everyone wants in on the action.

 

Incubation, the process of bringing an entrepreneur, or a team, under the roof of a larger entity, has become a prominent topic of conversation. Popularized by such firms as Y Combinator and TechStars, many companies are toying with this idea. If done right incubation can create lasting value for your business by opening up new revenue streams, growing existing ones, or liquidating an asset for a much needed cash influx. Incubation has become an integral part of our business model at EDGE and may make sense for your business too.

 

If you are considering incubation, here are three principles to follow to ensure it’s done in an effective manner.

 

Incubation must be core to your business

Incubation is not something you should pursue because it’s trendy or innovative but because it drives value to your business. Incubation is an investment that requires resources whether they be financial or otherwise. Thus, the desired return on your incubation investment must be aligned with your objectives as a company. Before making your decision, take a hard look at your growth goals and determine whether a new technology, or product, will help you get there.  You may be better off making improvements to your own product portfolio.

 

Target the right incubator

It’s imperative you know the type of entrepreneur and team you want to help incubate, both from a product and skill standpoint. Once you determine that the product will help with your overall business objectives then you must ensure the incubatee creates a complementary fit with the skills and resources your firm provides.  It’s helpful to ask the question, ‘What’s prohibiting this entrepreneur from finding success on their own?’.If the list of answers are items your company can provide then you’re likely targeting the right company.  Incubatees and incubators should have a yin and yang relationship. The weakness of one should match with the strengths of the other.

 

Have a plan

It’s absolutely critical to formalize the relationship through a legal contract.  Beyond that you should have a project plan for executing the relationship based on the result both you and the entrepreneur are working toward.  No matter the incubatee’s goal, whether it’s to raise additional funding, be acquired, or grow organically, it’s important you track both time and milestones.  This enables you to plan, and provides extra incentive for the entrepreneur to remain focused.  Be wary of making milestones too specific.  Saying the incubatee needs to make X dollars by Y date is dangerous and ultimately can be harmful to both parties.  Being too regimented may cause the entrepreneur to sacrifice long-term value for short-term gain, negatively affecting your business as well.  Still, you need to draw a line in the sand.  If certain milestones are not achieved than the relationship should change.

 

In our rapidly moving world incubation can help keep you on the forefront of your industry.  If done correctly, incubation will add a fresh energy and excitement to your organization’s culture.  However, perfecting the incubation program is an iterative process.  Don’t be upset if you don’t get it right the first time.  Take notes, make changes, and continue to refine.