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How Do Business Incubators Make Money? (5 Smart Ways They Profit)

A business incubator is an organization specifically established to help start-up businesses grow and succeed by providing free or low-cost workspace, mentorship, expertise, access to investors, and in some cases, working capital in the form of a loan.

These organizations offer start-ups the platform to work around other entrepreneurial businesses, often with a similar focus. Incubators are all about helping start-ups and small businesses grow. Business incubators have existed in different forms for decades, but reports have it that the first surge of business incubators came about a little over a decade ago.

Since then, they have become a central part of the business world and there are a number of incubators across the globe looking to boost entrepreneurialism. There are over 7,000 incubators worldwide, supporting entrepreneurs in various fields.

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Note that Incubation activity has not been restricted to developed countries; incubation environments are currently being implemented in developing countries thus raising interest for financial support from organizations such as UNIDO and the World Bank.

Joining an incubator is more or less like joining a college program: You have to apply, be accepted, and then follow a schedule in order to meet benchmarks set by the incubator. You’ll also need to commit to a length of time to be a part of the incubator, typically one to two years.

Many incubators serve as a temporary launching pad for new ventures, expecting that participants (newly launched businesses) will eventually grow and move out. Unfortunately, not all companies achieve this objective as some realized their business ideas were not viable and end up shutting down.

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Anyone providing incubation services is taking a high risk. It involves commitment as they spend time generously with start-up entrepreneurs in their ventures. Thus, making money and earning profit is imperative to incubator services, growth, and sustainability.

5 Smart Ways Business Incubators Make Money

A major objective of an incubator is to assist a start-up grow. Incubators solve issues of the start-ups and provide workspace, training, or other resources. However, there are direct ways to earn revenue, and it includes:

  1. Government, Corporate, or investor sponsorship

A government, company, or other investors pay the incubator to run. This is because they wish to see, invest, or access the start-ups. This is one of the sole reasons why they hire an incubator (a third party) so that they can focus on the benefits.

  1. Profit from liquidity events
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Have it in mind that the incubator is an accelerator. It may run a VC firm seeing on their investment ten times return. It is the pipeline (accelerator) and a way to filter investments and to de-risk.

  1. Participants pay for participation

Don’t forget that an incubator charges the participants who are the start-ups. They pay so they can get quality advisers, connections, and content.

  1. Selling additional services to start-ups

There is a massive chance that since you develop affiliations and relationships through the program, it becomes attractive to rent office space, a desk, lab access, or pay membership fee as a part of the network.

  1. Selling the processes, talent, and lessons, to others

Also note that people running incubators see hundreds or dozens of start-ups. Therefore, you can become an expert in advising or seeking help. Whether it is selling your templates, tools, methods, consulting hours, books, professional services, or others, it is worthwhile.

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With over 90 percent of start-ups failing in the first few months, an organization that can guide startups through the starting hurdles can be very helpful. There are a number of business incubators that have focused on particular industries or on a particular business model, earning them their own name.