Features February 2018

How To – Graduate from an Incubator


Written By: Mark Long

Getting admitted to a business incubator is one thing, but how do you get out of an incubator?

Business incubators provide a stable, supportive environment for the growth of small companies.  Basic incubation services include providing quality space, mentoring, advising, access to capital and many other amenities.  Several incubators also offer specialized equipment for use by clients and access to university resources, when affiliated with a university. The United States has more than 1,600+ incubators; the world has more than 7,000 business incubators.

Getting admitted to an incubator program is very similar to getting a job – you have to fill out an application, go through interviews and make a good impression to prove you are a quality, growth-oriented company with a unique, marketable technology or service.  Once in the program, companies are asked to hit milestones, to grow and to eventually move into the public sector.

That brings us to the actual process for “graduating” from a business incubator.  Most incubators have flexible criteria when it comes to asking companies to move out: there are good and bad reasons for asking a company to leave.

Incubators provide tremendous support and resources for a single, fixed price. When a company becomes profitable, it is time for it to leave the nest and vacate the space so another start-up can move into the incubator and benefit from the support and resources. Becoming profitable is a good reason to ask a company to leave the space.

Typically, incubator managers, accompanied with mentors and advisors, meet periodically with company representatives to discuss goals and milestones necessary to advance the company’s growth.  When a company consistently hits all of these targets over time, this typically takes a year, and requires less supervision and mentoring, it is time to consider “graduating” the company.

Last, but not least, business incubators are multi-client facilities. When an individual company requires more than 20 percent of the available leasable space in the business incubator, that company needs to move out to continue growing and expanding. At UF Innovate | The Hub and Sid Martin, we celebrate each and every company that graduates with publicity, assistance and, of course, a party.

Of course, there is always the other side of the coin – when a company doesn’t meet its milestones on a consistent basis, when it fails to thrive or stops taking advisement/counsel regarding growth or it has issues with cash flow. All of these situations call for re-thinking the company and its product.

Some companies fail, some move out and decrease size or activity and some actually re-form or even re-apply to the incubator. Regardless, when a company ceases to grow, it is time to leave the incubator.  The good news is that these situations rarely happen, as most business incubators are selective about admitting clients and also provide substantial support to aid success.

Studies performed by the International Business Innovation Association (InBIA.org) indicate that over 87 percent of companies who graduate from a business incubator are still in business, or have been acquired, five years after graduation.

Bringing companies into a business incubator is a sign of a healthy entrepreneurial ecosystem, where new startups are being generated and where entrepreneurs understand the value of business incubators. However, graduation is an even better sign of a healthy growing economy.

Just as students look forward to graduating from school, startup companies look forward to “incubator graduation day.” It is a sign of growth, stability and success.

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 Mark Long is the director of incubation services for UF Innovate at the University of Florida. UF Innovate is the umbrella organization that unites two incubators and the university’s tech transfer efforts. Long leads both UF innovate | Sid Martin in Alachua and UF Innovate | The Hub in Gainesville. Under Long’s leadership, the Sid Martin incubator was named the “Randall M. Whaley Global Incubator of the Year” for 2017. Prior to serving as director, he was the former president and CEO of the Indiana University Research and Technology Corporation, where he directed activities of IU’s business incubator and tech transfer office. He also served as director of Technical Operations at Washington University in St. Louis. Long has authored several books on incubation and economic development, served as a global consultant for startups, tech transfer and business incubators and accelerators, and won the President’s Award for Lifetime Achievement in Business Incubation from the International Business Innovation Association. 

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