Incubators for Dummies

By Avatar on
January 12, 2015
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Being your own boss is an enticing idea for anyone stuck in a dead-end job. But entrepreneurship is about a lot more than having control over your career. Many successful business startups are born based on a market need, government incentives, philanthropy or a passion for innovation.

The reason many dreamers, and disgruntled employees, never work towards their dream of independence is the striking risk of failure that all business owners must face, at least in the beginning. Millions of ideas by talented individuals never get realized since they are either too afraid to startup on their own, or don’t know where to start, don’t know the right people, or simply don’t have the finances to start off.

This is where incubators come in. They provide a favorable environment for talented individuals, who have been scouted based on the individual incubator’s requirements. These individuals come in with existing small business setups or at least a comprehensive business plan for the next two years. They receive community support of the incubating panel, which is composed of industry leaders, regional alliances/authorities and other entrepreneurs looking to give back. It could be in the shape of seed money, infrastructure, work space, HR services, accountants, lawyers, supporting staff, marketing services, networking opportunities and most importantly, seasoned advice to avoid the various pitfalls that startups must avoid to survive.

The panel, in turn, benefits by increasing their own clout in the industry and having a vested interest (financial and otherwise) in the startup. They also benefit from the expansion of the consumer market for products associated with their own fields. The market in turn benefits from a budding startup scene, which attracts more foreign investment interest.

The recent collaborative acquisition trend seen in existing businesses (for example: Instagram and WhatsApp acquisitions by Facebook) may be applicable to incubators as well. This could mean developing distinct products autonomously while benefiting from each other’s technical knowledge and business insights, to capture different sectors of the same market.

As evident from WhatsApp vs. Facebook Messenger and Instagram vs. Facebook Mobile App, any resemblance that they may previously had is now gone and each app is thriving on its own. Most importantly, they learnt from each other’s user-base (which is now their combined user-base) and incorporated these insights into each product.

Similarly, Incubators can help industry veterans find upcoming talent with fresh ideas that may soon be their competitors, and rather than resisting them, joining hands with them, to enable mutual growth and innovation.

We must also consider that the risks are real. The overall rate of success in the international array of incubators is low, for example, it is 2 – 5% in UK, host to more than a thousand incubators. This is compensated by low cost investment by incubators and banking on one startup’s success to make up for the failure of the rest.

There is also the opportunity cost that comes with dedicating yourself to projects that may lead to financial loss or nominal profits, especially at the beginning of your career. Not everyone may be in a position to accept trading off a year’s salary at a respectable job in exchange for experience. However, considering the volatile business landscape in Pakistan, many young entrepreneurs may be willing to test their odds in an incubator rather than in the job market.

In Pakistan, more than 28 incubators are servicing different industries in various capacities. These include Government initiatives like Plan 9 Tech Incubator, organized by the Punjab Information Technology Board and SMEDA (Small and Medium Enterprise Development Authority), which caters to the overall entrepreneurship landscape. University level incubators include IBA CED (Center for Entrepreneurial Development), LCE (LUMS Center for Entrepreneurship), Microsoft Innovation Center, NESTIO in Karachi and MIT Enterprise Forum Pakistan. Other commendable efforts include Pasha Fund, DotZero, SEED Ventures, ArpaTech, Cloud9, VenExel and JumpStart.

It is an exciting time for tech startups. Overnight success is not guaranteed but a very real possibility. If you have a year or two to spare, and have an idea that could help change the world for better, there are people out there willing to help. Just make sure you do your homework and leave the rest to the elusive ones and zeroes that rule the world.

Image Credits: Coin Setter

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