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What are the success factors for a startup tech incubator?
Factors of success in the tech incubation industry include the creation of an appropriate and diverse network of mentors and investors, offering basic business services and resources, and establishing a system for selecting the best new startups and entrepreneurs for mentoring. We determined these factors by researching services offered and practices used by several companies identified as some of the most successful in the industry by Forbes and other trusted providers of business news and research. These companies include Y Combinator, TechStars, Excelerate Labs, and within the health tech industry Blueprint Health, Startup Health, and StartX Med.
Several of our sources discussed methods used by both incubators and accelerators. While an incubator provides critical support in the beginning phases of a business and an accelerator encourages faster growth in the mid-stages, it does appear that many of their factors of success overlap and we have therefore utilized sources in both spheres.
WHAT SUCCESSFUL INCUBATORS OFFER
Successful incubators offer a variety of services, including “Help with business basics, marketing assistance, connections to strategic partners, intellectual property management and legal counsel” according to research done by Top MBA. In order to be competitive in the incubator market, it is important to decide which services are relevant within health and medical startups and to establish a strong team of mentors for each service.
PRACTICES OF SUCCESsFUL INCUBATORS
By examining the habits and services of top tech incubators, we have determined that the most successful companies:
1. Create a strong “ecosystem.”
Within our research we found strong references to the importance of creating an “ecosystem” for clients. An ecosystem refers to the network of mentors, coaches, and resources offered by the incubator. The strongest ecosystems were exemplified by companies like Y Combinator, which has funded successful startups such as Reddit, Dropbox, and Airbnb. Their system of mentors and multiple funding resources provide support across the federal, regional, and local levels. Strong mentorship is a critical service for an incubator’s client. Creating a network of mentors with a variety of expertise keeps clients coming back to the same incubator to fulfill their assorted startup needs.
2. Are self-sustaining.
Successful companies have strong connections to investors, alumni companies, and start out with strong funding from those sources. They are able to maintain relationships with those entities by demonstrating success with the startups they select.
3. Are selective.
From a study done by Global Accelerator Learning Initiative (GALI), it was determined that successful companies vet their client prospects carefully and focus on entrepreneurs with stronger “educational, entrepreneurial, and senior management experience.” They tend to focus on newer ventures (1.73 years or younger, on average) with promising ideas rather than older ventures who have not yet proven their worth. They keep the number of startups they manage to a minimum in order to maintain quality mentorship.
4. Teach, not take over.
In order to be sustainable, tops incubators teach startup essentials and give direction, but allow entrepreneurs to apply the knowledge they have gained by taking the lead on all major decisions within the startup.
5. Are specific.
Smart, successful incubators put more emphasis on improving presentation, networking, and communication skills within their entrepreneurs so that they can continue to succeed after leaving the incubator stage.
PRACTICES SPECIFIC TO HEALTH TECH INCUBATORS
These practices were identified by examining the top services offered by health incubators and accelerators listed by Becker’s Health IT & CIO review. Successful health and med-tech incubators:
1. Know the industry.
Leading health tech incubators and accelerators such as TechStars’ Cedars-Sinai Accelerator make it a point to stay up-to-date on the information, trends, and tools of the health world. They offer clients access to the newest and best information in health technology.
2. Tailor their mentorship.
Mentorship specific to health and medical care should be a key offering of a health tech incubator. The mentorship should come from a variety of professionals in the industry, from physicians to executives.
3. Offer custom services.
Successful company Blueprint Health offers weekly discussions with founders of healthcare IT companies that have already proven successful. Custom services such as this increase the competitive value of the incubator.
CONCLUSION
The quality of services offered and the strength of the mentorship network are two of the most important factors contributing to a tech incubator’s reputation with entrepreneurial clients. In conjunction with services and network, establishing proper funding resources and using a focused approach to startup selection will create an incubator that is self-sustaining and successful over time.