Incubators help startups with mentoring, networking, and funding. According to the National Business Incubation Association, there were 1,250 such programs in the U.S. last year, which worked with 49,000 companies with around 200,000 workers.

Photograph by Robert Llewellyn/AgStock Images/Corbis

Incubators help startups with mentoring, networking, and funding. According to the National Business Incubation Association, there were 1,250 such programs in the U.S. last year, which worked with 49,000 companies with around 200,000 workers.

Photograph by Robert Llewellyn/AgStock Images/Corbis

Incubators Come in All Shapes, Sizes, and Specialties

Wide participation
Wide participation

Incubators help startups with mentoring, networking, and funding. According to the National Business Incubation Association, there were 1,250 such programs in the U.S. last year, which worked with 49,000 companies with around 200,000 workers.

Photograph by Robert Llewellyn/AgStock Images/Corbis
Who runs them?
Who runs them?

Incubators are popular with government agencies as a way to boost economic development. Such corporations as Turner Broadcasting [TWX], Volkswagen[VOW], and Panasonic[PC] also create their own incubators as a way to stay close to startups that may be worth investing in, partnering with, or acquiring. Venture capitalist firms such as Kleiner Perkins have partnered with tech incubators to give them better access to startups that may be the next Google[GOOG], Facebook [FB], or Twitter. And academic institutions are among the biggest supporters of incubators to help students get their startups off the ground. Schools sponsored 32 percent of incubators, according to the NBIA.

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Offering help
Offering help

Incubators can vary in size from just a few companies to dozens. The average number over a year is 35, according to the NBIA. Most incubators are multiyear programs that give young companies time to establish themselves. Program sponsors normally take no stake in the startups they mentor.

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Accelerators
Accelerators

The technology industry is an anomaly, however. Startups cycle in and out of what are known as accelerators after only three or four months. Accelerators are usually operated by for-profit, seed-stage investment companies. Startups accepted into such programs give up a small stake in exchange for office space and a crash course in entrepreneurship.

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The blueprint
The blueprint

Y Combinator, founded in 2005 by Paul Graham, a former programmer and technology industry veteran, popularized the accelerator concept. The idea is now widely copied in Silicon Valley and beyond by such accelerators as TechStars, AngelPad, 500 Startups.

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Hits and misses
Hits and misses

Graham recently wrote that the value of Y Combinator’s investments was close to $10 billion. Dropbox and Airbnb, his company’s biggest successes, account for three-quarters of that amount, he says. For every one success, though, dozens of accelerator-spawned companies fail or merely tread water.

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 Specialized incubators
Specialized incubators

While some incubators and accelerators accept virtually any kind of company, others specialize. Industrial ceramics, health, homeland security, biotechnology, and green technology are just some of the areas of focus.

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Showing off the goods
Showing off the goods

Demo day is the climax for startups graduating from an accelerator program. It is here that they show off the product they created during their stay and can potentially attract more investors.

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