First Office: Silicon Valley Business Incubators

Written by Francis Adanza. Posted in First Office

This is the first in a series of blog posts on where a start-up team might look for their first office. One of the first types of office space to consider would be space in a business incubator.

A business incubator is comprised of multiple businesses operating independently within one location or under a membership group. The objective of the incubator is to help its businesses get started and grow. Incubators offer services that can help entrepreneurs overcome a wide range of obstacles by reducing startup costs with a shared system of support and resources. Most incubators offer shared office space, utilities, and services that create a unique environment for new businesses to grow. Incubators are known for helping startups lower overhead costs, create networking opportunities, and increase the chances of survival.

Tenants in business incubators share overhead costs such as utilities, office equipment, IT support, conference rooms, laboratories, and receptionist services. Additionally, basic rent costs are usually below the normal market value for the area. Often, incubator managers and staff members provide insightful advice on a broad spectrum of issues including, business development, market research, strategy, and fund-raising. Jim Robbins, Director of the Environmental Business Cluster believes, “founders are surprised to learn that they can get startup services for no more than the cost of space, furnished units, strategic planning advice, and free common areas like conference rooms.”

With the desire to create an entrepreneurial environment, some incubators host a variety of events that cater to both their internal members and external community. Plug and Play Tech Center, one Silicon Valleys largest incubators, is well known for hosting conferences and entrepreneurial events. Some of their past conferences and events include the TechDirt Greenhouse, ANZA Technology Conference, Web 2.0 Expo, and monthly workshops like the SVASE Startup-U and VC pitch sessions. As a frequent attendee of these conferences, I appreciate the opportunities to meet other entrepreneurs, keep in tune with new technologies, and learn from distinguished guest speakers.

There are many factors involved in transforming an idea into a marketable product. Besides the significant technological challenges, building and operating a business is very complicated. The Small Business Administration reports that over 80 percent of businesses fail in their first five years. However, the National Business Incubation Association claims that 87 percent of businesses that graduate from an incubator program are still in business after five years. Since access to other startups, management professionals, executive mentors, and expert consultants are so readily available, it makes it easier for incubator tenants to fill gaps in their business.

If you are considering a business incubator you should make sure that your firm’s focus is aligned with the incubator’s mission and then schedule an appointment with the director. Most incubators have initial requirements before incubation consideration. Some incubators are industry focused and only cater to certain segments like Biotech, Cleantech, Software, and Semiconductor. Like investors–and remember many of these organizations will ask for equity–directors want to meet with the entire management team and see several written plans like marketing, financial, and product roadmap. Evan Epstein, Chief Operating Officer (Silicon Valley) for the Girvan Institute of Technology says, “It helps to be referenced in from someone within our network.”

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Comments (3)

  • Mike O

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    My startup has been extended an invitation to join an incubator. They’re in the process of sending me a lease agreement, but I’m not convinced. You mention that many incubators ask for equity, this one hasn’t (yet). I’m definitely going to read the fine print, but are there other things to look out for other than not giving up any equity?

    Reply

  • Sean Murphy

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    Depending upon who they can offer for your advisory board and how much equity they want, this may be a very good deal. It’s normally not (at least in these post-bubble times, or perhaps more accurately intra-bubble times) just equity for space, it’s equity for expertise and connections.

    Reply

  • SKMurphy » John Holton of Symphony Consulting on Business Incubators

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    […] Following up on my “Silicon Vally Incubators” post in the “First Office” series I wanted to get a tenant’s perspective on the the advantages and drawbacks of locating in a business incubator. Symphony Consulting is a manufacturing outsourcing, procurement, and supply chain consulting firm that helps original equipment manufacturers and their supply chain partners in three key areas: revenue, assets, profitability. I talked with  John Holton, co founder of Symphony Consulting, about his experience of finding his first office. Below are the questions and answers from our short discussion. […]

    Reply

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