Business incubators

As well as guiding your startup company to success — incubators can speed up your growth.

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What is a business incubator?

Business incubators are organizations that provide support to companies — in the early-stages of their development. This support can come in a number of ways — from providing co-working space to assisting with regulatory requirements.

Business incubator programs often provide startups with seed capital — in return for equity. Grants can also be provided — especially for businesses in specific sectors or industries. Consequently, incubators can be considered as a source of alternative finance.

Programs are sponsored by private companies, universities, development organizations and government related entities.

Business incubators — considerations

Business incubators play an increasingly key role — boosting innovation, growth and success. They may be focused on specific verticals, or markets. For example an incubator sponsored by a financial institution — may only be looking for fintech startups.

Startup businesses generally lack the resources, experience and network required — to start and sustain a business. Incubators provide a range of services that help these startups — get over the initial challenges of developing a business. Accordingly, incubators help with things like funding, accounting, legal, technology, office space and other essentials.

These services will typically come under four main categories namely:

  • Planning your business: turning your idea into a viable business plan
  • Launching your company: putting the business plan into action
  • Managing your business: mastering daily operations
  • Growing your company: sourcing funds to develop and finding new customers

Business incubators and startup accelerators while similar — have distinct differences. Startup accelerators are 2-6 month programs — focused on growing an existing startup. On the other hand, incubators are more concerned with providing an enabling environment for startups — to develop minimum viable products (MVP) and viable business models. Incubator programs also tend to be longer term.

Incubation can really benefit new business ventures — especially through networking and adding credibility to your business. This credibility can be crucial for raising funds in the future.

How do business incubators work?

Getting into a business incubator involves going through a selection process — after applying for admission. As there are a number of programs out there — each incubator will have its own selection criteria. Accordingly, it is important that you do research into programs that will not only accept you — but are a good fit for your business.

What knowledge are you seeking? Do you require investment? How long can you dedicate to the program? What end results are you looking for? Answering these questions will allow you to identify, and eventually apply to incubators that meet your requirements.

Most incubator programs offer co-working spaces and shared admin services. However what separates them — is the other services they provide. Services such as networking activities, accounting, market research, internet access, bank loans, grants, venture capital, angel investment, regulatory compliance, intellectual property law and much more.

Once you’ve found a suitable incubator — you’ll need to apply and be accepted. The application process commonly involves submitting a business plan. Some incubator programs are easier to get into than others. Generally the more perks or benefits a program offers — the harder it is to get in. Incubators that can help with funding are particularly difficult to get into.

If accepted — you would likely have to relocate.The amount of time you’ll spend in the incubator will also vary — depending on the program, your type of business and the skills you already have. Businesses with long research and development cycles, will need more time in a program — than businesses that can quickly bring a product to market.

With some incubators you would graduate after a specific number of months, others will require that you meet certain benchmarks — other than time. These benchmarks may be company turnover, first round of funding, staffing levels etc.

Benefits of business incubators

  • Inspiring environment
  • Valuable advice
  • Established support structure
  • Validates your business model
  • Can get free access to services — you would otherwise pay for
  • May get seed capital

Limitations of business incubators

  • Long application process — can be difficult to get in
  • Requires a significant time investment
  • Equity may be required — if offered seed capital
  • Some incubators charge a small fee

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