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What Is a Startup 'Excubator'?

You've probably heard of "incubators" for new businesses, but what's a startup "excubator"?

Business incubators aim to fast-track the growth and success of startup and early-stage companies. Fledgling entrepreneurs can gain access to coveted capital, equipment-rich work spaces and guidance from industry experts -- if they're approved to participate in the incubator, that is. Some only allow startups to "incubate" for a few weeks.

But the industry is now abuzz about startup "excubators," which work with any startups that are willing to pay. Here's what this emerging model is all about, and what entrepreneurs need to know:

  1. Holistic help. From venture capital and tech development to marketing and PR, the overarching startup "excubator" concept is to nourish your startup under one roof. That's nice and all, but it's your company -- so pick the right team at the right price. Question excubator contracts that require you to use their preferred service vendors for things like legal assistance, accounting, advertising and so on.
  2. Not DIY. For startups jonesing for capital-only help, excubators may not be the best fit. Incubators are more hands-off, while excubators offer a more "do-it-for-me" approach. With such hands-on help, it's critical for startup owners to read the fine print and look for language that might give intellectual property rights to the excubator.
  3. Non-exclusivity. Getting picked for incubator participation is like winning the startup lottery. For every 1,000 startup applicants to the TechStars Chicago program this year, about 990 would get rejected, according to StartUp Beat. But excubators will open their arms to any startup with enough money. Before you leap into the excubator embrace, get all fundraising and assistance promises in writing to ensure the excubator puts its money where its mouth is.
  4. Long-term. Many companies that participate in accelerator programs have a tough time lasting three to six more months after the program ends. By contrast, excubator programs reinforce support by following up with a three-month bootcamp-style program and six additional months of curriculum and training, according to Nibletz. Make sure your agreement explicitly states what you're getting and for how long.
  5. Cost-effective. Excubators offer "creative capital" options. They provide discounts to startups that bundle their purchasing of all member companies' services and offer even deeper discounts for an equity stake in the company. It's a good option for cash-strapped startups. Still, you should be careful about swapping equity for excubator assistance without knowing exactly what you're getting from them, cautions Business on Main.

Of course there are many more issues that may arise, depending on the type of business you're trying to get off the ground. Before joining a startup excubator, you may want to start by consulting an experienced business attorney first.

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