Wednesday, August 10, 2011

A New Incubator in Georgia

A new business incubator is coming online in Georgia in the Atlanta metro area, Alpharetta to be exact. This Alpharetta-based incubator, Alpharetta Accelerator, will focus on helping tech-oriented start-ups get the resources they need to be successful and grow. The perfect candidate will be a start-up from the software, medical device, medical services, or green technology realms.

This business incubator is a little different. It doesn't come cheap, as many do. Many incubators provide low cost rent and business advisory services. Not this one, at least not the low cost rent. The entire cost: a $5,000 entry fee - or $15,000 in company stock if you don't have the cash to pay the entry fee. Then, on a monthly basis, the fee is $2,500.  Unless your business is quite large, that's significantly more than the typical start-up would pay in rent in Atlanta's current real estate market.

So what do you get for these hefty fees?

  • Office space. (The business incubator has a total of 3,500 square feet. Each company will get a portion of this.)
  • Business advisory. Each company will have five business advisors. These individuals will mentor and coach them, provide access and introductions to prospective customers, and, assuming they like what they see, they may invest.

The Alpharetta Accelerator is beginning life with $10 million, the bulk of which will be invested in the incubating companies. According to the Atlanta Business Chronicle, from which most of the information from this article was obtained, "Investment rounds would range from $250,000 to $2 million. In return, investors would receive between a 10 percent and 25 percent stake in the companies, Bryant said."

So the cost seems high to me but if the business incubator invests in the companies and provides the level of business advisory it's implying it can, then the cost could actually be low in the grand scheme of things. Most small incubators don't provide more than cheap rent, some advisory, and an entrepreneur's community. That's valuable, but not worth $2,500 per month. Of course, most of the companies in those incubators don't expect to generate more than a few million in revenue. So perhaps it's all relative?


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