Nowadays, there are a lot of incubator programs sprouting all over the country. But is an incubator the right choice for your startup?
A lot of incubators come with great perks: business savvy support, a roof over your startup enterprise, hands-on mentor galore, VC radar and access, and a ton of other great resources to jumpstart your startup toward continued success. Yet as with all things in life, sometimes incubators can add a little sour patch of complexity with over-engineered deal documents that add more frustration than long-term benefits.
Hence, when faced with the opportunity of joining an incubator, make sure that what you are giving up is worth the momentary hassle. An incubator sign-up should not require a full-scale legal audit and review. If it does, make sure you understand what you will have access to and what you are giving up in return. Most incubator deals are straight forward (for example: they want common stock with preemptive rights), but others require substantial changes to your startup’s certificate of incorporation, which entails additional fees and more. Overall, you should know where you stand before you commit because an incubator should be just that, a place to nurture and grow your business.
Bottom line: When it comes time to sign on the dotted line, make sure you have read all the deal terms and conditions. A sure way to alienate future investors is to sign up for deals that work against you in the long run.
As with all my posts: This is for general information only, this does not constitute legal advice nor does it establish an attorney-client relationship. Also, please do not post any confidential information in the comments below.