The Washington Post reports that the U.S. Small Business Administration (SBA) has announced it is investing $2.5 million in new incubators, accelerators, and co-working spaces throughout the country. The investment is aimed at growing and supporting startups, microbusinesses, and freelancers.
These resources have one thing in common: they are all for fledging businesses that are primed to expand quickly. The SBA hopes to promote job growth across the country by focusing its funding efforts on these businesses.
The SBA is also giving some priority to incubators and accelerators that aren't located in traditional hotspots, such as New York and Silicon Valley, as well as to female entrepreneurs and early-stage manufacturers.
Questions about SBA Grants for Small Business Incubators, Accelerators, and Co-Working Spaces
To understand why the SBA is focusing on incubators, accelerators, and co-working spaces, you have to understand how the economy has shifted in recent years. More and more jobs are being outsourced to freelancers, especially in the tech industry. (We highlight this trend in our article "Obama: Freelancers Are the Future in Tech and Elsewhere.”)
In addition, the startup culture, proliferation of mobile technology, and growing demand for tech entrepreneurs has led to a rise in tech-business mentoring programs, such as accelerators and incubators. Communities, especially on the coasts, look to attract bright, creative minds and support their businesses in the early stages. The SBA wants to promote this startup culture in the middle of the country as well.
These grants might affect tech businesses in your area, so let's answer some basic questions about the SBA's proposal:
- How will these grants work? $50,000 grants will be given to 50 incubators, accelerators, and co-working spaces across the country.
- What are business accelerators? Accelerators are the most "hands-on" of the three options. Frequently, these are started or funded by venture capital firms that provide mentoring and workspace for startups. Small businesses usually only stay in the program for a few months until they "graduate." The accelerator usually makes a five-figure investment in the startups in exchange for a 1 percent stake in their equity.
- What are co-working spaces? Co-working offices are usually low-cost workspaces, (often costing a $100 to $300 in rent per month). This option is popular among freelancers, independent contractors, and IT consultants who rent desks in a shared office space. Co-working spaces come with Wi-Fi, printing and copying facilities, and access to business development resources.
- What are incubators? These spaces are sort of a cross between the hands-off and hands-on approaches of the other two options. At an incubator, a company receives tutoring but is left to its own devices. Small businesses pay rent for desks or offices.
- What are the benefits of working at an incubator / accelerator / co-working space? For microbusinesses and independent contractors, it can be useful to network with other businesses and learn from them. The theory behind these environments is that they foster competition and idea-sharing as much as they offer a low-cost space to work. In addition, these spaces offer basic business advice and resources to help you plan and budget.
What Tech Companies Can Take Away from the SBA's Proposed Grants
- You can take advantage of resources, even if you're in the early stages of your business. The SBA also offers lower-rate loans to small businesses. Keep your ear to the ground to find out if any of these accelerators / incubators in your area would make sense for your business.
- There's a step between running a business from your home and renting a full-scale office. Some small-business owners take advantage of co-working spaces so they can network and have a professional place to meet clients.
- The tech economy continues to evolve. It's not just new software and devices that change. The tech economy can completely restructure itself. In the last five years, the tech economy has become much more focused on freelance, outsourced, and flexible workers.
- The SBA can only do so much. Let's face it. You're out there on your own. If your business was sued or a fire destroyed your office, you probably wouldn't have the money to pay all the damages. While the SBA and other organizations can support you, you have a razor thin margin of error. That’s why it’s important to invest in products such as General Liability Insurance as soon as you can.
If you'd like to learn about IT risk management and how business insurance can protect your company, read our risk management eBook Protection for Tech Pros: Insurance to Help Your IT Business Thrive.
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