DEFINITION of 'Incubator Firm'

A firm engaged in the business of fostering early-stage companies through the developmental phases until such time as the company has sufficient financial, human and physical resources to function on its own.

The firm can be either a non-profit or a for-profit entity, and it can provide assistance via any or all of the following methods: 1. access to financial capital through relationships with financial partners, 2. access to experienced business consultants and management-level executives, 3. access to physical location space and business hardware or software and 5. access to informational and research resources via relationships with local universities and government entities.

BREAKING DOWN 'Incubator Firm'

An incubator firm that functions for profit will look to gain equity in the company in exchange for their services. Sometimes simple fees are charged at the time of service, but gaining equity in an early-stage company with strong growth prospects is the ultimate goal, and one that can provide a financial windfall for the incubator firm if the early-stage company takes off.

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