Why Effective Documents
Are a Must for Incubators

Why should incubation programs use written agreements in their interactions with clients? Anyone who’s ever been burned on a verbal agreement likely can think of many reasons. Participating parties can too easily interpret verbal pacts differently, and informal agreements can lead to inconsistencies in how an incubator treats individual clients. Additionally, without a written document to reference, it’s difficult to convey the terms of a standing agreement to new management on either side of the table.

Moreover, when it comes to legal enforceability, a written document is the best choice. "Often an oral agreement is technically enforceable, but you have to prove it exists," says Stephen Wurzburg, a partner with legal firm Pillsbury Winthrop LLP in Palo Alto, Calif. "If it's in writing, the proof issue goes away."

In addition to limiting an incubator's liability, written agreements and policies can help incubator managers and clients avoid needless misunderstandings by documenting things such as how an incubator handles overdue rent and what accomplishments the incubator requires of clients before they graduate. Written documents delineate the incubator/client relationship, helping both parties to understand their rights and obligations.

The documents an incubation program uses in interactions with clients can address everything from how to use the photocopier to the acceptable amount of time a client may remain in the program. For example, client handbook might cover photocopy protocol, while a lease or license likely would handle length of stay. Following are the most common documents that incubation programs create and employ in their dealings with clients.

Leases or licenses: Contracts that govern use of space and other services in an incubator. A lease agreement grants a client an exclusive right to space in an incubator for a specified period in exchange for rent. A license agreement outlines services a client will receive, including use of space, in exchange for fees.

Service agreements: Contracts that delineate the services an incubator will provide and clients' obligations to make use of those services. Incubators may execute a service agreement in addition to a lease or license agreement.

Applications and entrance requirements: Written questions and guidelines that an incubator uses to assess potential clients' suitability for the program and that potential applicants consider to determine their eligibility for and interest in a particular incubation program.

Client handbooks or manuals: The how-tos and rules of residing in an incubator. Handbooks can explain admission, graduation, parking, smoking and other policies; support services the incubator provides and their costs; client responsibilities; how to operate the photocopy machine or sign up to use a conference room; and any other information clients may need to know.

Conflict-of-interest policies: Guidelines for revealing and resolving financial, ethical and other conflicts that incubator representatives might have between their personal interests and their official duties. These policies depend on voluntary disclosure of potential conflicts and usually outline mechanisms to resolve or eliminate conflicts of interest.

Nondisclosure agreements: Confidentiality agreements that allow incubator staff to exchange necessary information with incubator applicants and clients, and provide applicants and clients reassurance that incubator staff will not inappropriately disclose that information. These agreements can identify with whom incubator-related personnel will and will not discuss client companies' business and can define a period of time for which specified information will remain confidential.

Graduation policies: Criteria used to determine when a client will leave an incubation program. These may include any number of factors, including that the client has reached the maximum allowable stay, maximum available space or a certain number of employees.

NBIA Members: Learn more about crafting documents for your incubation program in the August 2002 NBIA Review feature article, Good Incubator Documents Make Great Sense, by Carol James.