What history teaches us about startup incubators

17 thoughts on “What history teaches us about startup incubators”

  1. Om –

    “this time it’s different…”

    well actually, it is.

    differences between 2012 and 2000:
    – substantially greater audience (billions of people globally rather than barely tens of millions domestic)
    – broadband vs. dialup: way more high bamdwith usage than ever before
    – broad consumer use of social platforms; hundreds of M of people using facebook, twitter, etc that enables distribution
    – ever-improving monetization & payment platforms, even in developing markets
    – dramatically reduced cost for building, testing products, acquiring customers using free sw, cloud services, etc

    these days it does NOT take $5M to build a company; fail-testing can occur on a $50k budget rather than a $500k or $5m budget.

    that may not sound like much, but it is a lot when u factor in aggregate costs & sample sizes.

    1. Dave

      Having known me as long as you have – the arguments you are offering up are nothing new or alien to me. In fact, I was writing about them long before they were conventional wisdom. So, yes, I get it.

      What has not changed – and won’t change is human greed. Back then too it was over-population of incubators that killed the ones that were working. Please don’t tell me the sprouting up of half-baked incubators is not a troublesome idea as Andrew outlines so well in his post.

      The analogy I was thinking was “strip mining” 🙂

      Thanks for sharing your comment. As always, speaking from the heart. I like that.

      1. well of course… “90% of everything is crap.”

        but still, in previous times they DID all flame out (altho Idealab still had it’s share of multiple-hundred million dollar successes)… and that WILL NOT be the case here.

        no effing way YC goes away, unless PG gets tired & retires. I don’t think TechStars disappears, and damn certain I’m doing my best to make sure 500 Startups not fade away.

        There will be some attrition for sure, but we ain’t all going quietly into that dark night good sir…

  2. What you have mentioned is super correct, the real help and motivation is really missing! Everyone is getting into an illusion of starting up but their passion is not concrete enough to survive… money takes your passion away, passion keeps you dream alive, one should start something only if their passion is going to drive it not money. NoPay Startups is doing that experiment and trying to help true entrepreneurs to get going without money and just passion….. Cheers! – Chet Jain

  3. I can’t speak for 1999, but having gone through a couple of application rounds (http://www.kickofflabs.com) and talking to some folks behind Techstars in the Seattle area I’m not sure how it could be a bad thing. Sure, a lot of the copycat incubator businesses won’t make it… but if there is a higher goal to advance technology and human knowledge… they seem to be all winning there.

  4. Om, Happy New Year- great rant. I was one of those heading a wireless incubator in 2000/2001 and spot on it was a mess. Wrong model! Yes there is a lot of new ones out there today, “living the dream!” However, having launched one in London last year – there are other models now that you have not addressed, ones where we have learnt, grow up and now working. At IW (www.theIW.org) we have taken a totally different approach. 1. no filter on the way in. 2. stay based on performance and delivery 3. only co-investment (no favoritism) 4. no mentors, training, coaching – teams have to be able to succeed 5. some “adult supervision” 6. no services and no extra charges 7. dedicated growth program 8. only share in growth upside 9. vibrancy trumps occupancy.

    Love to chat through the details. Please don’t put us all in the same camp…. thanks and speak soon.

  5. Yup. I worked with Cyberstarts, an Atlanta incubator, in 2000. And I now live in Chicago, where Healthbox has recently sprouted (although they call themselves an “accelerator.” Also served on the Springboard Enterprises Midwest Venture Forum Committee (Springboard is a not-for-profit accelerator for women entrepreneurs). The #1 reason incubators fail? People. #2? Funding. If there is no link to funding, incubators have a hard time creating sustainable businesses. Sadly, university tech transfer efforts outside of Silicon Valley and Boston don’t work much better. Take for instance, U of M.

  6. An interesting piece, Om – thanks for writing it.

    At the risk of initiating a semantics debate: an “incubator” isn’t the same as an “accelerator”. I don’t think that’s a distinction without a difference.

    The financial and organizational structure and the business philosophy at Idealab (15 years and still going strong! here in Pasadena Calif.!) are fundamentally different than Y Combinator or any of the other accelerators. Not necessarily *better* – just different, in both theory and practice. (We love the YCs of the world and want them to succeed.)

    I can’t speak officially for Idealab but if you wanted to see what’s different here, you’d probably get a good reception by asking.

  7. Om –

    Great read. And as much as I agree with Dave on the fundamental differences between 2000 and 2012 I also see a ton of incubators simply not offering enough of real, actual support for their portfolio. Their networks are weak, their differentiation is negligible and the money they offer is too little to make a difference.

    At the same time – let them be. The worst they can do is pour (some) money and resources into companies which might not be fundable. But hey – that’s okay. Consider it a free real-world MBA course for the founders. And if all we get out of this a couple more people who are bitten by the entrepreneur bug – that’s an awesome outcome!

    On the other hand you do have the amazing work YC, TC, Seedcamp, 500 Startups and many more are doing – and they clearly inspired some amazing offsprings in very different markets such as The Unreasonable Institute who incubates social change ventures or The Designer Fund incubating strong, designer-lead solutions.

    So – life comes and goes in waves. It’s all good.

  8. have always believed with seedcamp that:

    (1) you need to take a long long view
    (2) you need to build something that fits the needs of its market (in the case of europe – ours – it was about bringing a network together where there had been fragmentation)

    its all about the people – and as Andrew Shaffer says – the network behind and around them

    i agree there will be a lot more before there are less – like most innovation cycles 😉

    BTW _ my view in 2009 – http://localglobe.blogspot.com/2009/11/seedcamp-thoughts-on-evolution-of.html

    “I know people say that long-term thinking is unfashionable in our industry, but I agree with Fred Wilson and my dad that great things take time. In my mind, helping to bring some cohesion to our region’s distributed network of talent, capital and advisors is a 15-20 year project.

    No single organization can achieve this. Even if Seedcamp is not ultimately a success – as measured by the success of the entrepreneurs who have been funded by it or experienced its programs – hopefully it will have helped to inspire some of the right thinking.”

    happy new year man

  9. Hi Om. Think you’re definitively humorous but a little too harsh on the poor ol’ incubators…and especially the younger sibling, the accelerator. The ‘batch style’ accelerator can provide value in three forms. First, the ‘artificial’ timeline to get a better plan ‘A’ on the table just seems to work for most people. Second, if it’s established a high likelihood of a decent exit, e.g. $150K convertible note or something, then it ‘signals’ value just to get in, and thirdly, unless we’re all completely cynical about our capacity to learn anything new past the age of 13, it is a good way to pick up a few tricks of the trade for the current or future venture, aided by the peer environment (and competitive pressure)…thus, reality learning. Now this could mean that crap coming in just gets done quicker, has a better chance of a zombie life with a little funding and erroneous cause and effect gets propagated…but no one said this was easy or perfect 🙂
    Yours, Ricardo dos Santos

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