Think Before You Incubate: How Incubators Can Hurt Your Startup

http://techli.com/2012/06/how-incubators-hurt-startups/

by MRonney • 14 years ago

43 13 14 years ago

nickler• 14 years ago

Great post, a few of the incubators/accelerators we looked at had very few mentors that could help us get to market, and in our discussions we discovered that none of them knew our space like we did.

The flipside is that if you're not already in a tech hub, you face a grim prospect for attracting tech savvy, forward thinking angel investors. The local incubator may be the best shot you have at rubbing elbows or warm intros.

In an era where barriers to entry are crumbling, too many people see incubators as a path of least resistance to success or funding, but the real acceleration will usually be found by networking with your customers and users instead.

michellewax• 14 years ago

While currently interning for a Chicago startup in an incubator, I completely agree that true acceleration is through networking with customers and sers. Even if incubators aren't necessarily helpful, if you use your time in one well you can succeed. It takes a lot of hard work, patience, and networking but I believe it can be done.

timjahn• 14 years ago

"but the real acceleration will usually be found by networking with your customers and users instead".

Amen. Regardless of whether or not your startup is participating in an accelerator/incubator, you need to be networking constantly and always have a pulse on your customers.

Alex3917• 14 years ago

These are interesting as discussion points, although it's a rather weak argument overall. Among other things there is no discussion of the benefits of incubators, which are not at all insignificant.

tptacek• 14 years ago

This is a little facile.

Incubator programs can hurt your startup. Since 2005, Y Combinator has funded 460 startups with only a handful of big wins. The rest have faded away, been acquired quickly without growing out of a feature company, or continue to hang on as zombie companies, which are not dying, but not really doing anything either. Who knows how many of these companies could grow into something bigger without the pressure of generating a return for early investors in just a few short years.

This is always going to be true of every incubator. No startup program can promise to vault a majority of its participants to Heroku or even Reddit levels of success. Similarly, the top tier of VCs famously get the best companies; what's the win rate at Sequoia? It's truism regarding the whole market that the success of 1 startup in 10 pays investors for the other 9.

Also, while it may be worth scrutinizing less successful startup programs, this advice...

Take a look at the list of current mentors on the program’s website, and try to identify businesspeople that you admire. Do you recognize at least 50 percent of the names? Are there mentors who have proven themselves in your industry?

... seems to miss a pretty important attribute of the successful startup programs like YC: they have vast alumni networks. Has Paul Graham started a successful streaming company? No; neither has John Doerr, Ron Conway, or Greg McAdoo. But I'm pretty sure Graham can get you a meeting or 10 with Justin.tv.

phildionne• 14 years ago

Incubators are becoming more and more like a popularity contest where the outcome is a crazy valuation. To me it looks like a broken system or one that's going to break sooner or later.

I was planning to submit my application to FounderFuel, a fairly new accelerator in Montreal, and decided to wait a bit. I'm still not sure if there is any value for my actual project in that kind of thing. The main drawback for me is the difficulty to focus on coding during the session.

Is this a problem for anyone else or is there incubators with a focus on coding?

alexro2• 14 years ago

Good incubators won't let you to code with one focus. They will shift your attention sideways so that you might discover new opportunities and validate your vision. Often it leads to abandoning the original idea completely.

dariusmonsef• 14 years ago

You talk about what goes on behind closed doors, but provide no proof that you actually know what goes on behind those doors. As a YC alum, Mentor with 500 Startups & PIEPDX and friend of the family to Techstars... This post couldn't be more wrong. It looks like mostly it was written to cause drama and generate pageviews.

"Since 2005, Y Combinator has funded 460 startups with only a handful of big wins."

We were just at the 7 year birthday party for YC in a room filled with successful founders. The collective valuation of the group is billions of dollars... and regardless that some founders have had their companies fail along the way, the network they're a part of adds huge value.

I'd go point by point and explain the counter for this entire post... but I don't have the time.

I think there is a valid argument about which incubator you participate in and the pros and cons each bring... but to warn people about the top incubators is almost comical.

redthrowaway• 14 years ago

The immediate reaction here appears to be to pan the article as though it was written from a position of ignorance or as flamebait, but consider that Techstars, YC, etc are not the only incubators out there. Far from it. There are a plethora of copycats, few of which boast any bonafide credentials or success stories.

If you can get into one of the tier-1 incubators, then it's almost certainly a good idea if you're building a consumer app. For the lower-tier accelerators, however, it might just be a waste of time and equity.

Just as an incubator can offer great assistance to a startup, it can also be a hindrance or waste of time and resources. Pick your incubator like you pick your cofounder. If you can't find the right match, then be prepared to go it alone. It's better than making a poor choice.

alexro2• 14 years ago

Incubators are just like street market. There are overcrowded spots where there is always something going on, and there are spots that no one visits. Be in the right spot and you get piece of action.

larrys• 14 years ago

"For the lower-tier accelerators, however, it might just be a waste of time and equity."

Is it? First of all the equity only matters if you are a success. The time only matters if there is an opportunity cost of the time (unclear with the "18 to 20" year olds). Hard to believe someone that age is going to not get some benefit from the mentoring that is worth the equity and psychic benefits. And of course we don't have good data and controls to compare non incubator startups either.

I would argue that, similar to "psychic income" there is a certain "psychic bump" to feeling that (even wrongly) you are on your way to something because of the structure of the incubators. Something similar might be companies back in the day (not sure if this is done anymore but it was in the 80's) who would take groups of laid off workers and have them show up at an office to work on resumes and look for jobs. Being in the presence of other job seekers apparently did some good for them in terms of their self esteem and how they approached that task (as opposed to doing it from home). (My first hand experience with this was as a vendor to a company that became the leader in this field, Manchester Career which landed large contract after contract and expanded greatly because of what they were able to achieve).

So I would question that there isn't some benefit to the lower tier incubators that is worthwhile to experience and I don't believe that has been proven out in any research of them and in fact there is this story which was widely discussed here:

http://www.forbes.com/sites/tomiogeron/2012/04/30/top-tech-i...

bascule• 14 years ago

Don't incubate, thinkubate

michaelochurch• 14 years ago

Incubators are the new MBA. The top few programs bring connections, which unfortunately are by far the most important asset in the VC-istan startup game-- especially now with all the carpet-baggers and summer soldiers and unsavory scene kids. (You also have the option to learn things, but that's tertiary.) The next few are well-run, generally good programs but don't have the prestige to bring the leadership positions (or, for incubators, the funding) to allow a person to make use of that knowledge... so it's only worth it if you have those resources already. Those in the bottom set provide neither knowledge or connections and are generally a waste of time.

Incubators, I guess, are a bit better in the sense that they only collect if you do. For that alone, they deserve a better name than MBA programs, which take their share regardless.

Think Before You Incubate: How Incubators Can Hurt Your Startup

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