Vijay Anand | The Startup Guy.

A New Kind of Incubation Model. Part II

Posted on: September 18, 2007

For those who had asked about how incubation centres work, I believe the comments in the previous post would have helped.

To summarize, an incubation centre supports an entrepreneur with an active advisory panel, infrastructure and with some financial assistance to help them jumpstart the process. That’s pretty much the gist of the matter.

As a commentor in the previous post mentioned, the system has a flaw.

For one, the entrepreneurs in an incubation cell are quite shielded from any immediate danger. The protection and support, sometimes even turns a great potential company into a mediocre one. Without being hungry, and being foolish, entrepreneurship seems to die out from its essence of radical pathbreaking.

The second aspect is that the value proposition that an incubation centre brings into an entrepreneurs life is that, they have a panel of advisors to help groom these entrepreneurs. These advisors are quite some experts in very specialized verticals – say marketing, HR, Scaling, Technology, Investment etc, and provide their inputs to mold the company into a solid one.

I believe a company that comes from an incubation centre is very much limited by its mentors. Most of the time, the mentors are chosen not to experiment with radically new and different business models, but to execute a well-trodden one in the life-cycle of a new company. What usually ends up is a newer and smaller version of their own company that they might have built or have been part of.

This always seems to be the case, with most incubation centres.

The issues seem to be a few:

1. Limited by Mentors
2. Over-Protected from the necessary tribulations that an entrepreneur and team require to harden and survive
3. Isolated Infrastructure
4. Highly biased focus: Either too much technology focus, or too business oriented, since all incubation centres are academic centric
5. Lack of being grounded in the reality of what the customer wants (some Incubation centres deal with this quite well)

These are the basic ones to start with.

I do like what the Y Combinator and CRV Quickstart guys are doing. Also with the recent addition of Obvious, (the guys behind twitter) to the list, its possible that the next successful incubation model will follow suit along these lines. With Yahoo! hiring seasoned entrepreneurs to run their internal incubation centre, there is a pattern that we are starting to see emerge here.

More on that in the upcoming post…

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18 Responses to "A New Kind of Incubation Model. Part II"

I kind of relate and agree to your thoughts. lets talk about this sometime 🙂

I agree with you totally regarding limitations of incubation centers. Incubations centers in India, even the reputed ones, suffer from most of these limitations. I have been involved in incubating ventures and also running an incubator-based company. About the only incubation center in India that I feel has done a reasonably good job is IIT Chennai Telecom (Dr. Jhunjhunwala’s).

Sometimes incubators are run just as “amusing experiments” and everything runs on the whims of people who start/fund these incubators. They may or may not demonstrate any accountability to the success of ventures.

I also think entreprenurs in India (especially the young ones) want lots of value added help from incubators, mentors, etc for free and without diluting equity. That is a very selfish attitude. This is not so in the US.

Experiencing the atmosphere at an Incubator, I have lived through some of the things you mentioned here.

Incubators tend to act like a Kite string , where the string controls the kite’s movement(the kite flyer has a sense of control). Instead, I believe incubators should be like a balloon, providing the necessary form, but leaving the direction/destination/distance to the one actually flying.

Thanks for clarifying on how incubator works.

A good incubator should provide

1.access to both “theoretical(academics) and practical(industry professional)” advisory capital. The point of bias will apply to professionals as well.

2.help protect and propagate the idea

3.Provide infrastructure support.Let the entrepreneur focus on the job and leave the support to the incubator.

4.With respect to funding it’s better for the incubator’s to allow high risk quotient with the entrepreneur.

Vijay,
I too believe a model like Y-combinator would be a best model. Though am not sure, I think Mahesh murthy of seedfund has been doing some thing with his earlier seedfunding firm passion funds ( well to be frank i also don’t have much clues about how seed fund works rather than a seed/angel funding firm).
Anyway Vijay hope you can also share us a li’l bit about Dr. Jhunjhunwala’s initiatives as well as how KB Chandrshekhar’s incubation initiatives at Anna University is doing (Well though we don’t know each other, the first time i saw you was at the TIE chennai forum where K B Chandrshekar was sharing his entreprenial experiences..well if am not mistaken you were the one who gave the audience a few intro about proto…).

Vinu; Sure.

Old Hand: I am with TeNeT. I would agree with you for the most part.

Ram: You speak my mind.

Abubucker: There are some things – some very simple things that a startup must learn from falling flat on the face. Sometimes its better to learn those things with trying to negotiate a lease, Its the small things where you learn the most – without losing too much.

Anish: That would be me. I was really hoping to avoid names here.. but sure I’ll write about TeNeT and some of the awesome stuff that goes on in here in the near future.

Vijay,
No system or idea in this world is flawless. This kind of incubation model emerged out of necessity and works well in most scenarios. The flaws that you have pointed out are what incubation centres are supposed to deliver.
I’d say, its upto startups, whether to use that support umbrella or work outside of them. Same goes whether or not to seek VC funding. It all depends on the vision of the founder and the primary motto behind the enterpreneur himself (looking for safe exit, create disruptive technology, serve target customers in chosen segement for life etc)

Your article would even make enterpreneurship education or for that matter any education a waste as they give similar support if not the same.

If I get it right, being your own natural self and venturing out to create something pathbreaking (Think Ayn Rand’s Howard Roark) works for very few and 99% in this world require the kind of incubation model that is existing.

And coming to YCombinator, it has more flaws than the other incubation models and nobody knows it better than the Slashdot crowd

Venkat,

You got me wrong here.

1. Incubators, and everyone that I know of is trying to figure out how to build great companies. Trust me, the amount of work that goes into it and the pain in trying to raise that “seed capital”, all for what? At the end of the day any incubator is left with nothing more 1 – 3 % of the company – which is ridiculous. That number doesnt make sense unless the company itself grows to become amazingly well.

So, no, this has nothing to do with bashing incubation centres. The idea is to look at, perhaps tuning incubation centres to enable higher productivity, or enable “great” companies. That was the point.

2. I dont think i am the sure word on startup matters. Better or for worse, it is better for people to know what to expect and what not to.

3. I dont believe in “entrepreneurship education”. Entrepreneurship is a lifestyle and a way to thinking. You either have it, or dont. I have seen guys coming up with really amazing business models without knowing even the basics of business or having a fancy MBA on market segmentation and marketing. You could probably train a monkey, not an entrepreneur. You can only enable an entrepreneur.

4. “If I get it right, being your own natural self and venturing out to create something pathbreaking (Think Ayn Rand’s Howard Roark) works for very few and 99% in this world require the kind of incubation model that is existing.” I agree. The 99% of the companies, arent “great” companies either.

Can incubation centres churn out good companies? Yes, and they absolutely can. My question and thought is focused on, can they churn on “Great” companies. In literal terms, What is it going to take, and what kinda environment would it require , if a youtube were to come out of an incubation centre, was the question in mind.

As for the flaws, they are always there. Even if the system is perfect, we being unperfect will mess it up. But then, thats philosophy.

The title doesnt read “Incubators, down down” 🙂 It just says, do we perhaps need a newer model. Just a thought.

An interesting thing, stanford still is the probably the only institution which can boast of billion dollar startups. !!
I don’t know if they have an incubator there.
But, something worth observing.(considering most of the incubators are based out of educational institutes!)

Ram,

You are right. But that’s not going to be the case for long. There is an upcoming incubator which might challenge that in the near future quite aggressively.

But you are very much right, most incubators are based out of educational institutes. There are though, some incubators who arent. The results arent that much different, in my opinion.

Tweeter? I believe you are referring to twitter?

[…] blogs about successful or unsuccessful incubation models. I do agree with several points raised by Vijays Blog on some of the […]

Vijay,
I am new on this forum and I also agree that a model on the lines of Y-combinator will add a lot of value. Recently I came to know about an initiative iAccelerator from CIIE (IIM Ahmedabad) which is more or less like Y-Combinator

Ritesh, Yep. But i think it will be a batch or two before they will get their timings right. We’ll see. They have a fabulous team behind it. Perhaps they’ll pull it off.

I read your article, its really nice..
I am searching for incubation center for women in India..
If possible share something regarding that..
Thank you.
komal

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