Techstars, Y-Combinator, and to a lesser extent, programs such as Digital Launchbox are popular incubator programs scattered in large cities throughout the country. The keys to their success, IMHO, are:
- “Program schedules” – they run on a cycle. After ~13 weeks, it ends and people are off and running. This time-boxing exercise makes sure that everyone is focused and it allows a company to sign up with a relatively small commitment. “It is just a few weeks!”
- “Demo days” – There is a tangible product at the end of the incubation. The companies participating have to show and tell and they know if they show and tell well, there are people that can help their business in the audience.
- Great mentors – People that participate in the incubator get to meet and have varying degrees of access to people that it would be hard for them to get access to otherwise.
These incubator’s take a small slice of equity in exchange for their services. Incubator costs are relatively low and certainly the theory is they are more than exceeded by the value of the equity in the companies that participate.
I believe these incubator’s are a powerful force for innovation in a city. If a program runs 13 companies through the program every cycle and runs two cycles per year, that is 26 fairly viable start-ups created every year. The Demo Days create a focused opportunity to try and fund them and the mentoring ensures that they are better positioned for success than your average boot-strapped start-up.
Further, unlike something like an “Angel Organization”, they need to meet their quota. There will be 26 companies per year. They feel incented to get deal flow.
This feels to me like something that every city government should be wanting to do. Why haven’t they started to do them?