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Incubators, incubators, every where

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Is there an incubator bubble? Perhaps it’s an incubator arms race. When I wrote Incubators, Accelerators, and Ignition in 2009 there were not a lot of Canadian based incubators (the now defunct BootupLabs was the only one listed in the ReadWriteWeb article).

Incubator Index +18

There has been a rise of support for early-stage entrepreneurs across the country. Yesterday’s announcement of GrowLabs in Vancouver along with the launch of Foundery, Multiplicity Accelerator in Toronto, FlightPath in Edmonton, YearOneLabs in Montreal. There are existing players including Extreme Venture Partners, Mantella Venture Partners, Wesley Clover, Innovacorp and Real Ventures/Notman House. The are university incubators like UW Velocity, MEIC, LeadToWin, Ryerson’s DMZ, Next36. There are Communitech, WavefrontAC, CoralCEA, MaRS, NBIF among others.

There are companies like Jet Cooper, Teehan+Lax incubating people and ideas (Rocketr & TweetMag). There are new programs like the Under 20 Thiel Fellows that had 2 Canadian students: Gary Kurek (LinkedIn, @gskurek) & Eden Full (LinkedIn, @roseicollistech).

There is competition from YCombinatorTechStars and 500StartupsAndrey Petrov YC10 (@shazow), BackType YC08 – Christopher Golda (LinkedIn, @golda) & Mike Montano (LinkedIn, @michaelmontano), Rewardli 500Startups- George Favvas (LinkedIn, @georgefavvas) & Jean-Sebastian Boulanger (LinkedIn, @jsboulanger); A Thinking Ape YCW07 – Eric Diep (LinkedIn, @ediep), Kenshi Arasaki  (LinkedInarasakik) & Wilkins Chung (LinkedIn), InPulse YCW11- Eric Migicovsky (LinkedIn, @ericmigi), Vanilla Forums TechStars09 – Mark O’Sullivan (@navvywavvy) and others.

There has been an explosion of support for existing organizations, there has been a rise of a new breed of incubator/accelerator/catalyst.

How does an entrepreneur evaluate an incubator?

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Do you pick the incubator? Or does the incubator pick you? This is a business decision. It’s somewhere between chosing an investor and a service provider and picking where to go to graduate school. There are implications for incubators about which startups they choose to help. Their reputation, alumni and talent pool are determined by the people they let in.

There is no magic formula and rationalization or justification can make any decision sensible. But when I advise entrepreneurs, I want them to think about:

Pedigree & Reputation
What are the exits? Who are the alumni? What do others think about the program? One of the big reasons that YCombinator has become so successful is the success of it’s alumni. It has been reported that the YCombinator portfolio is worth almost $3B. They have an strong history of helping companies succeed like crazy. Think about this in terms of post secondary education. What is your opinion of a computer science graduate from: Carnegie Mellon University, MIT, Stanford, UWaterloo, Slippery Rock University? The quality of the education might not be any different. But you need to consider the external optics of an incubator program, just like you do in picking a school.
Alumni, Mentors and Advisors
Who do you have access to? Does the pedigree or alumni network change your access to people? Think about YCombinator grads, they get access to Yuri Milner and Ron Conway and $150,000. That’s something most of us don’t have access to. What doors and connections that aren’t available to you today can be enabled by attending an incubator. Who are the mentors what have they built? For example, look at the great talent behind GrowLab – Debbie Landa (Dealmaker Media), Boris Wertz (Abe Books), Michael Tippett (NowPublic), Leonard Brody (NowPublic) and Jason Bailey (SuperRewards). These are some people with impressive histories of building, promoting, operating and selling startups. You need to think about your vertical, your customers, the connections to potential acquirers, etc. Are the people connected with the incubator beneficial to me.
Culture
You need to make sure that the culture is something you can work in. I can only describe the culture of places I’ve seen, but I look at Extreme Venture Partners and Mantella Venture Partners in mentoring, motivating and growing entrepreneurs. What is important to you? I watched the Like A Little video on TechCrunch Cribs, and there is no way I could live through that again. There’s nothing wrong with the culture, it’s amazing (disturbing), but I could not do it because my stage in life just would not allow it. My advice is that you visit the incubator, meet the people that are in residence, ask questions, observe, form an opinion.
Funding or equity stake
What do you have to give up? Equity? A board seat? How does it compare to other incubators? How much will you benefit from the network and pedigree, from the connections and mentors? This is a decision about do you believe the costs match the benefits? Do you have to move? How long can you survive on the capital?
Free stuff
This is a funny thing. What do you get for participating? SwagBag? Press? Boardroom for customer meetings? Hosting? Design services? Legal services? Templated documents? Do you get to attend StartupSchool? Do you get press coverage at your demo day? Do you get coffee? Dinner every other week. You’re in it to get the best deal to help your startup grow.

Do you need an incubator?

I’m curious about the feelings and opinions about incubators from:

  • Scott Pelton (@spelton) – GrowthWorks has previously invested in BootupLabs. Scott has worked with companies from incubators including Bumptop. Does having an incubator change your opinion or evaluation of young companies?
  • John Philip Green (@johnphilipgreen) – John has started LearnHub, been part of the early or founding teams of companies in Silicon Valley and now the leadership team at CommunityLend.
  • Leila Boujnane (@leilaboujnane) – Leila is a pillar of the community. She is the founder of Idee & TinEye. She advises startups and hosts events like HackDays.
  • Ryan Holmes (@invoker) – Ryan is a founder of HootSuite, he is also an advisor at GrowLab. Wasn’t HootSuite incubated at Invoker? What is the role of the incubator or companies in organic growth of new ideas? How should entrepreneurs evaluate an incubator vs being an employee versus something else?
  • Evan Prodromou (@evanpro) – Evan is the founder of Status.net and has raised seed money from MontrealStartup and continued to build an amazing product. I’m curious about his opinion on starting in an incubator.
  • Patrick Lor – Patrick cohosts DemoCamp in Calgary. He is on the board at Fotolia. He is an active angel investor. To the best of my knowledge outside of his involvement in SIFE he is not affliated with an incubator.
  • April Dunford (@rocketwatcher) – April is the best B2B Marketer in the world! I just said it on the Internets so it must be true. April has worked with lots of startups including NexJ and Janna. I wonder what her advice to a startup considering an incubator would be.
  • Rob Lewis (@robertslewis) – A drunken rumor says that Rob is starting his own media incubator in Toronto (possibly with ExtremeVP). And since Rob is a W Media Ventures portfolio company, I don’t want to see any puff PR pieces on TechVibes about GrowLab companies.
  • Chris Arsenault (@chrisarsenault) – One of the Jacques’ Mafia and an incredible investor. He has portfolio companies like Chango that have been incubated at Mantella VP. Are incubated companies better?
  • Danny Robinson (@dannyrobinson) – Now running BCIC and I’m curious at his opinion about what is rising out of  the ashes of BootupLabs and his thoughts on the incubator business model.

More importantly, what do you think about this new bumper crop of incubators?

  • http://chrisarsenault.wordpress.com/ Chrisarsenault

    Amazing things happen when you put amazing people together. That’s the secret to a successful accelerator or successful angel investing. Great entrepreneurs working within an environment that allows them to thrive and meet their ambitions, will deliver awesome products and will build successful companies.

  • http://www.rocketwatcher.com April Dunford

    Great post!
    I can’t get over the number of incubators out there now. Some have great reputations and longer histories so it’s easy to talk to folks that have been through the process to figure out if it’s a good fit or not. I worry that some of the newer ones might be harder to figure out (and indeed might still be working on determining what their best value to the startups can be). 
    I agree with your points on how to evaluate them. I would caution startups to really look at the terms closely and not to put too much weight on things like “network” and “mentors” that are not only hard to quantify in terms of value but can also be had (with a bit of hustle) outside of the incubator. I’d also be careful about giving too much away or making big commitments to things like paying for office space. 
    I probably do about 6 or 7 meetings a week with founders where I dole out advice in exchange for coffee (which might be all my advice is worth). Sometimes I’m busy and travelling but I pretty much never say no when a founder asks to meet with me and I often introduce them to folks in my network. I would love to be involved in a more official way with an incubator now that I think of it (gee maybe I should do that).
    April

  • http://davidcrow.ca/ davidcrow

    April you are the officially the first StartupNorth Fellow. Details to follow. 

  • http://www.rocketwatcher.com April Dunford

    Woo Hoo! Will y’all sing “For she’s a jolly good fellow” when I show up? I always want to hear that. ;-)
    Thanks!
    April

  • bwertz

    Great post, David! Like your idea for a Techvibes media incubator in Toronto :-) Honestly, I see incubators as start-up universities and the more we can have in Canada the better. Competition is good for the entrepreneurs out there and will push the incubators to keep innovating.

  • http://www.AnimatedMedia.ca ChrisBrady

    As someone who has had some interaction with incubators in Toronto and San jose (Silicon Valley) I was looking forward article’s content.  It raises a lot of the right questions on how to evaluate an incubator, and to use one or not.   For an   Entrepreneur I would suggest evaluating on the resources available to effectively reach your customers, with a message that results in revenue.  Connections to the customers who purchase your product or service is key.  Otherwise you spend your time chatting with other members, and not advancing the company.

  • Andrew Peek

    I think it’s also important for these incubators (the impromptu ones specifically), to be clear with themselves on their expectations and what they hope to achieve. To borrow from a poker analogy, if your approach is to build a sustainable business model from your incubator, you will need to play a certain number of hands to achieve the odds.

    If the approach is to push your core business forward (through learning, exploration, or diversification etc.), you should manage your expectations around returns, and focus on the value of the intangibles you’re acquiring.

    @aprildunford:disqus – your time over coffee is always much appreciated. :)

  • http://www.rocketwatcher.com April Dunford

    hey no problem – I always have time for you guys :)
    April

  • http://www.onceabeekeeper.com/ Kevin Swan

    Great topic, David.  The rise in these incubators is very similar to the rise in Technology Commercialization programs in the 80s.  At that time, everyone looked at what was going on in Boston and the Silicon Valley and tried to model it.  It didn’t work: http://chronicle.com/article/A-Better-Formula-for-Economic/125441/

    Now we see the success of Y Combinator and TechStars and everyone is trying to model it.  More than 100 in operation today: http://blog.shedd.us/321987608/

    It is important to look at all these programs and properly identify them as they are not the same.  There is essentially 4 types – University / College Incubators, Private Incubators, Foundries and Accelerators.  Even among those that fall into the accelerator category there are ones for profit and others for economic development.

    We believe that nothing like GrowLab existed in Canada.  A top tier accelerator that has the vision and ability to compete with Y Combinator and TechStars.  I shared some thoughts on why this can work: http://inoviacapital.com/2011/05/building-an-accelerator-growlab-is-all-about-the-entrepreneur/

  • http://blog.bmannconsulting.com/ Boris Mann

    As Kevin says — these are not all the same kind of beast. Even GrowLab is trying to say “startup bootcamp”, whatever that is. They look like an accelerator. I’ve said in the past, I would stay away from anything called “incubator” — that’s a place where baby animals that aren’t strong enough to survive on their own go.

    As I said on Twitter, GrowLab has launched to much fanfare. The proof is in results. And, of course, what results we are looking for. Returns for a fund is one measure of success, ecosystem is another.

    iNovia is one of the few VC firms in Canada that I have respect for in the Internet / Digital Media space, so I’m glad they are enthusiastic backers / participants.

    At the end of the day, I’m glad that there is seed-level funding available “out west”.

  • http://www.onceabeekeeper.com/ Kevin Swan

    Appreciate the kind words, Boris.  We are excited to be a part of this.  I had to laugh at your comment about the word “incubator” as I constantly correct people.  GrowLab is an accelerator. :-)

    GrowLab is based in Vancouver and will have a definite visibility and present an opportunity to western entrepreneurs.  However, trust that we want to attract the best entrepreneurs from across all of North America, and even the world!

  • Dprelazzi

    No bubble – just a much needed increase in support to assist less experienced entrepreneurs succeed. Considering the traditional failure rate of SMEs, one might conclude that more help was desperately needed. And in all the names mentioned, we’re not talking about bringing in big campuses of entrepreneurs. They’re generally smaller numbers, which in aggregate in any region is still a relatively small number. And overall, the collective influence of these organizations, and especially the people behind them, in terms of “deal” decision making, serves the community well in elevating the entire community’s “game”. Better busineess building, better judgement, better business models, better salemanship, etc.

  • http://www.linkedin.com/in/scottjhoward ScottjHoward

    Great post, this will be a resource to ever growing number of Canadian Startups. Much love for the Coral CEA mention. What excites me about the expansion of options & resources to early stage companies, is the opportunity to connect & do Open Innovation. Too often Canadian companies live in a bubble, which leads to building solutions not connected to real business problems, reinventing the wheel, missed opportunity, etc. I think the real struggle for Canadian Startups is the lack of aggressive venture capital (a theory I was previously unconvinced of). 

    Disruptive companies spawn from ‘crazy’ ideas, to make a ‘crazy’ idea into a solution is pretty cheap these days, the hard part is  disrupting behavior & getting commercial traction; that needs ‘crazy’ investors. Incubators, accelerators, communities, etc are helping to sort, refine, and build crazy ideas into ‘interesting’ solutions; but the failure rate is still way too high because these early stage startups/solutions are way under capitalized. 

    Yes my VC friend you WILL LOSE money on the majority, no matter how good the feeder ecosystem is, but innovation and thus explosive returns REQUIRE failure. If we can inject more capital early into promising teams and solutions we will reduce the number of failures and up the chances for the big wins VC’s need. We need to give startups more at bats, which means batting averages might go down, but the number of singles, double, triples, and homers will go up. The way to build great hitters and teams is to invest in the at-bats otherwise they will go to where the money is. The Valley wins because they embrace failure & learn from it, AND they have crazy smart innovators paired with crazy aggressive investors.

    Canada has the ideas, the talent, and the spirit to be home to a highly innovative and profitable startup market. We need to direct less of our capital at holes in the ground and interest rates and invest in building 21st century businesses. Digging holes and working for the Man sucks, lets go build something cool and sell it for a gazillion loonies.  

  • http://blog.bmannconsulting.com/ Boris Mann

    Yes, I’ve heard that “best in the world” story before. Sorry, but the very fact that we have a border with our southern  neighbours is an issue.

    Then there is the “let’s apply to TS, YC, and everybody else and see who accepts us” issue.I look forward to GrowLab focusing on the StartupVisa issue. I (still) think that attracting European-based startups is a good role for us to play.

  • http://davidcrow.ca/ davidcrow

    It’s the new official entry music for all presentations. 

  • http://twitter.com/karimawad Karim Awad

    I’m not sure a company building cool products or applications with good people is really an “incubator” but really just a cool company that builds good stuff. Calling everything an incubator seems to be a buzz word right now, but I figure it will go the way of paradigm, synergy and ___’osphere.

  • http://twitter.com/dwalper Dustin Walper

    We’re seeing all sorts of incubators, accelerators, spin-offs… and the question I have is: where is the venture capital to support these incubators? i.e. what happens when you’re done being incubated, accelerated, or spun-off? How do you get big fast?

    The Globe and Mail had a good article on our VC problem today: http://www.theglobeandmail.com/news/technology/tech-news/tech-startups-wrestle-with-venture-capital-rut/article2035417/

  • http://twitter.com/leilaboujnane Leila Boujnane

    Really great post David. I want to point to Jason’s blog post “don’t give bullshit advice” http://www.humbledmba.com/dont-give-bullshit-advice because he hits it on the head: what startup founders need is support, clarification of hypotheses, and process advice (I mean if you have done it once like going public, surely you can provide process advice to someone who hasn’t).

    Startups don’t need space. So if all the benefit you get from an incubator (or accelerator or whatever you want to call it) is space, introductions to service providers and help hiring: run for your life. Because that’s totally useless.

    Now say you are interested in joining an accelerator, what should you look for? The same thing you will be looking for when you look at building your team: fit. And please don’t join an accelerator because they can provide “introductions”. People who have succeeded are not afraid to share their knowledge nor their introductions. So reach out.

  • http://www.rocketwatcher.com April Dunford

    Until someone decides to launch an “Incubator 2.0″ ;-)

  • http://davidcrow.ca/ davidcrow

    I am assuming this is referring to @Teehanlax:twitter and @jetcooper:twitter I singled them out, because like @invoker:twitter while a services firm they have an explicit EiR (Entrepreneur or Executive – in Residence) that was focused solely on spining out a separate company. @TweetMag:twitter and @Rocketr:twitter are not products at their parent organization but a separate organization. They share services: HR, Payroll, Design, Space, Dev Infrastructure, Culture but they are separate. This doesn’t have to be at initiation/creation.

  • http://davidcrow.ca/ davidcrow

    Bootcamp, Accelerator, Venture Catalyst, Incubator, Wavemaker, Spark Plug, Stimulus, Incendiary, Ecosystem fill in your favourite synonym.

  • http://davidcrow.ca/ davidcrow

    European, Indian, Chinese, etc. Agreed. One of the benefits in Canada has been our open immigration policies have created a culture. We need to continue to support the StartupVisa initiative.

  • http://twitter.com/karimawad Karim Awad

    I see what you’re saying, David.  I guess it comes down to how you speak of your product in relation to your business. If you say it’s incubated, it is but the entire creation and methodology can be identical to a company simply producing a product. Breaking off a product into it’s own entity at a certain point (like Hootsuite) is always going to be the greatest outcome as the growth potential sky rockets, but that can happen regardless of the initial concept of an incubator in my opinion.

  • http://www.hootsuite.com invoker

    Great post David. 

    Invoke’s model has always been to find needs and fill them. We happened to find a massive one with HootSuite and I left my role as CEO of Invoke to head up HootSuite. We always look to put great people behind projects who are most often employees. If they kill it, we get them more resources. All of the products Invoke has incubated with the exception of HootSuite has been bootstrapped and profitable from day one. Call me old fashioned, but it’s done well for us. I am not allergic to taking money, but there can be a diverging interest in the best needs of the company (realistic, organic growth) and vcs (as big of ownership as possible ~ cash induced growth).

    Due to velocity of market and other factors, we didn’t have this option with HootSuite, and I don’t regret raising to this day. Had an incubation program been around, we wouldn’t have taken advantage of it for HootSuite because Invoke was able to bootstrap for quite a while, BUT that being said, when I founded Invoke in 2000 I would have loved to have had programs like this. There were several skunkworks projects that I was developing that died on the vine due to lack of resources. I am very happy to see a supply (and even oversupply on this side). It’s all about ratcheting up both sides of the market, capital and talent. 

    The next big problem… talent. We’re going to need to get entrepreneurs excited, activated and ultimately with some exits. We’re also going to need programs graduating amazing engineers, designers, pms, etc etc. Orgs like BCIC are built to lobby and work to make sure there is enough supply here @@dannyrobinson:disqus, start your engines. If this happens successfully, everyone is going to win big.

  • http://www.Spidvid.com Jeremy Campbell

    I should do a web reality show on the challenge of getting accepted to an incubator, TechCrunch would have a field day with it, and entrepreneurs would get an inside close-up look at the process. Hmm…

  • http://twitter.com/JohnPhilipGreen John Philip Green

    I love the incubator model… it would have been perfect for me when I graduated back in 2004 and started my first company. My colleagues & I worked mostly in isolation with little support (until DemoCamp started!) and made too many avoidable rookie mistakes.

    FYI, I’ll be at Dogpatch Labs this weekend, which is a particularly awesome incubator in SF: http://dogpatchlabs.com

  • Michael

    Great post David and the trends that you have highlighted are motivation behind Cdling.

    If you head to our about page at http://www.cdling.com you will find links to related PwC report on the Canadian context and a recent Economist article that places these trends in a global context.

    An of course, while you are there, we would love all of the folks referenced in your post to sign up to help us work through our first iterations.

    I like your question about whether the start-up picks the incubator or the incubator picks the start-up.  From a social network analysis point of view, we would say the most productive answer should be in “between”.

    Cheers,
    Michael

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  • http://blog.bootuplabs.com dannyrobinson

    The GrowLab team has kept me up to date with all the details as they have been assembling it. Most of the team there is actually comprised of the Bootup Labs funders, and those that weren’t funders, I consider close friends. I am not involved in GrowLab, and the only link between GrowLab and Bootup Labs is in the form of the lessons we learned together about what we did right and what we did wrong.

    I hope it goes without saying that I’m extremely excited that there will be a world-class Seed Accelerator in Vancouver, operated by an experienced, well connected team, taking over where Bootup Labs left off.

    Also, as a point of clarification, there has always been Bootup Labs (the Seed Accelerator) and Bootup Entrepreneurial Society (the non-profit).  BES produces the Launch Party events, works closely with Debbie to create the GROW conference, and provides a series of community driven entrepreneurial mentoring and workshop events. BES is still ongoing, chaired by Boris Wertz, and I’m sure will work closely with GrowLab to build the best Internet startup culture around.

    It’s a great time to be a founder in Vancouver!

  • http://davidcrow.ca/ davidcrow

    I’m glad you caught the Rob #fakerumor just making sure ;-)

  • http://twitter.com/hamiltonkb Kevin Browne

    For what it’s worth I’ve heard of at least 4 incubators starting up over here in Hamilton.  This is a great post and an awesome discussion, I’ll forward it to the people involved over here.

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  • http://www.tabrizilaw.com Arshia Tabrizi

    Great post Dave. If you wanted to start an “incubator” a decade ago people would go running for the hills. Then came YCombinator and Techstars and start-up costs in web/mobile dropped to $20k and incubators/accelerators (whatever you wanna call them) are now all the rage. It’s a marketplace: each start-up has different needs and will have to find the right match (and some may go solo) but I’d look at the tail-end on the funding (channel into bigger and reputable VCs, a la YCombinator) and sector knowledge/depth as key ingredients. At the end of the day many incubators are product development shops in disguise, mixing and matching talent/ideas/money/resources to generate a go-to-market beta.

  • http://twitter.com/HowardGwin Howard Gwin

    Broken record time from Gwin.  Here are a few quick thoughts. Incubators with very strong mentor teams who are either successful operators or entrepreneurs are a great thing – anything else is a waste of time and focus in Canada.  The bottom line is we lack two major components that grow large outcomes: no where enough venture capital $ and a deep bench with game changing mentor skills.  I love the killer entrepreneurial environment we find ourselves in – I do not like the dilution of an already shallow mentor ecosystem in Canada.  GrowLabs has some strong people in there so should add value.  My advise to organizations either running incubators or thinking of starting incubators in Canada -if you do not look like http://realventures.com/team or http://www.extremevp.com (and several others with this pedigree) don’t bother hanging up a shingle.  We need our best mentor echo system focused on our best entrepreneurs.  

  • Paul

    Good post as it echos the philosophy of many business incubation facilities that have existed for many years.  Tom Lyons once wrote: “at the heart of business incubation is not a facility but a concerted effort by a group of qualified, committed professionals to help companies grow.”He continues “When we think of business incubation in this way the potential for incubation to become the guiding model for regional entrepreneurship assistance strategies becomes very apparent.”

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  • http://www.Spidvid.com Jeremy Campbell

    I want to raise angel funding for my startup, but I’m thinking of reaching out to incubators across Toronto to get into one of their programs, is this a good idea? 

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