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July 05, 2006

Comments

Matt,

First off, great post.

Watching a university incubator in the Midwest go through the planning, and launch stages, I can see exactly what you are talking about. That the incubators website now even emphasizes real estate and not startup companies.

You clear summary, made me go back and think everything that had gone on there.

Thanks,

P. Roales

Hi Matt,
I would argue that an "incubator" like TechStar Early Ventures (www.tsearlyventures.com) has been successful. They minimize the real estate play by sheltering only one or two companies at a time, and they contribute a great deal in terms of interim management and consulting services. Rather than rent money, the model relies on equity. Rather than relying on the proximity of other entrepreneurs to impart wisdom to one another, the managing partners do the heavy lifting themselves. They aren't connected directly to an investment pool, but they obviously have a strong network of angels and VCs to get in front of. They've launched several successful companies in diverse fields that may not otherwise have made it, and they've helped generate a great deal of enthusiasm for entrepreneurship in an otherwise staid midwestern city.

Have they made a ton of money while doing this? Well, no (still waiting for those IPOs--and it's important to note that successful incubation requires an even longer timeline than VC returns). But their contribution to the economy far exceeds what is indicated by the remuneration "scorecard." Incubators are not investment banks but they can be a valuable piece of the bigger picture.

Matt:
Thanks for the post. I don't follow incubators all that closely, but I do believe that a successful one is The Innovation Factory, www.innofactory.com. They incubate exclusively life sciences companies, and instead of attracting entrepreneurial ideas to co-locate in their space, they actually come up with the ideas and/or license the IP and launch the businesses themselves. More similar to an idealab than a university incubator. The founders have all been highly successful life sciences entrepreneurs previously.

Their partners in this endeavor are the Carlyle Group, Versant Ventures and SV Life Sciences...all VC firms with excellent life sciences practices. I know of them through my friend Mike Partsch (and fellow Kauffman Fellow) co-founder of AMV Partners (and formerly of Versant), which is a medical devices venture firm that has the principals of the Innovation Factory as principals in the firm. Its still a bit early...they've only been around since 1999 but my understanding is that it has been very successful so far.

So it seems like it can be done successfully, but like any business it all comes down to the management team running it. The concept alone is not enough, no matter how great its access to technology is or other common factors cited by incubators.

Interesting post, Matt.

Your suggestion of gathering entrepreneurs in social settings vs real estate ones seems more industrious, though by its nature, quite different and spotty perhaps (perfect post to put under the tech cocktail gathering.)

I wonder whether incubators featuring complimentary ventures has been explored vs single industry/expertise like tech.

Space holding a marketing firm with a web firm with a tech firm with a life sciences firm AND a method that links them actively for shared knowledge or cross-pollination could be quite fruitful.

Of course, a VC firm could bring same virtually if the firm had a broader range of ventures and/or contacts.

Intriguing to think about an incubator from that more broad entrepreneurial standpoint, barring vastly differing space requirements -- to be certain, all marketing firms require loft space (insert choice of emoticon here.)

-- Rob

I am currently in the due diligence phase of starting an incubator. Looking at "those that have gone before" there are a number of common obvious problems: (1) No serial entrepreneur experience in the team (2) A low bar to entering the incubator, and (3) an ill-conceived business model.
The team I have in mind is small, with both entrepreneurial AND big business backgrounds, including significant CFO/CEO/COO level experience. The geographic location is a tech-center with a strong tradition of local research. We would provide space and basic infrastructure, but the primary focus is adding our combined expertise to the new company’s arsenal.

My inner entrepreneur says that there should be a workable business model in here somewhere. Idea Guys + Good Mentoring + A little $$ *should* = Better chance at success.

Anyone have any thoughts on a workable model?

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