Incubators are a ghetto

Andrew Clay Shafer:

There has been an explosion of incubators in the last few years. Most of them suck. Some suck so bad that the net value created by the program is probably negative. I’m not going to name names. This is just about results.

Let’s start with a story. There are minor variations, but I’ve seen it played out in real time more than once in the last few years. The story goes like this. An incubator has a class of companies, they give them a little cash, they have a weekly session with a mentor or whatever, time goes by, demo day, no one gets funding, fail, fail, FAIL.

what’s wrong

They tried to copy the Y Combinator model, and by ‘copy’ I mean cargo cult. They performed the outwardly obvious ceremony, but didn’t understand and thus couldn’t replicate the mechanics of cause and effect.

Y Combinator has had impact on the dynamics of startup formation and funding not because of the exact details of a program. But the details are what cargo culters can see: three months, a dollar figure, weekly sessions, gogogo, demo day… the end , most of the companies dissipate.

To be successful an incubator has to do two things. First, create companies that are actually fundable, second, get them an audience with investors interested and able to fund. That’s it. That’s all. Connect the dots. Success.

See also Jed Christianson’s Copying Y Combinator - WHY and HOW and Looking back - 1.5 years since “Copying Y Combinator”. In the latter, he opines:

I am still absolutely convinced that if you’re a Y Combinator clone, just located in a different city, you will never be a top-tier program. Why? Because if you’re just doing exactly what YC does, but you provide less money and less expertise, you’ll never have the top startups wanting to work with you.

I think this is absolutely true. If you want to compete with Y Combinator, it’s going to be tough, and you need to do something different.