Twice a year, every tech website seems to devote lavish coverage to just what startups made it into Y Combinator’s latest class. It’s the tech world’s version of covering the presidential primaries: Plenty of these companies aren’t going to exist in a few years (or perhaps even in a few months), but some may go on to do great things.
For those of us actually bent on founding our own startups, the coverage creates mixed feelings. It’s great to see people actually making it. But all the press also reinforces the feeling that every startup needs to go through an incubator in order to succeed. That can be incredibly frustrating for startup entrepreneurs. Not only do we need to come up with a great idea, we have to make sure that it’s something that works for an incubator.
Guest author Thursday Bram is the editor of 21times.org, a daily email newsletter for developers and entrepreneurs who want to turn their side projects into viable businesses.
There Is Value in Incubators
Without a doubt, an incubator can help a startup get up and off the ground quickly. Ella Dyer is an alumna of Springboard Enterprises, the Startup Chicks Accelerator and Venture Atlanta. “Winning the first annual pitch competition placed us in a four-month mentoring/coaching program where we learned, were reminded of and shared valuable insights into the making of a successful startup. Throughout the program we were able to network with proven leaders, several who have become close advisers and even investors in our company.”
Many startups point to the value of connections, just as Dyer does. Connections go beyond just getting venture capital, of course. Dyer notes, “The Atlanta chapter of Startup Chicks is ripe with support in every category. From the start we knew who to turn to should we need assistance with spreadsheets (something covered several times throughout our first year) or tax details.” Dyer’s experience with an accelerator had other benefits: “Sharing the launch of our first application, FashionAde, with the vast community of Startup Chicks was a bonus; we immediately had users, feedback and more assistance.” Overall, Dyer considers incubators very valuable and a key to her success.
But is an incubator actually necessary to a startup’s success?
The Counter-Argument
“Considering that incubators tend to look for very specific business models – startups that can grow quickly and offer a major return on investment – a close look at the numbers can sometimes make it hard to justify applying.”
When you’re outside looking in, an incubator seems to do certain things very well: connect you with investment capital and guide you through the process of setting up a business. For this service, most incubators take a percentage of the startup in question. There are some subtler benefits as well: When a new startup lands in one of the better-known incubators (like Y Combinator), it gets a huge amount of attention from the media, at least online. That attention may be enough to turn the tide for a new company.
But what if your startup doesn’t need the services that an incubator offers? What if you can bootstrap the startup you have in mind? For those companies, there may be little point in applying to an incubator. And, as an added bonus, you get to keep control of your entire company.
Considering that incubators tend to look for very specific business models – startups that can grow quickly and offer a major return on investment – a close look at the numbers can sometimes make it hard to justify applying. And if you’re doing something particularly new, you may not be able to get into an incubator even with a truly great idea. Incubators aren’t exactly conservative, but they do clearly prefer the types of startups that they’ve seen before.
Incubators: Nice to Have
We need to cultivate the mindset that incubators are a nice-to-have option, not a need-to-have. I’m saying that as someone who has started a business without needing (or being a good candidate for) an incubator, but who would love to go through an incubator at some point just to get the connections it offers. I see a lot of value in the process. But I also see that plenty of startups can establish themselves without that sort of assistance and go it alone.
