When yet another smart pal told me that they’re applying to an incubator for their early early stage startup, the scale of incubator and accelerator programs’ growth was notable. GigaOm wanted Women 2.0’s take on the trend (which has expanded so much that TechStars’ co-founder David Cohen warned recently of an “implosion”). Shaherose Charania and I collaborated on the piece you can read here, and the graphic is hers.
Traditionally, business school gave young businesspeople the “chops” to get ahead in corporate America. But even though the tech startup has become an almost everyday part of modern business, B-schools are still highly focused on issues that large corporations face. And while many do now offer entrepreneurship classes, today’s smaller, more nimble, and highly iterative businesses need a place that’s specifically dedicated to their unique needs. Where’s a person with an idea to learn how to make their own job or company? Enter incubators.
Think of them as e-schools — entrepreneurship schools, to use a term from entrepreneur Steve Blank — of varying lengths and formats that help businesses launch by providing hands-on startup skills, space and mentorship (and often taking equity in return).
As the number of incubator and accelerator programs increases, there are more options for entrepreneurs to work with co-founders and test ideas in safe spaces. Choosing the best programs to apply to depends on your readiness and idea phase.
Phase 1: Get smart
A great source of new founder education is the Founders Institute, a four-month program that is regularly hosted around the country to promote the business of technology startups and “avoid common mistakes that lead to the failure of a business.” Its “semesters” are heavily focused on classroom-style learning to provide company setup recommendations, networking, and expert advice. The program’s founder equity exchange requires that participating startups give 3.5 percent, an amount of equity that is split between other founders, mentors and the Institute.
Phase 2: Validate and prototype
After you’ve identified a need but before you’ve validated your idea, a pre-incubator like Founder Labs (hosted by our organization, Women 2.0) can help you overcome what’s arguably the toughest phase in launching a company: building a co-founding team and validating your idea. Over the course of five weeks, a group of 20 people (50 percent female, 50 percent male, and half with technical backgrounds) spend their nights and weekends meeting with potential customers “pitching their solution” through customer development practices and rapidly prototyping their product with lean startup principles to be nimble and high-cadence. Weekly the teams present a “product release” — demoing a product and sharing learnings from customer development to gain guidance from founders and angels who have been there (and lived to tell). (The costs for the next Labs are still being determined.)
Phase 3: Prepare to share your idea with the world
After rounding up the team and testing your product or service, an incubator or accelerator is a good idea when funding and space become necessary. These programs offer a full ecosystem of services that you’d be unlikely to access on your own, like discounts for services that new companies need.
The fabled TechStars accelerator offers between $8,000 and $16,000 in seed funding (the earliest stage of venture funding), mentorship and three months of company development time in its Boston, Boulder, Colorado, Seattle, and New York programs.. TechStars wants to be “thought of as an experienced and well connected co-founder” and takes six percent of founders stock, which may be a risk worth taking depending on your setup.
The Mountain View, California, seed fund Y Combinator receives more than 1,000 applications for its biannual classes and accepts between 2.5 and 3.5 percent of the two- and three-person teams that apply (if the five to 10 percent acceptance rate scared you away from B-schools like Stanford’s Graduate School of Business, YC may not be your best option). YC was started with the idea that the actual monetary amount needed to get started is tiny. While YC gives companies about $20,000 in seed funding in exchange for two to 10 percent of equity, the organization believes that it’s not money that founders need but the opportunity to take a leap of faith to work on their ideas.
With a few applications still coming in, about 40 companies have been selected to join the upcoming round for January through March 2011, which will have the YC trademark of weekly working sessions and founder dinners. This meetup schedule is different from the Unreasonable Institute, another great Boulder incubator, which insists that founders are most productive when they live and work together–in a vacant sorority house no less.
And in Women 2.0’s stomping grounds of San Francisco, the new i/o Ventures focuses heavily on mentorship with the companies it provides $25,000 with to cover expenses during the four-month incubation process. With partners from the likes of MySpace and BitTorrent and mentors from companies including Yelp, Digg, Mint, and MochiMedia, you just might believe them when they say they know how hard it is to build something.
Depending on your needs and location, additional recommended programs include AngelPad, an amalgamation of Google alumni, with a similar mentor-heavy approach. Astia is a global program to expand funding for female entrepreneurs. But those are just a few among dozens of helpful programs.