An insider`s guide to incubators Redherring.com January 19, 2000 - 500 Beiträge pro Seite

[investor_007]

An insider`s guide to
incubators
Redherring.com
January 19, 2000

Divine Interventures founder Flip Filipowski doesn`t
like the word incubator. He says it reminds him of a
bunch of chickens running around with their heads cut
off. But there may be no better way to describe the
incubation scene today. At least ten new incubators
were hatched in December alone, including some in
far-flung places like Columbus, Ohio; San Diego; and
Radnor, Pennsylvania.

With all the hype swirling around incubators -- some of
which have taken to calling themselves "venture
catalysts," "Internet zaibatsus," and "venture
construction" firms -- you`d think the phenomenon of
nursing infant companies to maturity was new. It`s not.
The first incubator was created in New York in 1959
(see story). Cities, counties, and states glommed onto
the idea to revitalize economically depressed areas.
Universities, such as the fecund Rensselaer Polytechnic
Institute, jumped into the game to commercialize
technology. And venture capitalists, most notably
Kleiner Perkins Caufield & Byers, adopted the
concept in the late `70s.

What is new is the surge in commercial, stand-alone
incubators. Their emergence can be attributed largely
to the success of Bill Gross`s Idealab, which gave birth
to such companies as eToys (Nasdaq: TOYS),
Netzero (Nasdaq: NZRO), and GoTo.com (Nasdaq:
GOTO). Idealab knock-offs are popping up as
quickly as the companies they incubate. If Idealab and
Divine go public as anticipated early this year, feathers
will really start to fly.

THE NEW GREED
"There is a whole greed factor -- everyone wants to be
involved with a huge dot-com startup," says Dinah
Adkins, executive director of the National Business
Incubation Association (NBIA). She likens the current
environment to the Roaring `20s. "Long term, I think
there will be a shakeout," Ms. Adkins says. "It`s like
everything else: a lot of people jump in without the
skills, the contacts, the money, or whatever it takes to
succeed in the long haul."

She isn`t the only one skeptical about the motives or
staying power of new entrants. "Our industry is made
up of a bunch of lemmings," says Andy Rachleff, a
general partner at Benchmark Capital. "When was the
last time you heard an original idea from a venture
capitalist?"

Despite the cynicism about all the newbie incubators,
proponents and detractors agree that entrepreneurs
can only benefit from all the new incubation resources
flooding the market. Even if some of the new
incubators flop, most entrepreneurs will be able to get
in and out of them before they crash.

So, Mr. or Ms. Entrepreneur, how do you know if you
belong in an incubator -- and which one you should
pick from the hundreds to choose from? Not to worry.
Redherring.com scoured the incubation scene to make
sense of it all. Along with the profiles and incubator list
in this special report, we give you the essential
information you need to decide.

THE NEED FOR SPEED
The most frequently cited advantage of incubators is
that they allow entrepreneurs to ramp up their
companies much more quickly than they could on their
own, which is imperative for first-mover advantage in
today`s hypercompetitive market. Not only do
incubators save time by eliminating the need to look for
office space, equipment, Internet services, and the rest,
but they also foster an environment that encourages the
exchange of ideas. "The Internet in so many ways is
about speed," says Steve Jennings, former CEO of
MyHome.com (at Idealab). "We`re able to learn from
the experiences of other companies, and don`t have to
make the same mistakes."

Speed is the operative word. The amount of time
allowed to seize a business opportunity has been
drastically shortened -- from two years down to just
six months, according to Promod Haque, general
partner at Norwest Venture Partners. "Once you
launch your product, if you`re not established in six
months, it`s goodnight, the company`s gone," he says.

Another major benefit of incubation, particularly for
entrepreneurs at VC-backed incubators, is a tight
connection with their patrons. That gives them the
support to get through rough patches quickly.
Normally, when a startup gets VC backing, "there is a
getting-to-know-you period," says Mr. Rachleff of
Benchmark, which incubated Ariba (Nasdaq: ARBA),
Accept.com (bought by Amazon.com [Nasdaq:
AMZN]), Shasta Networks (bought by Nortel
Networks [NYSE: NT]), and many others. If a
problem arises -- and it almost always does -- it might
take a month to work through it with a newly funded
company versus just a week with a company in a VC`s
incubation program, because "you`ve developed a
shorthand with one another," he explains.

Although there are a lot of similarities between
incubators, there are also plenty of differences that
distinguish them from one another. The variety makes
the field a virtual smorgasbord. For example, the
year-old Women`s Technology Cluster of San
Francisco has a formal group of mentors that helps its
startups all the way through the funding stage (see
profile). It also hosts CEO lunches every Thursday, as
well as weekly seminars on the basics of startups.
Divine stands out for its one-stop-shop approach. In
addition to "habitats," it offers its incubated companies
an array of in-house services, including expert help
with hiring, finances, public relations, sales, Web
design, and startup fundamentals. And the
IBM-Conxion Dotcom Incubator Program is notable
for its absence of any actual physical space. Its pitch is
to provide up to $1 million worth of technology,
services, and support for six months to select Internet
startups, which have the choice of leasing, buying, or
walking away from the technology at the end of their
incubation period.


WINNING WAYS
The biggest selling-point of incubators isn`t the services
they offer but rather the fact that they actually work. A
striking 87 percent of incubated companies are still
going strong at least three years after they graduate,
and many as long as long as 10 to 15 years, according
to a 1997 study of 50 incubators by the National
Business Incubation Association (NBIA), the
University of Michigan, Ohio University, and the
Southern Technology Council. In contrast, U.S.
companies as a whole posted a 72 percent survival
rate from 1992 to 1996, according to the Small
Business Administration.

If you haven`t landed venture capital, an incubator may
be just the place you need to be to get noticed. It may
give you the spit-shine you need -- plus a personal
introduction -- to get venture-backed. Even though she
has raised seed funding, Krishna Subramanian, CEO
of Kovair Software, says she has received invaluable
help and advice from Jim Robbins, executive director
of the Software Business Cluster (SBC; see profile).
Mr. Robbins has established an enviable track record
at the SBC: in the past three years, 80 percent of the
SBC`s 50 graduates have received venture funding
totaling $250 million.

What`s the best place for you? We`ve made it easy for
you to figure that out. What follows is an extensive
sampling of incubators from around the country
organized into six categories. Click on each category
and you`ll find an explanation of how a particular kind
of incubator works, its pros and cons, and a detailed
list of incubators in that segment. Read on and take
your click.

[investor_007]

http://www.herring.com/insider/2000/0119/vc-fea-incubator-ho…

mfg
investor_007

[kfuchs]

Hi investor_007,

Du hälst uns ja immer so nett auf dem Laufenden über CMGI,
aber der etwas längliche Beitrag hat mit dieser Aktie
(außer dem generellen Thema) nichts zu tun?!

cu
KF

[investor_007]

Hallo kfuchs,

Du hast natürlich recht, ich hätte den
Beitrag vielleicht nicht der Aktie
zuordnen sollen. Im Titel habe ich es
ja auch nicht getan.

sorry

mfg
investor_007

PS: Jetzt eröffne ich noch einen Thread, bei dem
ist es wieder angebracht.
( CMGI - 1stUp.com Announces Wholesale Agreement with AT&T Canada to
Support <CMGI.O> )