Tuesday, August 19, 2008

Incubation Centers & Academic Institutions

This morning I met with a business school in Pune to discuss the incubation center they are planning. I attended and talked at a workshop at SINE IITB a couple months ago. The sentiments I expressed on both occasions were similar, so I thought I'd share them here.

Hire a Professional.
By definition incubation involves working with less experienced entrepreneurs who need more non-financial guidance and support than business people who have successfully built and sold businesses before. By involving an experienced entrepreneur the incubator can provide this kind of support. I don't know if there's another way.

Focus on the exit.
After having a number of investments hang out in the 'living dead' category, I am totally convinced investors need to have some vision for how they are going to exit their investments before going in. This seems obvious, but its easy to ignore
since its much easier to find an entrepreneur with an idea and a need for money, than a corporate development executive who's willing to spend significant cash for that entrepreneur, his idea and the code he was able to produce with the investor's help. My feeling is this is one of many factors which skews the industry towards "professionals". Professionals can afford to develop relationships with those organizations that have the wherewithal to make these kinds of acquisitions, individual first time entrepreneurs and small time angels don't. An incubation center can develop these relationships, but it takes effort, and most don't even try.

Make it up in volume
India seems to have a variety of funding sources and financial incentives available to academic institutions who set up incubators. The funding doesn't appear to be tied to the number of companies incubated or their success. From an academic point of view having a smaller number of companies occupy the available offices for a longer period of time is the easiest way to fill the requirements. Its also possibly the worst algorithm for have Google type successes. In contract the YCombinator works a large number of companies for a very finite about of time ~4 months, and then everybody 'graduates' some fail, some succeed, and the YCombinator focuses on finding another group of companies to work with. Its indicative of a 'fail fast' mentality which is more prevalent in the Silicon Valley and needs to take root here in India if the culture of technical innovation is to thrive.

Encourage Inter-Department Dating
Most of the entrepreneurial teams I've seen so far consist entirely of engineers. Occasionally I meet business students who have aspirations of starting their own companies. These groups don't seem to have any social overlap. I would include marketing people and designers in this mix as well. We know a successful startup will have elements from all these groups, but the petri dish we're coming out of appears very segregated at this stage. Its one reason startup 'mixers' are so
important. Its a place where potential founders from varied backgrounds can meet. Facilitating these interactions and events can be an important role for an incubation center. The trick is how to make it interesting for a wide range of people whose only commonality is a desire to start a business.

Critical Mass
There seems to be a pervasive desire in B-Schools to imbibe a sense of entrepreneurship in their student populations. In Palo Alto in the late 90s it seemed everyone you met had start-up aspirations, and at some point it just wasn't hip to cool your heals in a big company indefinitely. My sense is to get the same culture established at a b-school, you might need to import entrepreneurs so that you could make sure the start-up perspective was being represented and defended in the cafeteria and at parties. Co-hosting an incubation center at the university could do this, but there would need to be an openness to accepting outsiders. Manifesting a cultural shift with people from within will be difficult.

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