Incubating a Company the Old-Fashioned Way
Before start-up incubators became an industry,
I had the benefit of being “incubated” the old-fashioned way in Silicon Valley. It was one of the best things that happened to me as an entrepreneur, and was completely in keeping with the “pay it forward” philosophy that some special people still subscribe to around here.
The folks who ran my incubator didn’t charge for office space, utilities, in
ternet access or advice (drinks in the fridge and toilet paper were another matter). They didn’t want equity in my company. They knew everyone in my industry and were generous with introductions.
I know there are lots of new, hot incubators out there, but what if you can swing an arrangement like mine? You might discover that sometimes the old-fashioned way of doing things is best.
It all started with a desk, a big old grey-green metal one that reminded me of a tank. I desperately needed a desk outside of my house, somewhere I could go and focus on work. After I’d set up camp at the desk, my hosts were quick to offer a conference room, a kitchen, regular FedEx and UPS service, a faxmachine, Internet access, a small machine shop and a laboratory. Heaven.
I was starting a laser company at the time, and the guys that housed my company were Tom Roderick and Kelly Gooden, co-owners of a custom optics shop (a machine shop for optical components, basically) called VECO Custom Optics. VECO’s offices were
like Grand Central Station for all the local companies in the lasers and optics industry, and I had instant exposure to everyone who visited. When I had my own first big visit, from a customer who had traveled from Japan, Tom was so excited for me that he made the coffee and set up the conference room so I could focus on my presentation. Starting out on your own can be lonely, but that day, I really felt like I had someone in my corner.
I also had companions to talk to—Tom and Kelly had been in my industry for more thirty years. Anytime I got a cold call, I could run the name of the caller by them. They’d tell me “Good guy!” or “Uh, let me tell you some stories,” instantly.
My mentors didn’t want money. Their philosophy was that someone had helped them, and now it was their turn to help me. My attorney was skeptical. He insisted we have some kind of contract, so I insisted that it be one page. The attorney said we needed to exchange money to bind the contract. We settled on $50 to cover drinks in the fridge and toilet paper.
Setting up an informal “incubation” is not as straightforward as applying to a more mainstream incubator. If you’re lucky enough to be offered such a deal, you could be forgiven for just jumping at it. But here are some things to consider first:
- Location. If your host is near other companies in your industry, and particularly other companies that your customer base would naturally visit, that’s a huge benefit. We were an easy extra stop on the way back to the airport for out-of-towners making the rounds to others in our industry, so we got a lot of traffic and made good use of the conference room!
- Symbiotic businesses. My company was prototyping new lasers and optics hardware, so it really couldn’t get any better than sitting inside a custom optics shop with a machine shop on-site! There was a natural complimentarity between our businesses, but we were not competitive.
- Win-win—make it balanced. I was extremely conscious of the “give-back” since I was benefiting from “pay it forward” so much. At the slightest excuse, I would give my customers a tour of the custom optics shop and explain my landlords’ business. I wanted to be a good source of referrals to VECO.
- Comfort & privacy. Are you totally, completely, 100 percent comfortable with the people you will spend time with everyday? Will they respect the boundaries of your respective businesses, especially when it comes to customers’ proprietary information? This is critically important. Your customers need to feel comfortable with the arrangement. In our case, the benefits were so obvious that our customers were excited about the arrangement. Of course, we also maintained professional boundaries between the businesses.
Incubation is a great concept, and I highly recommend it. I am still a regular customer of VECO Custom Optics. Since my departure, two other entrepreneurs, both friends of mine, have had a desk there as well. Lucky them, and lucky me.