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STARTUP

Is An Incubator Right For Your Start-up?

Some have ulterior motives. Some have money problems. What to watch for.

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You have an idea, but you aren’t sure how to get started. Join an incubator, you think. Imagine the upsides: Incubators are often an open, inspiring environment filled with like-minded people working on innovative ideas and approaches. The constant potential for a cross-pollination of ideas is extremely attractive and enriching. What’s more, being in an incubator can mean that you’re constantly learning from others’ ideas--and mistakes.
 
But nothing is perfect; not all incubators are created equal. They don’t always have the best management, and they can have ulterior motives. So if you’re deciding whether to join an incubator, or if you are already a part of one, there are a few things to consider. 

When money is involved, things get messy.  
 
Most incubators have an institutional framework. That means that someone owns the incubator, and there’s money involved. Those who invest in incubators are likely to have their eye on the company's future potential. That means that often they will expect to be rewarded with equity stakes if they’re first to access a company. As a participant, the burden is on you to be cognizant of those expectations.   
 
It’s also important to understand where the money comes from. If the money comes from a particular fund, are you willing to have the people involved be late-stage investors? Whether or not you make it to the next stage of growth, there will be consequences. Know exactly what you’re getting into, and be comfortable with all possible outcomes.  
 
Not all incubators are created equal. They have different models and different mentalities. Incubators can differ by their industry focus, but also by model. Some are attached to venture funds, while others are focused on the non-profit sector. Each kind has its own set of nuanced pros and cons. Personally, I believe that the best incubator model is one that is well-funded through multiple partners.   

Who's running the show? 
 
One of the most important questions you should ask when joining an incubator is, “Who started the incubator?” I’ve seen many incubators led by people who have a lot of money but are just not good at operations. Or, they are not good innovation technologists and have very little experience in guiding start-ups. That’s a pretty significant detriment. Imagine someone who’s never had a child telling you how to parent.  
 
Pay attention to credibility. You have to be careful about the quality of advice you’re getting, or will get. When it comes down to it, you have to be careful about who you’re getting into bed with. 
 
Most early stage start-ups are vulnerable. They don’t necessarily know how best to process data, let alone advice. Get the most out of your incubator by making sure the people in charge can actually help you.

Finally, watch for the track record of an incubator. If they are indeed a breeding ground for great startups, their list of graduates should speak for themselves.

IMAGE: Thomas Barwick/Getty
Last updated: Mar 22, 2013

MEHDI MAGHSOODNIA is the CEO of Rafter, which provides a cloud-based platform designed to help colleges make educational content more affordable and effective. He was previously SVP at CafePress and Intellisync.
@mmaghsoodnia




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