6 ms·

How incubators hurt startups

36 points by paulsilver 14y ago

alexro 14y ago
The OP doesn't really say how startups get hurt. I didn't went through any incubator but I'm planning to. From my point of view there are definitely bad incubators out there - the ones that get started by random people which the OP mentions - but these are no brainer: if you part with your equity for their pitch you don't deserve to be an entrepreneur anyway. There are also top-notch ones - YC the hottest one - these are no brainer too. And finally there are about a dozen of in-between. And that's where it stops being black-n-white. There might be some benefits in going through their programme, it just all unpredictable. You get different experience being in a different bunch, but still, I have no idea how it could "hurt" a startup if they get 3 month pay and advance their idea.
- swombat 14y ago
  A few ways: 1) The "pay" might slow down the founders' progress into a proper founder mindset, i.e. "we need to make revenues, dammit". In that way, it would hurt. 2) Many incubators I've encountered think they're adding value by imposing some kind of structure... requiring milestones, etc. For some startups, this may be suitable, but for others, it's completely wrong and will slow them down, discourage them, or even lead them in the wrong direction. 3) Good advice is worth its weight - bad advice can be the opposite. Get some convincing advice by someone who has no idea what they're talking about, and it could be very costly.
  - alexro 14y ago
    Good points. Will be great to summ-up all possible drawbacks and make a comparison table for all interesting incubators. What are other bad factors worth considering? ADD: the biggest drawback I can think of is requiring to have a co-founder when sole founder would do just fine.
  - ragincajun 14y ago
    Agree completely. It really all depends on the startup and the founders, but I wouldn't consider anything other than a top 10 incubator. For less than top 10 incubators, I think they could be great for inexperienced founders or someone looking for some help. Building connections are a big part of the incubator experience as well.
  - nimblegorilla 14y ago
    Many incubators are also geared towards VC-style companies going for multi-million exits. That might not be a good fit for all founders. I went to MicroConf and it was really refreshing to get advice and encouragement toward building a sustainable small business.
  - jasonhitchcock 14y ago
    RE: 1) this entirely depends on what your business model is. If you're validating your "insert SMB supporting SaaS here" in the market, you better believe I want to see you ring the cash register with your minimum viable product. If your building that "insert new cool social thing here", then go ahead and get your millions of users before you think about revenue. If you're referring to the "salary" of a founder as motivation, well, I don't see how having more money from that seed investment would hurt you more than not having it. RE: 2) incubators are hedge funds. they provide extremely loose structure to make sure their assets are serious. Show me a startup with no milestones and I'll show you a startup that isn't going anywhere any time soon. "we totally would have succeeded but we got bogged down in achieving goals and getting things done on time." RE: 3) If you're a founder and you don't seek advice, then you have no business being a founder. This particular point is agnostic of whether you're in a program or not. Sitting on top of a mountain and divining a business out of your own genius is not the most likely way to succeed. Talking to others and listening is. Best thing to do with bad advice is recognize its bad advice by talking to someone else about said advice. You will still receive bad advice, even if you aren't at an incubator btw. It's the founders job to scrutinize advice in the context of their vision/optimal business outcome.
grammaton 14y ago
"Who knows how many of these companies could grow into something bigger without the pressure of generating a return for early investors in just a few short years." It seems to me like this is part of a more general trend - namely that a lot of startups might do well to figure out how they can make a profit first, instead of going the venture/acquire/cash out route. It's not incubators that are hurting startups - it's that a lot of startups should probably figure out how to be profitable first.
- phamilton 14y ago
  Or those providing valuable exits for companies that don't make money should stop doing so.
Jun8 14y ago
Hough's article that's linked in the OP seems to be the classical definition of linkbait to me: outrageous claim backed up with little than simplistic reasoning. It does not even have anecdotal evidence, e.g. I talked to X's founder and he told me that YC or Techstars hurt their startup in so and so way. Some particular points: * "Startup incubators don’t guarantee that your startup will be successful when you leave the program after three months — although the big profile programs do hint at success through association." If you get involved with an incubator thinking it's a guarantee for success you are naive indeed. And where exactly does, say, YC "hint at success". * "Since 2005, Y Combinator has funded 460 startups with only a handful of big wins." This is the meat of the article. Since so few YC companies are successful, the YC experience must be hurting the applicants. The ratio "handful" to 460 must be compared to successful startup which didn't participate in an incubator to all start ups founded since 2005. BTW, for an analysis of "handful" see this discussion: http://news.ycombinator.com/item?id=2608440 http://news.ycombinator.com/item?id=2608440. Big hands indeed! * The only two points that are of importance, I think, are the uncontrolled publicity and relocation stress. Relocation is absolutely necessary, to cut you off from you usual surroundings. It's similar to the monks's shaving off their hair when they start their new life: a big step to show, especially to yourself, that you are starting something new. The uncontrolled publicity is a problem, but this dogs many a Kickstarter company, too. I've never done a YC round and am not a YC fanboy (in particular I'm worried about the uncontrolled publicity that YC itself is getting and its increased class size may dilute it.) but from what I read from HN over the years it seems to be a seminal experience.
- jonnycombust 14y ago
  Couldn't agree more. For example, Hough says "There are concrete examples of how some startups have been seriously damaged thanks to their participation in startup incubators"... but she doesn't even list one example?
- phamilton 14y ago
  I also found his claim that the non big win YC companies were either acquired, failed, or in a zombie state. The first two make sense, but I have no idea what a zombie startup is. The only real example of something like that would be Color. Those in Palo Alto have seen their giant office space with nobody in it, but whenever I walk by I get the feeling its a bit more like Willy Wonka's Chocolate Factory than a ghost town. These startups are churning away in a quasi stealth mode and who knows what they might produce.
startupfactory 14y ago
I am an accelerator "fanboy" having run LaunchBox Digital in Durham, NC and recently launched Triangle Startup Factory in January. Here is the meat of the issue - - They are not for everyone. But, it is a perfect model for many. There is a Darwinian aspect that does weed out many who are not ready for that particular startup path. But there are many paths to success. Like most endeavors - approach with eyes wide open. Understand the expectations and value delivered and if it matches up with your goals - welcome. Sounds like taking on VC investors. But accelerators don't hurt startups.
jasonhitchcock 14y ago
This doesn't explain how incubators hurt startups. Also, i'm wondering what the author believes the ideal success conditions are for a startup? Billion dollar company? the tone suggests an acquisition is a failure. Also, one anecdote about your non-business savvy friends thinking about launching an incubator isn't indicative of anything other than having delusional friends. The streaming video example infuriates me too. What if you have a mentor with domain expertise in another vertical of the economy who sees a massive biz dev opportunity/pivot that the naive founders never considered? I saw this happen first hand while I went through StartEngine in LA. LINK BAIT.
tlogan 14y ago
Are there any Dropboxes, Herokus, or similar startups from other incubators? I have felling that there are only a couple incubators worth applying for.
adjwilli 14y ago
That is a well balanced critique of accelerators. One possible defense of incubators could be that their value increases with time. The first class of companies may not benefit much, but as time goes on, some of those companies will certainly succeed. And those those successful companies will offer value to the current/future batches. Of course, YC has the advantage of already having several successful alumni. And like the Matthew Principle says, those who have will be given more.
toddmorey 14y ago
I think the implication in Kate Hough's article that incubators encourage you to lie on stage is more than ridiculous; it's irresponsible. I knew a guy who lied once in college. It had nothing to do with his own weak backbone: the pressure of college forced him into it and the whole institution is on trial. Look, an incubator may or may not be good for your startup. I don't know for your own situation. But I do know this: articles like this one are certainly not good for honest discussion, information, or the image of tech journalism.

36 points by paulsilver 14y ago

The OP doesn't really say how startups get hurt. I didn't went through any incubator but I'm planning to. From my point of view there are definitely bad incubators out there - the ones that get started by random people which the OP mentions - but these are no brainer: if you part with your equity for their pitch you don't deserve to be an entrepreneur anyway. There are also top-notch ones - YC the hottest one - these are no brainer too. And finally there are about a dozen of in-between. And that's where it stops being black-n-white. There might be some benefits in going through their programme, it just all unpredictable. You get different experience being in a different bunch, but still, I have no idea how it could "hurt" a startup if they get 3 month pay and advance their idea.

swombat 14y ago
A few ways: 1) The "pay" might slow down the founders' progress into a proper founder mindset, i.e. "we need to make revenues, dammit". In that way, it would hurt. 2) Many incubators I've encountered think they're adding value by imposing some kind of structure... requiring milestones, etc. For some startups, this may be suitable, but for others, it's completely wrong and will slow them down, discourage them, or even lead them in the wrong direction. 3) Good advice is worth its weight - bad advice can be the opposite. Get some convincing advice by someone who has no idea what they're talking about, and it could be very costly.
- alexro 14y ago
  Good points. Will be great to summ-up all possible drawbacks and make a comparison table for all interesting incubators. What are other bad factors worth considering? ADD: the biggest drawback I can think of is requiring to have a co-founder when sole founder would do just fine.
- ragincajun 14y ago
  Agree completely. It really all depends on the startup and the founders, but I wouldn't consider anything other than a top 10 incubator. For less than top 10 incubators, I think they could be great for inexperienced founders or someone looking for some help. Building connections are a big part of the incubator experience as well.
- nimblegorilla 14y ago
  Many incubators are also geared towards VC-style companies going for multi-million exits. That might not be a good fit for all founders. I went to MicroConf and it was really refreshing to get advice and encouragement toward building a sustainable small business.
- jasonhitchcock 14y ago
  RE: 1) this entirely depends on what your business model is. If you're validating your "insert SMB supporting SaaS here" in the market, you better believe I want to see you ring the cash register with your minimum viable product. If your building that "insert new cool social thing here", then go ahead and get your millions of users before you think about revenue. If you're referring to the "salary" of a founder as motivation, well, I don't see how having more money from that seed investment would hurt you more than not having it. RE: 2) incubators are hedge funds. they provide extremely loose structure to make sure their assets are serious. Show me a startup with no milestones and I'll show you a startup that isn't going anywhere any time soon. "we totally would have succeeded but we got bogged down in achieving goals and getting things done on time." RE: 3) If you're a founder and you don't seek advice, then you have no business being a founder. This particular point is agnostic of whether you're in a program or not. Sitting on top of a mountain and divining a business out of your own genius is not the most likely way to succeed. Talking to others and listening is. Best thing to do with bad advice is recognize its bad advice by talking to someone else about said advice. You will still receive bad advice, even if you aren't at an incubator btw. It's the founders job to scrutinize advice in the context of their vision/optimal business outcome.

grammaton 14y ago

"Who knows how many of these companies could grow into something bigger without the pressure of generating a return for early investors in just a few short years." It seems to me like this is part of a more general trend - namely that a lot of startups might do well to figure out how they can make a profit first, instead of going the venture/acquire/cash out route. It's not incubators that are hurting startups - it's that a lot of startups should probably figure out how to be profitable first.

phamilton 14y ago
Or those providing valuable exits for companies that don't make money should stop doing so.

Jun8 14y ago

Hough's article that's linked in the OP seems to be the classical definition of linkbait to me: outrageous claim backed up with little than simplistic reasoning. It does not even have anecdotal evidence, e.g. I talked to X's founder and he told me that YC or Techstars hurt their startup in so and so way. Some particular points: * "Startup incubators don’t guarantee that your startup will be successful when you leave the program after three months — although the big profile programs do hint at success through association." If you get involved with an incubator thinking it's a guarantee for success you are naive indeed. And where exactly does, say, YC "hint at success". * "Since 2005, Y Combinator has funded 460 startups with only a handful of big wins." This is the meat of the article. Since so few YC companies are successful, the YC experience must be hurting the applicants. The ratio "handful" to 460 must be compared to successful startup which didn't participate in an incubator to all start ups founded since 2005. BTW, for an analysis of "handful" see this discussion: http://news.ycombinator.com/item?id=2608440 http://news.ycombinator.com/item?id=2608440. Big hands indeed! * The only two points that are of importance, I think, are the uncontrolled publicity and relocation stress. Relocation is absolutely necessary, to cut you off from you usual surroundings. It's similar to the monks's shaving off their hair when they start their new life: a big step to show, especially to yourself, that you are starting something new. The uncontrolled publicity is a problem, but this dogs many a Kickstarter company, too. I've never done a YC round and am not a YC fanboy (in particular I'm worried about the uncontrolled publicity that YC itself is getting and its increased class size may dilute it.) but from what I read from HN over the years it seems to be a seminal experience.

jonnycombust 14y ago
Couldn't agree more. For example, Hough says "There are concrete examples of how some startups have been seriously damaged thanks to their participation in startup incubators"... but she doesn't even list one example?
phamilton 14y ago
I also found his claim that the non big win YC companies were either acquired, failed, or in a zombie state. The first two make sense, but I have no idea what a zombie startup is. The only real example of something like that would be Color. Those in Palo Alto have seen their giant office space with nobody in it, but whenever I walk by I get the feeling its a bit more like Willy Wonka's Chocolate Factory than a ghost town. These startups are churning away in a quasi stealth mode and who knows what they might produce.

startupfactory 14y ago

I am an accelerator "fanboy" having run LaunchBox Digital in Durham, NC and recently launched Triangle Startup Factory in January. Here is the meat of the issue - - They are not for everyone. But, it is a perfect model for many. There is a Darwinian aspect that does weed out many who are not ready for that particular startup path. But there are many paths to success. Like most endeavors - approach with eyes wide open. Understand the expectations and value delivered and if it matches up with your goals - welcome. Sounds like taking on VC investors. But accelerators don't hurt startups.

jasonhitchcock 14y ago

This doesn't explain how incubators hurt startups. Also, i'm wondering what the author believes the ideal success conditions are for a startup? Billion dollar company? the tone suggests an acquisition is a failure. Also, one anecdote about your non-business savvy friends thinking about launching an incubator isn't indicative of anything other than having delusional friends. The streaming video example infuriates me too. What if you have a mentor with domain expertise in another vertical of the economy who sees a massive biz dev opportunity/pivot that the naive founders never considered? I saw this happen first hand while I went through StartEngine in LA. LINK BAIT.

tlogan 14y ago

Are there any Dropboxes, Herokus, or similar startups from other incubators? I have felling that there are only a couple incubators worth applying for.

adjwilli 14y ago

That is a well balanced critique of accelerators. One possible defense of incubators could be that their value increases with time. The first class of companies may not benefit much, but as time goes on, some of those companies will certainly succeed. And those those successful companies will offer value to the current/future batches. Of course, YC has the advantage of already having several successful alumni. And like the Matthew Principle says, those who have will be given more.

toddmorey 14y ago

I think the implication in Kate Hough's article that incubators encourage you to lie on stage is more than ridiculous; it's irresponsible. I knew a guy who lied once in college. It had nothing to do with his own weak backbone: the pressure of college forced him into it and the whole institution is on trial. Look, an incubator may or may not be good for your startup. I don't know for your own situation. But I do know this: articles like this one are certainly not good for honest discussion, information, or the image of tech journalism.