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I think incubators (except for truly valuable ones) are doomed because have these options: a) raise seed money from an angel b) develop a mvp, show some tract

I think incubators (except for truly valuable ones) are doomed because have these options: a) raise seed money from an angel b) develop a mvp, show some traction and raise money from VCs c) bootstrap a profitable product or d) go to an accelerator from my expirience almost all accelerators have will present you with a bad deal (say 10-20k and office space) and claim to provide you with more value by helping you out with their expertise in other areas. In exchange they want a 20-30% equity cut. BUT the value add through their network (for most accelerators) will be negligible that's why it is a bad deal. Every other option is better: a) Angel -> can be a vocal defender and loyal partner or early adopter of your product b) VC -> You get money at a fair valuation c) Bootstrap -> Keep all the equity and stay hungry So for what it's worth I think reducing the number of accelerators would not be a bad thing for the startup eco system.

barry-cotter 14y ago
Really? The first accelerator, the most prestigious, exclusive and selective asks for 6-10% and there are others asking for 30%? No wonder Thiel said getting into another accelerator was a negative signal.
- codesuela 14y ago
  I was thinking of HackFWD though to be fair after a quick Google check they offer you about 70k for a one person, 110k for 2 people, 160k for 3 people in exchange for 30% equity. [1] https://hackfwd.s3.amazonaws.com/system/documents/4bd586/e2e8b66c7c32000034/hackfwd_offering_overview_download_v1.1__3_.pdf https://hackfwd.s3.amazonaws.com/system/documents/4bd586/e2e... [2] http://hackfwd.com/ http://hackfwd.com/
  - niggler 14y ago
    You should also do the quick calculation: YC originally gave something like 10K for roughly 6%, giving a rough valuation in the 180K range. HackFWD is giving, for two people, 110K for 30% which implies a value of roughly 370K. On the numbers alone the deal isn't as bad as it sounds.
    - codesuela 14y ago
      true, but my point is that YC will add WAY more value then the 190K diff.
      - niggler 14y ago
        Do you have numbers / proof of that claim?
        rdl 14y ago
        The only first-hand data I have is seeing the valuations YC companies raise on their notes, vs. what I consider to be fairly comparable teams (if not companies) from 500 Startups and no incubator. The YC companies are maybe 2x 500 Startups, and 3-4x people from outside the Bay Area. Given that a lot of YC teams weren't bay area insiders when they joined YC, it's a no-brainer. (and I'd consider 500 Startups worthwhile in general as well; I just think YC is better) I think a top FB/Google tech lead who knows investors who leaves to go do a related startup probably doesn't see as much of a bump in valuation from YC as someone who just dropped out of U of Michigan and is living in Ann Arbor, but there are plenty of other reasons why giving up 2-10% to YC is more than worthwhile.
        niggler 14y ago
        "I think a top FB/Google tech lead who knows investors who leaves to go do a related startup " I suspect there's a strong selection bias in YC and other incubators (take dropbox, for which Drew is an MIT grad), which probably makes my request for numbers somewhat foolhardy.
        rdl 14y ago
        I believe the YC application process is an effective filter, but I don't think it particularly needs to be -- I'd be willing to bet that the marginal admit and marginal reject are close enough in quality that YC and its benefits are a major difference in outcome. (It might be a harder problem than elite college admissions, since while you can pretty readily identify top credentials and signs of failure, successful startups are more frequently hidden behind cosmetic flaws (or personal biases) than successful students are hidden in with C/D students with a bad GPA.) YC has gotten pretty big now relative to a certain part of the startup ecosystem, but look back in 2005-2008 for when YC was smaller, and the success rate of YC companies vs. non-YC companies of that time. It seems pretty good, which warrants the valuations.
  - deleted 14y ago
    [deleted]
- IsaacL 14y ago
  It doesn't surprise me at all. Just like lower-tier universities have harsher rules for students, or cheap hotels have to ask for a larger % as a deposit, the more exclusive you are, the more you can trust the people you choose. If you have the pick of the best people, you don't need to take a big cut to show a return. I saw one accelerator in the UK that takes a 75% cut. (Not joking).

barry-cotter 14y ago

Really? The first accelerator, the most prestigious, exclusive and selective asks for 6-10% and there are others asking for 30%? No wonder Thiel said getting into another accelerator was a negative signal.

codesuela 14y ago
I was thinking of HackFWD though to be fair after a quick Google check they offer you about 70k for a one person, 110k for 2 people, 160k for 3 people in exchange for 30% equity. [1] https://hackfwd.s3.amazonaws.com/system/documents/4bd586/e2e8b66c7c32000034/hackfwd_offering_overview_download_v1.1__3_.pdf https://hackfwd.s3.amazonaws.com/system/documents/4bd586/e2e... [2] http://hackfwd.com/ http://hackfwd.com/
- niggler 14y ago
  You should also do the quick calculation: YC originally gave something like 10K for roughly 6%, giving a rough valuation in the 180K range. HackFWD is giving, for two people, 110K for 30% which implies a value of roughly 370K. On the numbers alone the deal isn't as bad as it sounds.
  - codesuela 14y ago
    true, but my point is that YC will add WAY more value then the 190K diff.
    - niggler 14y ago
      Do you have numbers / proof of that claim?
      - rdl 14y ago
        The only first-hand data I have is seeing the valuations YC companies raise on their notes, vs. what I consider to be fairly comparable teams (if not companies) from 500 Startups and no incubator. The YC companies are maybe 2x 500 Startups, and 3-4x people from outside the Bay Area. Given that a lot of YC teams weren't bay area insiders when they joined YC, it's a no-brainer. (and I'd consider 500 Startups worthwhile in general as well; I just think YC is better) I think a top FB/Google tech lead who knows investors who leaves to go do a related startup probably doesn't see as much of a bump in valuation from YC as someone who just dropped out of U of Michigan and is living in Ann Arbor, but there are plenty of other reasons why giving up 2-10% to YC is more than worthwhile.
        niggler 14y ago
        "I think a top FB/Google tech lead who knows investors who leaves to go do a related startup " I suspect there's a strong selection bias in YC and other incubators (take dropbox, for which Drew is an MIT grad), which probably makes my request for numbers somewhat foolhardy.
        rdl 14y ago
        I believe the YC application process is an effective filter, but I don't think it particularly needs to be -- I'd be willing to bet that the marginal admit and marginal reject are close enough in quality that YC and its benefits are a major difference in outcome. (It might be a harder problem than elite college admissions, since while you can pretty readily identify top credentials and signs of failure, successful startups are more frequently hidden behind cosmetic flaws (or personal biases) than successful students are hidden in with C/D students with a bad GPA.) YC has gotten pretty big now relative to a certain part of the startup ecosystem, but look back in 2005-2008 for when YC was smaller, and the success rate of YC companies vs. non-YC companies of that time. It seems pretty good, which warrants the valuations.
- deleted 14y ago
  [deleted]
IsaacL 14y ago
It doesn't surprise me at all. Just like lower-tier universities have harsher rules for students, or cheap hotels have to ask for a larger % as a deposit, the more exclusive you are, the more you can trust the people you choose. If you have the pick of the best people, you don't need to take a big cut to show a return. I saw one accelerator in the UK that takes a 75% cut. (Not joking).