What Makes An Incubator Tick?

by Aditya Dev Sood

6a00d8341c562c53ef01bb07d80aae970d-800wiIt’s been three days and our eight teams are already up, pitching for their lives. Watching them from the front row is a series of mentors we’ve curated, from areas like branding, user interface design, product development, technology, business and investing. There’s a tug between the mentors and the startups underway — criticism and backtalk, kicking the tires and trash-talking the car, defending its value and selling its golden possibilities.

Startup mentoring is a lot like teaching, supervising, consulting, parenting — plus maybe running a cult retreat. It can’t happen without a deep and personal bond between the mentor and mentee. That relationship usually arises accidentally, through life circumstances, working relationships and chance meetings. Here we were engineering that relationship into existence, several entities and multiple individuals at a time.

In the run up to our first day, my main goal was to ensure that I made a personal connection with each cofounder. Without this central relationship gelling, the whole thing would fall apart, fall away. In the weeks leading up to the launch of Startup Tunnel I’d been taking long winter walks, doing yoga and actively working on clearing my thoughts to make space for this set of startups and their many needs. I also designed a series of exercises that would allow startup founders to see in one another and in our mentor group a useful set of resources that they could draw from as they developed their business. I scripted every aspect of our initial interactions in detail. There would be a ball to play with, a registration desk, thirty chairs set up against the demodeck, startup names posted along their workstations. There would be self-introductions, peer-feedback sessions, a seminar and workshop on understanding end users.

This way of working is not very old. It brings together three distinct kinds of expertise: entrepreneurial insight, technology capacity and financial investing. It was Y-Combinator, beginning in the summer of 2005, that began putting batches of young entrepreneurs through a common program of enrichment, trying to learn through that process what would work and what wouldn’t, thereby iteratively improving their program and reinforcing observed insights. Y-Combinator has enjoyed extraordinary success over the past nine years, having seeded numerous successful startups, in which the group’s equity holdings now exceed a billion dollars USD. But the scope of their success is even more unfathomable when one considers that they have also brought into existence a significant new business model that inverts everything that most people thought they knew about business: that entrepreneurial success cannot be predicted, that the charisma of the entrepreneur cannot be taught or improved, that entrepreneurship cannot be any better organized or routinized.

In Silicon Valley, Xerox PARC was an early attempt at systematizing technology innovation under a new kind of industrial umbrella, but it built on earlier models of the corporate lab — Large corporate research labs — Bell, AT&T, Kodak. PARC has been accused of fumbling the future, but the means to align funding resources to useful innovation activities that had been somehow validated with the market simply hadn’t been devised at that time. Corporate extension programs for tech universities, industrial parks attached to campuses, and other kinds of tech transfer entities all suffer from the absence of market signalling. It’s when individual investors vote not only with their mouths, but also with their wallets on what kinds of startup dreams should be funded, that a more focused and rapidly self-evolving type of innovation can be unleashed.

With the dawn of the internet, all kinds of entrepreneurial frenzy was unleashed, which brought scheming tech investors into a difficult dialogue with the more sedate and tony world of equity investors. Michael Wolf’s 1999 novel Burn Rate provides a glimpse of that pre-Y-Combinator cowboy frontier, where scheming tech investors could easily swindle soft-shoe old money, and the worlds of private equity financing and startup advisory services had yet to synthesize and recombine. The startup incubator provides a stable intellectual and social space where these worlds can collide and forge something new.

On account of Y-Combinator’s success there has been an explosion of incubators and accelerators in every part of the world, including in India. In 2009, The Morpheus began incubating companies remotely, operating out of Chandigarh. Venture Studio began trying to bridge the worlds of design and investment at NID in Ahmedabad. The Times of India opened its TLabs out of an building in NOIDA outside Delhi, where it had once planned to house a television and films division. GSF began incubating batches of mobile and tech startups in New Delhi and Bangalore two times a year. Microsoft and Google host and enable developers through their offices in Gurgaon and Bangalore with a view to keeping their respective platforms well stocked with apps and games interesting for their users. And Silicon Valley investors like Vinod Khosla have opened offices in Bangalore. More and more sophisticated and thematically-specific kinds of programs are now being planned, including at med-tech incubator in Bangalore. That’s the crowded field in which we’re now digging Startup Tunnel.

As with conventional institutions of higher education, one of the strongest predictors of incubator success is the strength of their pipeline: when strong teams are competing to enter an incubator, it’s a better bet that stronger teams will exit. Along the way, they seem to receive a still ad-hoc mix of war stories from former investors, critical feedback from specialists in different areas from technology to finance to marketing. They also meet potential investors at demodays and other networking events, which can also shake open their social network and increase the chance for them to achieve entrepreneurial success. All this sounds decidedly unscientific, and I believe there’s still abundant opportunity to better understand what entrepreneurs need and how those needs can most effectively and quickly be met.

Startup Tunnel has organized its incubation program into a series of seminars and workshops under two distinct heads: Product Development and Startup Operations. The first ensures that teams arrive at product concepts that truly solve existing needs for end users, while the second helps the entrepreneur conceptualize a large business at scale and then design a pathway for how to arrive there. The formal, routinized part of the program is complemented by the individualized attention and mentoring that startups received through our network of mentors. But in order to receive this mentorship they must first connect with a mentor, and convince them that the startup concept is worth their time and effort. Startups get a chance to chat up mentors through a speed-dating exercise right after pitch presentations. We bring in some seven to nine mentors to review eight startups, and follow up with a process of mutual matching between them, face-to-face as well as online.

All of our structured training is about readying founders for the marketplace. Once they’re up there, explaining and defending their proposition, and the audience begins to evince some interest in the startup, the buzz can get dizzying. It all begins to feel very real. You can breathe in the electric current of the market.

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This is the second of a series of brief pieces by Aditya Dev Sood on the unfolding journey of a new incubator based in New Delhi: www.startuptunnel.com, @StTnL. Also check out the first article, which was published on 3QD last week.