A few weeks ago, I said I’d look into incubators to get a better sense of the structure– mostly because I’ve heard comments like this from Chris Dixon:
History has shown that incubators are really hard to pull off. In fact, the results from incubators in the 90s were apparently bad enough that the word itself carries a bad connotation in VC/startup circles.
But I haven’t read anything that describes the fundamental/structural issues that either cause a misalignment in incentives or failure to allocation resources properly. Here’s Chris’ stab:
Here’s why incubators are so hard to make work. Every successful startup requires a great entrepreneur focused solely on that company’s success. You can’t just take a great idea and have a great entrepreneur work on it for a while and then pass it off to a mediocre entrepreneur. It just won’t work. Maybe you can do that after the product is launched and gaining traction. But this is hardly an incubator. It’s more just like an early-stage entrepreneur transitioning to an advisory role – a pretty common practice a few years into a venture.
I’m also listening to issues/evidence of how and when to let the bad deals die, how certain decisions can signal (to investors) and impact funding, and allocating scarce/valuable resources (and properly structure incentives) among companies. The thought process is a bit more academic but at the end, I’m probably saying the same thing as Chris.