Incubators are Bullshit, or are they…?

At Fundacity we regularly read an awesome CB Insights newsletter. In addition to really high quality content they put there each time about VC investing, they also include a section with interesting articled about startups and starting up from around the web.

Today an article that caught our attention was called Incubators are Bullshit. We read it with interest, as at Fundacity we work with many accelerators around the world. The author raised some valid concerns about the structure of some programs that pack too much activities, when founders should really be focused on talking to customers, looking for product/market fit, etc. We thought however that the article was quite one-sided and quite unfair to accelerators (which the author kept calling incubators) in general.

Below is our response added in the comments section, which was promptly marked as spam. The admin of this blog of course had the right to do that, but we found that qualification a bit harsh, hence this blog post. Please see for yourself.

“The problem with being that judgmental as you are in this post, is that one tends to include only arguments (or rather opinions) that support their view. There are few of them that caught my attention in particular.

1. At Fundacity we work and know many accelerators, helping them manage their startup selection process and soon portfolio management. The value they give to startups indeed does differ and in many cases I am sure there are too many meetings and not enough actual work being done. However, the vast majority of accelerator graduates are happy with their experience and would repeat it (http://techcrunch.com/2014/03/10/these-are-the-15-best-accelerators-in-the-u-s) Since they are the best people to evaluate if their startups have made any progress during the program, it makes your argument flawed.

2. Track record. Most of the accelerators have been around for short time and Y-Combinator is the oldest one really. I am sure you know that most startups are not an overnight success. At the moment most people agree the jury is still out if accelerators work or not.

3. Networking. Accelerators give you many people to network in one place, which makes it a very time saving exercise. What startups also get is a kind of automatic referral – accelerator’s brand – which opens more doors. Founder that wants to network outside of such ecosystem will inevitably spend more time doing that. Since, as you point out in your post, they need to be primarily focused on building their business, most of them will simply do little networking. Besides, the quality of networking depends primarily on how one does it. You can suck or be good at this regarding of how many people you meet, but meeting more people at least makes you practice. Also, I cannot imagine anybody is forced to network instead of working. Smart founders know hot to balance both.

4. Who are you modelling yourself after? I do not understand this argument at all. So if you join Y-Combinator you will somehow model yourself after Dropbox or Heroku? In what sense – culture, success, client acquisition? Why is it good or bad?

5. Investors. Is it the same investors who go to Demo Days and then invest in graduates of acceleration programmes? What would be a traditional way? It’s the same investors in most cases – graduate startups can just meet them easier and they get a “stamp of approval” from an accelerator, which works as a good referral. Investors do their own one too. Again, time saving for startups. Also, most of startups enter programmes in a very early stage, often too early for an investment by VC funds. Accelerators fill in the early stage funding gap around friends, family, sometimes angels.

By the way, there is a difference between incubators and accelerators, All your examples referred to the latter, so unless you intentionally tried to be dismissive, your research could have been more thorough on fundamentals.”

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