Curious Office

Lot’s of mention lately about new seed investment and incubation firms popping up which confirms some of what I already felt. Here a few of the latest tidbits:

• Internet entrepreneur Phil Cooper, founder and CEO of Utarget PLC, today launches a new internet incubator, Utarget Ventures. Designed to assist dot.com start-ups with financial backing, online and offline expertise, the new incubator has already secured its first client, Ultimatehome.co.uk.
• Adaptive Path, the cutting-edge Internet consulting and design firm that has helped define Web 2.0 (and developed the term “Ajax”) said today it has agreed to provide Sierra Ventures’ portfolio companies with consulting services in exchange for equity.
• After nearly 20 years as a venture capitalist, Kathryn Gould is now investing her own money backing a select group of entrepreneurs who have “big ideas, frugal attitudes and serious intent to win at whatever they’re doing.”
• Denuo from Publicis launches an incubation type service.

Why all the fervor? I think it’s because people are seeing that interesting platforms can be built quickly and with less money than ever before. Also, some investors, VCs (and entreprenuers) can see that these types of services may give new start-ups a competitive advantage over other venture capitalists who are courting consumer Internet startups. In our case, it seems lately we put about 80% focus into finding and developing our own ideas. That percentage could change as we’re constantly on the lookout for great new companies. We originally thought we’d invest more passively than we are actually apt to do. We see now that our ideal scenario is to get some smart folks with a good idea who find us early enough that we actually become part of the team on a deeper level. I can see that most of the companies we meet with need help in several areas to include business and financial modeling, product scoping and development market positioning, web, print, etc. Mostly, they need help being told what NOT to get excited about. What NOT to focus on. I really cannot overstate this enough. We have met with several very, very smart former Microsoft and Amazon execs over the last few months and the one thing that I believe happens frequently is a propensity to get caught up in the mechanics of the start-up. People get excited about meetings with VCs. Doing VC pitches isn’t a glory ride. The reality is that you can get those meetings one way or another. But most will not pan out. You’ll spend hours working on powerpoint decks only to realize later that you probably should have spent more time early on perfecting the product or service you want to bring to market. The product has to be better…not the powerpoint deck. The number of customer meetings has to be higher…not the number of VC meetings. If the product is further along and the prospect list is growing then maybe…just maybe…some of these so-called incubators might really be onto something. What you really need in the early days is less money, a lot of feedback, advice AND a ton of elbow grease injection from other smart people. Incubators can provide this. Most VCs aren’t well equipped to help you bootstrap your business when its not even on first base.

The other thing to add here is that not all VCs are the same at all. Some local firms (like Frazier take the attitude that rolling up the sleeves and getting in the trenches is just part of the job. I haven’t personally worked with them before but I know a few of the partners there and I know how much time they do spend on the investments they do make. So, if an incubator is doing their job, they can help guide a start-up to the right profile of VC when its time to take that step.

I’m going to keep watching this emerging space of Incubation 2.0. I think this second time around some of these firms might just provide exactly the right kind of value for aspiring entreprenuers.