There are two types of successful startup incubators in the world: YCombinator or TechStars

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Incubator 8000 SC
Incubators and accelerators have but one purpose: move startups along in their life cycle at a faster pace than they would normally and increase the likelihood of a return by providing that service. If you are a startup looking at applying to an incubator you need to understand that the differences in how these programs differ go beyond the money they give you in exchange for equity.

An oversimplification of the incubator/accelerator space is to classify them as either a Y-Combinator (YC) or a TechStars (TS). If you really look at the booming world of incubators for high tech startups you see a model that either based on education and peers that is driven by a strong personality (YC) or a model that is more institutional, mentor driven, follows a script, and feels less personal but is more in line with how VC’s work (TS) (right in the middle is where I would place 500 Startups – which is arguably representative of a third type). There is plenty to be found about the differences but here is a bit of a deeper exploration into the differences.

Startup lifecycle

Startups have a number of key phases in development that is best outlined in Fred Destin’s presentation on startup lifecycle.

  1. Start
  2. Launch
  3. Build
  4. Chasm
  5. Scale

With the 12-14 week cohort models, like YCombinator and TechStars, the focus should be on moving through starting and on to launch phase. There may be some that get into a build phase. The incubator or accelerator hopes that once they are done a 12-14 week program the startup will be in a much better position to move quickly through the build stage and at least take on the chasm phase.

Where I see the key difference between YC and TS is that YC seems to be able to get companies to go through stage 1 to 3 and they accept companies mainly in the start phase. TS seems to not attract a cluster of companies in a particular phase or not care about what phase a company is in.

The basics of an incubator/accelerator (whatever you want to call it)

Within the execution of any incubator or accelerator program there are, in my mind, 4 core stages in a typical cycle:

  • Recruitment
  • Onboarding
  • In the program
  • After the program

Within each of these of these stages there are a number of specific activities that all incubators do but in general they aren’t all that different.

Recruitment

YC currently leads the thought leadership with Hacker News, Paul Graham’s (PG) blog, and it’s success. Applicants fill out a form and once told they have an interview, travel to YC in Mountain View for an interview. They get just 15 min with a small panel and the panel does a bunch of tricks to the founders like carrying on side conversations – there are a lot of blog posts about that.

TechStars has adopted a more consistent process over it’s many affiliated programs (it appears) but they lack YC’s Hacker News or thought leadership (although they would claim otherwise). With Techstars there appears to be an affiliation with the Kauffman Foundation and the role they are taking in promoting the incubator model in general they have made themselves an authority in the space. From people I know that have been in the program it is a fairly standard process similar to raising Angel capital.

Onboarding

I am not sure on TS on-boarding but YC has a very short interview to decision to start of program window. YC has a little book that is like a long Wikipedia article written by Paul Graham that offers insights and baseline knowledge. From what I have been told the YC machine is pretty much immediately available to you when they say “you are in” — startups decide when to tell others. What is really interesting is that YC doesn’t announce it. They generally let a company know they are YC funded on the interview day but they don’t make a big announcement or anything.

Not having a big incubator announcement is a key difference here. I will assume that with TS it is just like YC in that they have decided to fund you, they are now available to you. However, TechStars (it appears) doesn’t approach announcing the cohort in the same way as YC — they announce them ahead of the program. For a startup this little difference could be a big one if you are concerned about managing expectations of outside investors as you go through the program.

In the program: peer mentorship, startup culture

Each program runs for roughly 3 months, 12-14 weeks, where mentorship, various events, and a demo day to close it off normally occur. Each week is important given that each team only has 3 months. Over three months there are phases you can generally identify:

  • Teams becoming familiar with each other, their mentors, and what they need to do (first 2 weeks).
  • The heads down getting stuff done phase (8-10 weeks).
  • Funding mode going into Demo Day (2 weeks).

Other incubator programs are fairly similar with any given week involving office hours (optional or required) and a speaker/dinner. The office hours are used to check in and place goals on the teams. Throughout the term there are demo nights, which are used by YC as a way to put peer pressure on other teams that might not be moving as fast as others.

Where they differ here is in the education of the founder(s). From everyone I have talked to that has gone through YC it seems to me it is a very challenging but rewarding relationship for a certain type of founder. That would make sense as a certain personality type will work best with Paul Graham’s way of doing things and will excel. I am not entirely sure it is simply a hacker/coder persona as most assume. I think it is a personality and learning style that goes a bit deeper.

TechStars has a co-working model with parts very similar to YC. The key difference is that TS doesn’t have the Paul Graham approach to educating founders so you will get very different details depending on who is running the program. The character of the TS program can vary because it is so mentor driven and puts the onus on the startup to engage those mentors. There is a big plus to this approach as you are more likely to find a good fit in the large mentor pool for you and your company. TS also gives the startups a place to work where YC leaves them to find a house and work out of it.

After the program: Alumni network

The key value any incubator or accelerator provides after the program is the alumni network of companies that are now a few steps ahead (depending on the age of the incubator there could be alumni with very large companies) of the current cohort in the program. Over time these alumni are your best mentors and connectors.

It is at this phase where the greatest value is for the startup, I believe. You now have access to what the old folks call a big rolodex (social graph) that will open many doors which essentially leaves it up to the entrepreneur whether their company will succeed or not. There are few to no barriers, generally speaking.

Any alumni of YC or Techstars still have contact with the folks in their cohort and all cohorts along with Hacker News. Techstars Network is so big they have a conference just for alumni while YC taps its alumni for all kinds of things. Also, founders seems to find going through the program a second time is different but just as valuable. These massive networks of successful alumni with a flock of high profile admirers is very similar to that of Higher Education alumni networks, so much so it convinces me that this entire process is a form of higher education.

Programs that work copy YCombinator, even TechStars did

The current culture of education focused incubators started with YCombinator (started in 2005). I believe what we are seeing with the success of YC and TS is new take on graduate school. Both are different, both work, and people can have strong opinions either way. They feed a need that I don’t think people outside of incubators or startups fully understand yet, learning to be a founder is really hard. Being a successful founder is even harder. The bet is that if you help young founders focus on what is important they will see success earlier or just simply see what success looks like.

If you are looking at an incubator anywhere (there are lots of great programs out there) you need to understand that the money is secondary. You need to find a program that will fit with the way you learn and has companies that you want to work with. It is just like how you picked your University or College except this time it can cost you a lot more (in equity) if you are successful.

 

The road trip: San Francisco and Austin (sxswi) notes

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For a week in March I did my first big road trip in many years and headed to San Francisco on my way to Austin for SXSWi. With only 3 days in SF and 4 days in Austin I was expecting a pretty intense trip, I wasn’t let down. The goal? In SF it was to meet up with VeloCity alumni (there are around 14 of them I know of there) and find out if there is more VeloCity can do for our students. In Austin it was to purely network and take in all that SXSWi circus has to offer. Every type of marketing strategy is being executed at once by hundreds of different companies; from traditional brands trying new things to crazy useless apps trying to get my attention using the more traditional (but not so classy) booth babe strategy.

San Francisco and the valley

Oh my. I forget how sexy the city of San Francisco is for the entrepreneurial minded. Sure people fall out of love once they get to know it (or think they know it) but if you are wanting to bounce ideas around that is the place. You can meet dozens of different people in a day that will give you dozens of new ways to think about a problem. The weather there is like May in Waterloo without the crazy chance of snow storm so you can walk around comfortably dressed and spend a lot of time outside.

I met up with 10 VeloCity alumni (they have lived in VeloCity before) working for different startups or doing their own thing. Some are very well connected already as they are highly skilled and know their worth. Others are taking notes and plotting their own move. It was great to see them and it was even better to hear their perspectives in the context of the environment we were in.

Austin and SXSWi

What a circus. I booked in late January and the best hotel I could get was the Hampton out at the airport. Thankfully a friend offered up a room downtown which made my experience that much better. Getting around is a nightmare if you aren’t located downtown and you will be tempted to bring your laptop around with you. There is no point in doing that, the internet doesn’t work during the day — far too many people.

What you have in Austin is a great event for networking but don’t go for the talks unless you are there for a few specific ones and you can actually find them on time. I am entirely not sure if the marketing works for all the apps pushing hyper-local services but it is hugely entertaining for those of us there to observe and see all the different things that people try to gain attention. The conversations with people are priceless as well, the event attracts so many leading edge folks. If you are a new startup looking for some validation on what you are building that is the place to be. For more established brands or products like GM, they put on a great show. They even let me drive a Corvette.

It was very cool seeing Kik there as well — they have the most useful chat app but the network suck-age hurt them. I was a bit disappointed because there were a ton more people I wanted to meet and chat with but the best ‘twitter friend I had yet to meet in real life’ moment was bumping into Jonathan Snook in the elevator at the Hampton. How unlikely is that?

A short list of knowledge

The key bits of wisdom sticking in my head:

  • The Canadian Angel scene is totally messed up (not news to many) — there are some good angel investors but not nearly enough are spending the time to build relationships with entrepreneurs in Canada or willing to take risks. This is really clear to me now.
  • Better connections are needed in the valley for students — not to drive them down there, more to demystify the place and provide them with some solid connections. This could be accomplished through their peers or a group like the C100.
  • You never have to eat alone in San Francisco.
  • Austin is an awesome city that is totally overwhelmed by SXSW and you will love it.
  • If you have any dream to be a community manager or be in marketing you have to participate in the madness at least once but do not plan anything there unless you have been there already.
  • Waterloo students are everywhere. Randomly ran into Holden of CS Club fame playing foursquare at the foursquare location, talked with a returning VeloCity resident who is currently working for Foursquare as well.
  • VeloCity/Waterloo needs to do more relatively simple things to help our students — even use SXSW as a way to find new and exciting employers for our students on co-op. We can’t stay in Waterloo waiting for people to come to us.

As I plan to sit down over the next few months and pull together a grand strategy for the next little while at VeloCity I am full of crazy ideas. This is good!