The Return of the Incubator

Those who recall the Dotcom era will recall the Incubators, the idea being that if you gave tech startup companies a home port, power and publicity for preference shares, then hopefully a few of your incubatees would strike it rich and you'd cash in your shares.

Well, today separate stories in TechCrunch and GigaOm both featured Incubators - TechCrunch first, although today they are called Accelerators:

...today the movement is joined by the Oxygen Accelerator a UK-based investment programme designed to intensively mentor super-early stage startups. The 13-week programme will take applications from around the world, so long as the startup sets up a UK limited company.

The programme is unusual in that it’s offering an “evergreen” loan of £20,000 to start with, in return for a 6% equity stake. In effect this covers the startup’s costs and ‘ramen noodle’ living expenses during the programme (they are working with local athorities to also provide subsidised or free accommodation for teams).

Then GigaOm, also saying that Incubators were already passe this time round it's a MetaCompany:

As the dot-com boom progressed, “incubator” became a much-maligned term. Thus, the idea of a metacompany was born.............. I wrote about it in the November 2000 issue of Red Herring magazine:

It aggregates the key features of an incubator, a VC firm, and a diversified company. Like a corporation, a metacompany has a CEO and a corporate management team and maintains a significant, but less than 100 percent, ownership stake in a number of ventures, whether they remain closely held or later go public. But unlike VCs and incubators, metacompanies focus on a single area of business.

...............

This morning when I read about Firestarter Labs, a new venture from Craig Walker, who was one of the co-founders of GrandCentral, the service that became Google Voice, I had a feeling of deja vu.

GigaOm notes that the last time round the number of startup incubators went from a few to c350 in about 3 years. Whatever you call it, the role of the Incubator in a Bubble is to manufacture startups, in order to have sufficient volume there for the Dumb Money* to buy - (or else the silly sausages just go and spend it all pushing the value of a few favourites up to stratospheric heights. Oh ,wait.... )

Anyway, this is all in our 10 steps of Bubblemania prediction, a strong Force 4 (see chart above). What incubators then drive is the increase of companies funded off the slide deck (in Froth Time, quantity not quality is the watchword) which of course attracts The MBAs from The Banks.

Update - Original Incubator Y-Combinator has accepted a record number of entries this year

The Summer 2010 batch was “just” 36 companies, although that felt like a lot at the time. But with the continued success of a lot of these startups, more applications come in (Y Combinator hightlights Loopt, Reddit, Clustrix, Wufoo, Scribd, Xobni, Weebly, Songkick, Disqus, Dropbox, ZumoDrive, Justin.tv, Heroku, Posterous, Airbnb, Heyzap, Cloudkick, DailyBooth, WePay, and Bump on their home page). And the $150,000 convertible debt offerings to every Y Combinator startup from Start Fund in the last class don’t hurt, either. None of Y Combinators competitors have anything like that to offer new entrepreneurs.

(Clearly quality is rising, as they only accept a minimum quality...... discuss)

* The Dumb Money is your money, spent by the Pension Funds etc that you give it to, near the top of the market. You have been warned.....