Given that eCompanies created the very backbone of Business.com, Gumbel feels that the cost of the incubator was well worth it: "The most important thing that happened was when eCompanies bought the URL of Business.com for $7.5 million. That received a lot of publicity and was really the founding moment of the company."
Another graduate of eCompanies, however, thinks his venture's worthiness is only conditional. Because he gave such a large portion of equity to eCompanies, Brett Morrison, 31, co-founder and chief information officer of ememories.com, believes it will have been worth it only if his business becomes a billion-dollar company. Ememories offers film processing, online photo albums and free digital uploads. Morrison, along with partner Carlos Blanco, founded the company in 1998. They joined eCompanies in November 1999 after a cool reception from other investors. The incubator staff went to work in its usual, ex-pedient way; and according to research company PCData Online, by March 2000, ememories' site was No. 1 among sites that offer photo processing or photo sharing. The company recently signed a deal with Kodak that brought investment capital and affiliated contacts. Despite the early advantages an incubator delivers, Morrison cautions entrepreneurs to evaluate carefully the loss of equity. "If we execute the plan, we'll reach a billion, but we're not there yet," he says. "If it's not a billion-dollar company, it wasn't worth it."
Incubation seems right for many companies. The speed to market is a big advantage for Internet start-ups. With many of the functions handled by someone else, and with the help of mentors, the entrepreneur gets a jumpstart on the competition. But each founder has to decide whether the equity they give up to the new for-profit incubators is balanced by what they get in return.
Cynthia Harrington, a freelance writer in Austin, Texas, writes about business for a variety of publications, including Bloomberg Wealth Manager and Senior magazines.