Peep Peep
In a business climate where the line between laying the golden egg and becoming poultry is a fine one, can an incubator provide the help you need?
NASDAQ paints a picture that, at times, is grim; at others,
uplifting. But there's no doubt: Tech companies that were
riding a huge wave of prosperity just one year ago are now trying
to plan for the erratic ebb and flow of a slightly less confident
economy. Does that mean potential dotcoms have decided to wait for
the next big wave? Hardly. Internet start-ups are still popping up
in large numbers, and fueling those businesses are investors
wanting to get in on the game. One of the fastest-growing areas of
investment is the incubator.
As the name implies, start-up companies still in the
"egg" come to incubators to get hatched. Armed with
nothing but their experience and an idea, entrepreneurs can be in
business overnight if selected by an incubator company.
Entrepreneurs who would have started out in the garage can now
start their companies in fully furnished offices with phone lines
and servers, some cash if needed and high-level mentors just down
the hall.
Today's incubators are a different breed than their
predecessors. Whereas incubators were once the purview of
universities and small-business organizations that typically
charged entrepreneurs fees for their services, most new incubators
are for-profit entities that help you in exchange for a piece of
your company.
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Choosing incubation over angel or venture capital financing
means choosing different risks and rewards. Angels and VCs
don't help as much on a day-to-day basis; the incubator,
however, is always there. The incubator staff fills needed
functions, freeing you up to focus on your com-pany's larger
goals and strategies.
But you give up substantial equity with for-profit incubators.
Tyler Orion, executive director of the Pacific Incubation Network,
a San Jose, California, incubation organization that serves all
Pacific Rim incubators, emphasizes the need to investigate
for-profit incubators. "In for-profits, you'll give up 50
to 75 percent of equity," Orion says. "You have to
carefully evaluate what you get and what it's worth. You cannot
presume you're going to get what is promised. And you should
talk to one of the companies they're working with."
Steve Sanford, CEO and co-founder of Icebox.com, and Peter
Gumbel, editor in chief of Business.com, say their incubator experiences
were invaluable in moving their companies forward in the
competitive world of the Internet.
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