The real cost of Incubators and Accelerators and the boogymen who promise capital
I love startups. I hate the startups that don’t do any thing and cant stop playing pretend. They are wasting every ones time, most importantly their own. But at no fault of their own, they don’t know any better.
Day in and day out, I see founders that are more interested in playing startup than actually being one because of the guidance they are receiving from their “mentors” and “Incubator Owners/Hosts”.
Startups are a beautiful thing; they create value where nothing existed before, and the best of them succeed despite the unimaginably high likelihood of failure. Yet some how we are going down a misguided path of what a startup is, should be, who should run it, what it should do and how it should scale. Let alone how it should make money, create employment and empowerment.
This path is misguided because most startups are coming out of incubators that are run by people with money (or access to money, or who like to play rich) or those appointed by institutions who have zero background in doing any thing enterprising or even working some where that has done any thing remotely in line with being entrepreneurial. We are misinterpreting money and retired corporate types + academics as those who can help any of these startups. They can barely help them selves. Generalizations aren’t great, but this one is fairly on the money.
Incubators are good for the ecosystem, but when the entire ecosystem is mostly incubators, with no real VCs along with a sprinkling of angel investors that typically want a photo op rather than a patent ap and incubators that have 20 some things using downloaded guides to building a startup or Guy Kawasaki’s models and PowerPoint’s. My response is, you are already late to the game and completely lost, we have “Google” for all that. I should be the last one advocating age as a pre curser for success, all my life I’ve bet against the status quo, skill rather than age is what matters, unfortunately its linked in our ecosystem, the folks handing out the advice them selves are completely lost and the irony is, they are not volunteering at the incubators after a successful or failed startup journey, they are entry level upstarts trying to navigate their own careers and futures. The flip side is not any rosier, our system is set to respect Grey hair vs Grey Matter.
What a travesty that your first/entry level gig is that at an incubator. Wherein you will be responsible for helping and advising others on how to lead their startup journey. You cant make this stuff up, this bizzaro level crazy.
It had to start some where(Some incubators in Karachi and Lahore for the risk of Bias, are doing a service to the underserved masses) and I am glad it did, but it has to quickly evolve beyond what it is today. There are also incubators who are working on the look good methodology, to look good they bring in companies, not startups and do a fantastic PR job around them whilst they are incubated, sprinkle some institutional/govt capital, sign a few MOUs, cross promote within their fraternity and 6 months later we see this cycle being repeated and no trace of the last ones. Its self promotion at best.
In the last 6 months I’ve seen any one with some money + recent retirement + Doctorate + Bureaucrats all enter this space by the boat full. For some its post mid life crisis, unfortunately due to the hero worship mentality and the lack of career counseling in general at our academic institutions, our kids/youth will get in line and gobble up the garbage advice coming from these types and abandon their real dreams for getting a seat at the table with these self professed success stories and play pretend. There is no real money coming; there is no real growth. In 2 years I want to revisit this post and see how many startups got 50m$ in scaling capital post their incubation, let alone be commercially successful.
Most of the people running or deploying the incubators have been corporate types, who are now pretending to be Titans of industry. Their hired help, on the other hand comes from a varied mix, some have never had a real job, but a crisp white shits and a suit with spit polished shoes are essentially all that is required for the photo op and misleading every one around them. They by disposition of their last name, or their pedigree were in the right jobs, or by virtue of their political or family affiliation at the right place. These kids are far too naive to really understand the Sind Club / Punjab Club /Islamabad Club undertones and pick them up, there are just pawns in this game of pretend. Incubators that have spawned as of late, their promoters to me look like “frat brothers”. It’s a nexus of the small and interconnected and borderline incestual. I wouldn’t have a problem if they’d invested real money, beyond self promoting their own agendas and doing launch parties and lunches and posting pics with other “self professed” starsJ.
What’s lost on the startups is that these guys are hawks, they are fishing for ideas under the guise of “investing” “growing” “helping”, they are running industry events, collecting insights, finding cheap labor, handing out 8-20% equity and deploying their capital to fund their companies that will be run by fairly smart kids at what any where else in the startup world would be considered minimum wage. I.e a lock in at 8-20%. Incubators are what discotheque were to party goers in the late 70s and early 80s, a way to stay relevant, it’s the LSD of the Baby boomers Generation of Pakistan. They are doing a real dis service.
So here’s what you must ask the “owner, host, patron” of your incubator/accelerator/VC promise seller to really see if they can help you before you eagerly hand over your sanity and future to a lock in:
- Have you ever built a company or a product? Being a politically or family nominated CEO doesn’t count.
- Have you ever worked at a successful or failed startup?
- What makes you qualified to evaluate technical ideas?
- Who are the mentors in your network?
- Have you ever funded a successful or failed enterprise?
- Does your money come with strings?
- How much available capital does your network pledge to invest post incubation? Do you have a credible network of investors? What is their track record?
- Do you have a financial or technical background?
- When did you last file your personal taxes? Can we get our accountant to look at your incubators corporate structure?
- Do you have any patents? Have they been commercialized?
- Can you provide 2 references that will vouch for your past investments and business dealings?
- In you last job what did you do?
- Is your capital, family money, a retirement fund, or does it come from an institution or govt of politically backed entity ?
- You have shared that you are prolific venture capitalist? Do you have a Venture company license to operate in Pakistan?
- Who will own the IP we create in the business and how will we protect it?
- How much time will you spend with each startup? How many startups in each cohort, and besides introducing to your corporate friends, can you share a list of mentors and their background?
- How many times a year will you introduce us to funding cycle programs/demo days?
- We need to go from 1m$ in sales to 5m$ in sales, what would recommend as the best way to raise the money? Venture Debt? Dilution? PE?
- Since there are no bankruptcy protection laws in Pakistan how do you propose to deal with a failed startup?
- How do you select ideas and people to invest in, host, or accelerate, what is your growth and investment philosophy?
There is still time, look at the data and facts and select wisely.