Introduction: In recent years (especially during the past six- to nine- months), the number of new incubators has increased dramatically. Incubators are seen as organizations that can address the unique needs of today's new ventures: speed to market, synergy and network, talent cultivation, and strategic cohesiveness. The growing number of incubators in the New Economy also represents a wide range of different organizational forms. This paper explores the range of organizational forms of incubators, focusing specifically on the risks and benefits of horizontally (general) versus vertically focused incubators, and in the vertical market, taking as an example, wireless-telecom.
Goal: Understanding the risks and benefits of horizontally (general) versus vertically focused incubators.
Advisor: Professor Edward Roberts, author of Entrepreneurs in High Technology (a classic), Chairman of the MIT Entrepreneurship Center, and considered one of the founding fathers of today's modern venture capital. Prof. Roberts book documents the formation (1946) of Advanced Research and Development Corporation (ARD), the world's first venture capital firm, from MIT to move research and technological ideas forward into the market. Currently, MIT processes on average 2 inventions/day and 3-5 patents/week, and is the leader in patents granted annually to a single institution.
Advisor: Professor Ken Morse, Managing Director of the MIT Entrepreneurship Lab, a course at Sloan that focuses on bringing business school, engineering, and science students together to work in teams with promising startups. Prof. Morse is an alum of Harvard Business School and has started 6 extremely successful companies by any standards. Among them, he is attributed as a founder of 3COM (Nasdaq: COMS).
Issues to be explored:
qUnderstand what is an incubator
-How does it relate to an accelerator?
-How does it relate to a venture catalyst?
-How do they relate to the venture capital firm?
-Explore the many and varied operating models
qWhat is the value proposition of an incubator?
qHow do you balance the incentive structure to "Build to Flip" vs. "Build to Last"?
qThe low cost of capital is muddling the analysis of incubator and makes it difficult to determine the real value, if any. Are incubators just another way to deploying capital? What if the market dried up today, would incubators still be around?
qUnderstand an incubator’s potential role in the development of a company. Do this by focusing on a specific market: wireless telecom. Does a deeper domain expertise create more sustainable value? What about potential cannibalism within the vertical incubator?
-Explore the value-creation of an incubator, horizontal and vertically in the wireless-telecom space
Methodology:
Interviews and a review of recent business literature. All information, unless otherwise requested by participating firms, will be treated confidentially and reported anonymously into rollups and trends.
Interviews with these firms/people:
qIncubators on their models [incubator]
qVCs to get their opinion of incubators [VC]
qIndustry and telecom firms and their thoughts on vertical incubators [visionary]
qKnowledge leaders to get their visionary views on incubators [telecom]
qInternet and high-tech analysts to get their views on incubators [analyst]
qPublic stock investors that invest in incubators [investor]
qEntrepreneur on why they would select an incubator, if any [entrepreneur]