Interview Questions for Incubator

Time: Approximately 60 minutes

Important: When answering, please try not to have later questions influence your answers to previous questions.

1.     How do you work with business ideas and teams? Internal and external ideas/teams. Equity requirements, investments, milestones, board seats, advisory seats, etc. What do you offer your ventures (your role, your resources, your processes, recruiting, technical, advisory, other)? Explain each in detail. What if an incubated company doesn’t reach its milestones?

2.     Is the incubator itself a separate entity (e.g. can it go public?), or is it a concept with services (e.g. an portfolio investment fund only)? Do you plan on taking the incubator public (if not already), and if so, what milestones would you need to achieve before this was to happen? If the incubator is already public, at what point was the decisions made to take it public? Like a first-fund venture fund, how do you balance the incentive structure of building the incubated company to “last” over building to “flip” (so as to “validate” the business model)? Do you think you will gain (or have gained) or will lose (or have lost) any benefits inherent in your operations and investing advantages prior to being a public entity (e.g. public disclosure and approval of strategic moves, etc.)? The same question is similarly posed for any companies that your firm has incubated and has gone public.

3.     How do you differ from other incubators? Why would entrepreneurs choose your incubator? What are you good at? Is it execution, a big rolodex and relationships, marketing savvy in a particular segment, or other?

4.     How many ventures can you take on? What are your anticipated returns (e.g. how many do you expect to fail, or averaged across the portfolio)? Do you have a co-investment fund? If so, how large of an investment? When do you seek future rounds of funding? What’s the expected payout to the General Partners, Limited Partners?

5.     Other than your own, what do you think of incubators in general? Do they provide value beyond what a top-tier, or non-top-tier VC provides? Do you see this changing? Do you currently have a partnership with a VC, if so how are these structured? If not, do you foresee developing these relationships, and if so, how?

6.     Do you specialize in a certain industry, product, or service? If not, what you do think of incubators that do have a single focus in an industry or segment? What are your future plans?

7.     Do you think the value you’re creating in an incubated company is intrinsic to your organization (non-replicable), or just by the sheer “hunger” in the industry for anything Internet or dot.com (e.g. it doesn’t matter who does it, just as long as someone does)?

8.   How do you think your Term Sheets differ from those of a typical venture capitalist's? Management rights, other rights?

9.     Say for instance that Darwinian Theory applies to capital deployment and that the smart entrepreneurs with great ideas find smart capital (e.g. a top-tier VC firm with a big rolodex – question: is this smart capital?). This then means by the process of elimination that the next-level down of ideas/entrepreneurs go to the incubators. Or, perhaps the market is big enough that the incubators will have some successes as well.

Incubator scenarios. How would you work with them, if at all?

Note: These scenarios pull together the concepts from the previous sets of questions.

1.     An entrepreneur with a corporate background (investment banking or consulting), spent the summer working at a startup, recent MBA graduate, and with a great Internet business idea. Has already developed the business idea into a 5-slide pitch presentation, but still needs to flush out the business plan.

2.     A scientist that holds a patent developed from within a university, wants to create a business plan around the technology and commercialize it.

3.     An A+ team (say 5 smart folks) has put together a business plan (needs some tweaking and will likely change as all business plans do), for a great idea.

4.     A top-tier VC firm has a deal that came to them. The VC likes the idea and the team, but they feel they need additional help to flush out the business plan and take it to the next level. Your firm has good relations with this VC and they trust you.

5.     A big corporate firm has a group that specializes in spinning off it’s internally generated ideas and/or technology, and needs assistance to give “core focus” to the startup, while still maintaining a relationship with the parent.

6.  Hard Question: Think of an Internet/High-Tech firm that you admire, e.g. Akamai, Sycamore Networks, Amazon, eBay, Yahoo!, etc. Now imagine if your incubator existed when they started, and they came to you to be incubated. How would you have helped them? Do you think they might be different today?

For phone and in-person interviews, I will ask to record the call/interview. This allows me to focus on the questions and answers rather than taking notes, and pecking on the keyboard while on the phone.

MIT is very strict on how these recordings are used and will only be used for my own academic purposes. If at anytime in the future, you or anyone within your firm would like the recording erased or destroyed, please let me know and I will comply. If you're uncomfortable in any way having it recorded, I can do without.  

All interview materials are considered confidential and proprietary to those companies interviewed. No direct references to the company will be made in the Thesis, other than in the "Contributors" section, unless otherwise requested. People and firms interviewed will not be quoted unless specifically requested by me and approved by the speaker.

Please be assured of complete confidentiality.