How To Start Smart: The Five Things To Know When Approaching An Incubator
Editor?s note: The following is a guest post by Jon Paris, CEO and co-founder of Astrid To-Do. Astrid participated in AngelPad and immediately raised a successful seed round from Google Ventures and other investors. His opinions are his own.
Incubators are playing an increasingly vital role in acquiring meaningful investment for first-time entrepreneurs. TechCrunch reported that elite accelerators like Y Combinator receive on average one application every minute, and AngelPad reminds its participants that it is many times more selective than the Harvard Business School.
Incubators ask for a 2 to 10 percent stake in your company, a sum that could alternatively be used to attract a junior co-founder or provide meaningful ownership to the first few engineers you enlist. In return, incubators offer intensive coaching, networking with other founders, and warm introductions to likely investors. Incubators give first-time entrepreneurs and international teams alike a crucial link to Silicon Valley.
In addition to the giving up meaningful equity there are other downsides to consider before participating in an incubator. Most have a schedule that?s built on a demo near the end of the program. While many companies view that external structure as helpful, others can find that working with such a timeline damages their business.
The long lead up to D-Day could mean a delay in fundraising or product lunch, which in turn can translate into missed opportunities. There are other potential pitfalls, from committing too quickly and prematurely to an idea, to trying to scale before properly understanding a market and the company?s place in it. And with any robust community, there?s the danger of succumbing to groupthink. Founders need to remember they understand their market better than anyone.
For most first-time founders, these downsides are far outweighed by the benefits. Below are some lessons I regularly share with prospective entrepreneurs interested in applying to incubators.
1. Know their interest and expertise