Create a productive and inspiring space for high-quality, early-stage internet entrepreneurs to share knowledge, resources, and support.
Most internet startups share the same early tasks: refining a business plan, developing a scalable infrastructure, creating a marketing strategy, vetting vendors, recruiting employees, courting investors, and managing logistics like legal, accounting, and operations.
Thousands of startups have repeated these tasks, often without benefiting from the mistakes and lessons of others. While advisers and venture capitalists can help with high-level decisions, we have found that sharp entrepreneurs facing the same daily decisions are often most informed on the many low-level decisions that shape execution. We want to maximize this benefit of shared experience, resources, and support with smart and driven peers.
Mistakes to avoid
Despite the theoretical cost- and knowledge-sharing benefits of incubators, they have an unimpressive history in the valley and typically make one or more of the following mistakes:
- Equity-for-space: the incubator host often takes an equity percentage, spurning some high-quality startups to whom shared space is not worth the trade-off.
- Passionless founders: some incubators brainstorm ideas and spin their execution off to an external team, which usually have insufficient passion.
- VC or corporate oversight: VCs and especially corporations can have insufficient operating experience to competently guide (or leave alone) budding startups. Further, the VC/corp’s immediate goals can cause conflicts
- Lack of focus: some incubators accept startups across all industries, such as biotech and internet, reducing the relevance of sharing.
- Too much distraction: some incubators throw several startups into a small space to the point of sharing rooms and tables. This distraction can impede execution and lead to more of a fraternity than a productive office.
- Too little sharing: on the opposite extreme, many incubators have no process for knowledge-sharing; they are simply office parks of individual startups.
- Charging for profit: some incubators charge premiums for the benefit of plug-and-play space. While this is a reasonable business, it does not maximize the quality of potential tenants.
- No marketing: despite numerous incubators, few do consistent marketing and none are recognized as a leader that attracts top talent.
- Low standards: landlords typically only vet startups for credit and personal fit, not entrepreneurial experience or business plan. Thus, most importantly, incubators fail because their overall proposition does not sufficiently attract the highest caliber entrepreneurs.
To this end, we will build a start-up co-op with the following features:
- No equity cost: tenants will only pay monthly rents (or possibly no rent if sponsors are secured).
- No corporate or VC oversight: all involved parties will be entrepreneurs. Beyond being a good tenant, no startup’s decision will be beholden to a co-op authority.
- Internet focus: we will focus exclusively on internet startups. This is where the co-op founders share the deepest expertise and the plurality of valley startups deal.
- Limited distractions: each startup will have a semi-private space with barriers to retain focus. Guidelines will restrict interruptions between startups during work hours.
- Cross-pollinating: to encourage brainstorming and build relationships, all tenants will be under one roof, share a comfortable leisure space, informally share meals, and be invited to weekly social events.
- Not-for-profit: the co-op will aim to nurture its individual for-profit companies, not make money itself.
- Quick up-time: spaces will be plug-and-play: furnished, wired, priced full-service, ready-to-go.
- Bay area marketing: the co-op will hold monthly entrepreneurial events to raise awareness and attract top talent. These events may include mixers, industry speakers, and workshops on how to build a successful internet startup.
- Highly-selective screening: we will set a high bar for admission. Ideal candidates will have entrepreneurial experience and join the co-op with a high-quality team and idea ready to develop. New tenants will need to be approved by all but one of the co-op committee’s members.
Our goal is to maximize the success of our entrepreneurs and become the premier Bay Area location for launching an internet company.
If we succeed in recruiting top talent, the co-op may be an attractive sponsorship opportunity for service firms. Firms that offer venture capital, legal, web design and development, IT, accounting, banking, space brokering, and other services derive much of their deal flow through networking and relationships. These firms are incentivized to find high-quality, funded or likely-to-be-funded entrepreneurs, especially firms that take on deferred fees or equity stakes.
For access to our screened teams, invites to exclusive mixers, speaking event opportunities, and association with our unique brand, these firms may be willing to sponsor rent for the co-op. Many of these firms regularly spend $5-25k for one-off, low-ROI sponsorships at events and conferences. Investing a comparable amount in high-value, long-term relationships may be a wiser investment. Free rent in a corporate-quality space would differentiate us from other incubators and greatly enhance the co-op’s appeal to entrepreneurs, thus attracting further sponsor interest and creating a virtuous cycle.