Tulsa Business Incubator Or Startup Accelerator?
When we founded BetaBlox in 2012, we had to explain to people what business incubators and technology accelerators were. Around 2013 is when we had to start explaining what the difference between the two are. Then, around 2014, when the clones started launching, we had to explain why we are the best. Now that we’re a recently launched Tulsa business incubator, we thought it’d be prudent to provide some more history on the industry, as well as a description of how we fit into it.
A Quick History Of Business Incubators
In 1984, it became legal for universities to start commercializing intellectual property that was created on campus. As soon as this happened, the question arose, “how do we do that?” The best guess was the concept of business incubators, that acted sort of like economic greenhouses for seed-stage ventures. It was acknowledged that without support, these early ventures would die before they could ever be transplanted out into the real world.
Governments then started mimicking incubators, but for different reasons; they were created to stimulate certain underdeveloped neighborhoods. Eventually, corporations got into the game by creating in-house incubators designed to coddle R&D projects while they became strong enough to be incorporated into the mothership.
The problem with this setup is multi-faceted. First, schools would put professors in charge of the incubators. Professors, are, by profession…professors – not entrepreneurs. We understand that there are exceptions, but for the most part, there was a major disconnect between their expertise and the experience needed to get a scalable business off the ground. Let it be noted, although we consider ourselves awesome entrepreneurs – we couldn’t be professors, nor could we be university administrators. We’re acknowledging that we can’t do their job to help add authenticity to the statement that they probably can’t do our job.
Cities that build incubators usually have the same problem; they hire someone to run the incubator. The problem though is there aren’t a lot of entrepreneurs available for hire. So much like the dinosaur and the professor-led incubator, so goes publicly funded civic incubators: extinct. Some fare better than others, so there are obvious exceptions to these blanketed statements. But – you get the premise.
A Quick History Of Technology Accelerators
A man named Paul Graham was giving a speech to his alma mater about investing in startups. One of the students asked if he would invest in their business. His retort was meant to be humorous, but actually became the thesis of modern technology accelerators. He said something along the lines of, “it’d be smarter for me to give each of you in this room $20,000, than it would for me to give one of you $500,000” (these numbers aren’t exact – we weren’t there…but they’re close enough to prove the point).
He soon realized the worth of that statement. It killed two major birds with a single stone. First, it added a layer of diversification that is very expensive and difficult to achieve as a lone angel buying into early-stage companies. In other words, by doing many companies, a great deal of the risk was spread out. This is more like taking a bet on the stage of business, rather than a bet on a particular opportunity. This is sometimes referred to as ‘The Mutual Fund Effect”. Secondly, it created a slew of value-adding benefits to the entrepreneur that wouldn’t be possible if they were getting invested in one-at-a-time.
So he set out to create Y Combinator, which ran its first cohort in Boston, and then quickly moved to Silicon Valley where it remains to this day. He started by investing $18,000 in each company, doing about 10 companies at a time, and taking about 8% equity in exchange. The program would act like a three month long boot camp, culminating in a showcase of each company to a room full of investors that he called “Demo Day”. The first batch included a couple of successes, most notably, Reddit. Since then, they’re cited as creating tens of billions of dollars in value, and being one of the most valuable funds in the world. They’ve created some pretty stellar companies, including things like Dropbox, Heroku, and AirBnB.
It didn’t take long for the investment community of America to take notice, and start replicating the model. The first of which being Techstars out of Boulder, Colorado. Eventually, there would be well over 1,000 technology accelerators across the country.
So Is BetaBlox A Business Incubator Or A Technology Accelerator?
By definition, we’re closer to a Tulsa business incubator than we are an accelerator. When we first came up with our thesis, there was no such thing as Y Combinator. The only model for which to benchmark ourselves was the many failed incubators across the country and world. But that doesn’t mean that there isn’t a lot to learn from fallen incubators. And there’s definitely a lot to learn from accelerators. We like to think that we pull best practices from both to create our little economic development Frankenstein.
Why We’re Like An Incubator
Incubators typically provide value (of some sort) to their clients for around two years. That’s about the amount of time that we work with each company before they’ve either failed or don’t need us as much as they did when they first began. We need longer than an accelerator to do our jobs. Or at least to do them well. We think the three month thing is simply too short. In startup years, that’s a blink of an eye.
Why We’re Not Like An Incubator
The only people who are on our team are entrepreneurs. Either recently exited, or are leading growth-stage ventures. This allows our team to relate to each entrepreneur in our program on a level that most people can’t.
We don’t teach business planning. We think it’s silly. In fact, we think it’s so silly that it can actually be cancerous. We’re doers, not planners. Many incubators act either like a co-working facility where they just provide office space and no services, or the services that they provide push a framework around planning and processes. We hear horror stories of entrepreneurs writing long documents, filling out worksheets, and answering hypothetical questions about what their path is supposed to look like. But like the great Mike Tyson said, “everyone has a plan until you get punched in the face.”
Although there is a time and a place for planning, and strategy – we think it’s far more important for our entrepreneurs to create a habit of doing, rather than habits of stalling and hesitation. A strategy will never be perfect, nor can it ever be completely de-risked. This will mean we break things. This will mean we publish code with bugs. This will mean we publish imperfect essays with speling mistakes. BUT, this will also mean we get more things done, faster.
Why We’re Like A Technology Accelerator
The best part of what a technology accelerator does is what they preach. They are very lean heavy, agile-driven, and nimble. They encompass the best philosophy for starting companies in this era. They can do this because they’re run by people (at least most of the time) that have actually started successful companies sometime in the last decade. Their leaders don’t just have experience, but here’s the important part – they have very relevant experience.
Like accelerators, we are cohort-style. Meaning a group of teams start at the same time as each other. This creates the same vibe that a military boot camp creates amongst a group of soldiers that all went through the same hardships together. It allows them to augment each other’s teams and networks in a way that would be otherwise be impossible (or expensive).
We’re compensated in equity, not in cash. This keeps the entrepreneurs’ cash close-to-the-vest so it can be spent on important things like building and selling products. But it also makes it so we care, a lot. If their companies fail, we make nothing. If they succeed, we succeed in a much smaller capacity, but we still succeed with them. This means we don’t milk them for their time so we can bill them more. This puts our skin in the game, the way it should be at a company’s formative stages.
Why We’re Not Like A Technology Accelerator
We don’t provide upfront capital to our ventures. Yes, we help our traction gaining companies raise money. Yes, we’re funded by people who funded us with the intention of finding investment opportunities. But a lot of accelerators center their entire existence around the funding problem.
We don’t exclusively focus on technology. A lot of times our startups have nothing to do with technology, but they’re somehow using tech to accomplish things that their competitors haven’t even thought of. Yes, we do have some straight-up tech plays. We have virtual reality companies, mobile apps, enterprise software, and IoT hardware. We chose those startups because the people leading them were awesome, not because it was a technology product.
Lastly, we don’t exactly have an end-date. We want our entrepreneurs to use us like a gym, forever. We’re never going to stop offering up our classes, events, time, and many other services that we provide. Even Y Combinator has admitted that these days they’re way more of a seed fund than they are an accelerator (a word that they ironically pioneered). They have to do that to manage expectations that it’s not as hands-on of a program as it was when it first started.
A Reflection From One Of The Newest Oklahoma Business Incubators
We pull best practices from the world’s best business incubators and technology accelerators, and then combine a couple secret ingredients of our own. This turns into something that doesn’t exactly have a name…yet. And we like it this way. If we HAD to put ourselves in a category, it’d be an incubator. But we don’t like categories. Categories are rigid, and hypocritical to the philosophy that we preach. We are continually adapting our offering, and adding to it. As the world of starting companies evolves, we pledge to evolve with it.