My co-founder Ilya and I have recently graduated from the San Diego chapter of the Founder Institute. There are many threads on start-up incubators on blogs and on Quora. Every class of such an incubator and each founder’s experience is unique and, as a founder, you will have to decide for yourself whether joining an incubator is the right thing for your business. I will try to do my best in sharing my experiences unaltered by what I have read on Quora and other founders’ blogs.
There are many advantages in joining the Founder Institute. Here are some that I feel are the most important to me as a founder:
Mentors are experienced serial entrepreneurs, corporate executives, and investors, who have “been there, done that, and have a t-shirt.” The mentors give seminars on various subjects ranging from sharpening your company’s vision, to hiring and firing, to raising capital. Every week, two or three mentors share their experiences and answer questions. You also get to meet with them outside of the classroom, and they help you figure things out. Even if you are a serial entrepreneur and have created successful businesses before (I have), you will find that you can learn a lot from the mentors. In fact, one of the reasons why mentors participate in this program is that they get to learn from each other as well. Which brings me to another advantage – the network.
Network of founders
During the course of the program, all participating founders work together, and help each other overcome obstacles. Working for a start-up company is a very intense experience. Being the founder of a start-up company is intense squared. The amount of responsibility, pressure, uncertainty and risk that you have to weather can be isolating. Once you start on this journey, you will quickly find out that most of your friends and relatives have a hard time relating to the challenges that you are facing. As mentors will tell you, start-up founders are crazy people with distorted perception of the world who do things that no normal person will do. The only people who can relate to this experience are other start-up founders. To some extent also lawyers, doctors and PhD students. Ask some of them, and they will tell you that peer support is critical for success and survival.
Even if you are a Harvard MBA (there was a Harvard MBA in our class), your professional network can always use a boost. Not only you get access to the mentors, but you also get access to their professional networks. The mentors will introduce you to people who can advance your business. Your classmates also become part of your network. If they persist with their businesses, they will certainly build up their networks very fast. In the months and years following the program you will benefit from their networks as well. If you graduate from the program, you also become a member of the graduate network, which unites several hundred entrepreneurs worldwide. I recently spoke to someone who graduated 3 years ago, and he said that for him, the Founder Institute graduate network is the most valuable long-term asset.
During the four months of the Founder Institute program you have to research the market, incorporate, build an alpha version of your product, test it with some customers, figure out your business model, and hire some help. That is a lot to accomplish in a very short time. Even more so, considering that most of the founders have a full-time or a part-time job while they are in the program. The truth is though, once you graduate, you have to pick up an even crazier pace. When you are on your own, it is very easy to start procrastinating and slow down, which is likely to kill your business. So, it is good to get used to it and gain speed while your group facilitator, your peers and mentors are holding your hand and making sure you are not running into walls.
The important thing to remember is that the program is only 3 years old, and they are changing and improving the curriculum every semester. We heard from the graduates of San Diego Spring 2011 semester that our curriculum was much stronger than theirs, and that their curriculum was stronger than the previous one. Personally, I think that the best thing about this curriculum is that it forces you to turn your idea into a real business. In fact, unless you manage to make a business out of your idea, you won’t be able to graduate. I have seen one of the founders progress from toying with a “this is an X for Y” idea, which had no future, to building a unique B2B service for restaurants, which gained customer interest before it was even finished. I hope one day you will read about him in the Fortune magazine. This, however, brings me to the second part.
One of the things that I did not like about the Founder Institute was that the curriculum is the same for everyone in your class. The problem with that, in my opinion, is that businesses are different, and the same curriculum does not fit everyone well. I think, the program works best for software businesses that can apply lean start-up model, build, test and iterate fast. Founders of companies that require making sophisticated hardware or conducting long-term research before a prototype of a product can be tested by real customers will likely find that the curriculum does not work out for them. That said, most of the mentor sessions are very useful for any kind of business.
Each founder has to go through the same stages and has to provide the same deliverables as every other founder. The problem with that is that each company joins the incubator at a different stage. We applied to the program when we had a prototype. By the time the program started, we already had a beta version of the product and had already incorporated. In the three months between the time when we got accepted to the program and the time the program actually started, we watched many videos of previous semesters and have already done some of the work that we would be forced to redo again. I feel that had we not joined the program, our product would have been farther ahead by now.
As I mentioned before, starting a company is a very intense experience. Throw in some additional pressure and unfairness, and it can get ugly. Especially when the person who feels he or she is being treated unfairly is not prepared to handle it. Consider the following: 70% of the founders in our semester did not make it to the graduation. Some of them dropped out, some got kicked out. Two founders got kicked out one week before the graduation, right after the last session. Imagine how frustrating that is!
That said, the business environment outside of the Founder Institute program is just as unfair and tough. Ask any investor what they are looking for in an early stage company, and you will hear the words “unfair advantage”. Ask founders who have gotten acquisition offers from big companies that walked away after hands have been shaken. It gets ugly!
Getting rejected is an unpleasant experience. And yet, I think that the Founder Institute benefits those who fall out of the program. They will either persevere and eventually succeed, or give up and avoid the inevitable and devastating failure.
Companies that graduate from the Founder Institute are very early stage and are not ready to get funded. Usually, it takes one to two years before a Founder Institute graduate raises a seed round. We have been bootstrapping Citybot so far, so I cannot say anything certain about how helpful the Founder Institute is for raising external funding. I read a blog of a graduate, who did not give the institute any credit for his company’s seed round. I have also spoken to another graduate, who raised a seed round last year, and he told me that the Founder Institute network was instrumental in getting his business funded.
Your understanding about lean start-up model is not complete, it can apply to companies producing hardware also and at it’s core lean start-up model is about reducing waste of time and money to validate your idea. For example a hardware producer would develop a powerpoint slide deck of the UI and scenario for a user to test against and provide feedback. If you are engaged in long term research and development, that is not a business. The startup landscape is litered with startup that spent years and millions researching and developing only to fail because they something else was better or the customers rejected the product. The lean start-up model is designed to reduce the chances of failure by gathering feedback early.Every business can use lean start-up methodology, I can’t tell you how valuable it is to validate an idea without wasting months or years developing something that will fail. If it going to fail it should fail fast so your resources and energy can be directed elsewhere.As a Founder Institute graduate in June 2011, I wish they had done a session or two up front on the lean start-up methodology and techniques. I’ve learn a tremendous amount from a local lean startup meetup.