Building a new company, at best, is organizing chaos. Business plans evolve, unexpected market challenges and opportunities are revealed, and a steady flow of new team members add to (or detract from) the mission.
It’s exciting, inspired, and full of small victories: the first customers who trust you, technology that actually works as expected, and outsiders talking about your pretty baby.
It’s heart wrenching, ego busting, and full of failures: investors you can’t convince, assumptions you get wrong, deadlines you blow.
In Chicago, and many other pockets around the country, startup activity is booming. Incubators, accelerators, and all sorts of community-driven activities have cropped up to support young companies. It’s easy to feed from the energy, and entrepreneurs have more access to collaboration today than ever before: accessible partnerships, big companies willing to adopt earlier, and mentors looking for mentees.
TechNexus is an incubator, and since 2007 more than 170 companies have grown with us. Hundreds more flow through our ecosystem each month. Our role is to be a gateway, not a gatekeeper. We help organize the chaos. At our best, we curate collaboration for young companies to help them make fast, meaningful connections. Our goal is to help each idea succeed–or fail–faster.
I have the privilege of meeting each startup that walks through the door. I listen to their concerns, discuss their goals, and determine not just if they are a fit for our space, but also if we will be able to provide them what they need to succeed. I ask a lot of questions, but my hope is always that I will answer just as many. Based on hundreds, maybe thousands, of these conversations, I present the five questions to ask before joining an incubator.
Roaming the halls of an incubator can be intimidating. Thirty-second hallway meet-and-greets don’t exactly provide a sufficient amount of time to make connections with others in the space.
The startup incubator should actively invest in its community and help foster networking. Look closely at the types of people in this community. What is the signal versus noise ratio? A room full of people can be exciting, but are they the right people to help you? Is the incubator active and deliberate in curating the community and programming to your startup’s needs, or are they simply trying to fill the room?
How diverse is the incubator community? That diversity is key to your collaboration, and an ecosystem full of people and companies at identical stages and experiences can easily become a monoculture.
Don’t be shy–expect incubators to help facilitate one-on-one meetings or make formal introductions. Incubators should be enthusiastic about collaboration; in fact, they depend and thrive on it.
One of the main draws for a startup is an incubator’s roster of mentors. People want to learn from the best (and some just want rub elbows). While big-name mentors increase credibility and cool factor, there is no guarantee you will be working with them. Although that is not necessarily a bad thing, it might make your decision tougher.
Mentors that float in for an hour or two of advice to a young company might seem helpful, but if they have no real vested interest, the advice may be more distraction than it’s worth.
It is your job to find out the specifics, such as problems the mentors have helped startups solve in the past. Do these advisers have diverse backgrounds and can their expertise help solve upcoming challenges you foresee your startup facing? For example, if you plan to launch a city-by-city nationwide rollout campaign, look for an incubator with connections to advisers with experience scaling nationally. What is the mentor-startup ratio? These types of questions will give you a more realistic outlook on the mentor environment.
If you are not impressed after doing your homework, look into the incubator’s alumni network. Depending on the extent of their involvement, they might help make up for a lack of mentors. Plus alumni have a pretty good idea of what you are going through.
Most incubators will be more than happy to discuss major accomplishments, like the Fortune 500 companies that are roaming the halls looking for acquisitions or partners, or the enormous amount of VC funding that’s been attracted by their businesses. Be prepared with questions that will give you a deeper and sometimes more honest understanding of the incubator.
Who is really behind the incubator and what are their goals for success? Not-for-profit incubators, run by a school, or backed by government funds, might have very different objectives than for-profit incubators, with fungible success metrics. Other incubators might be tied to one corporation, or to a particular venture capitalist, limiting the real collaboration they facilitate.
Keep in mind the ways in which you define success for your startup, whether your goal is to create a company and sell it to Google or establish a profitable business that you can work at forever. Find an incubator that can be aligned with both your short-term and long-term objectives.
While cash does not always exchange hands when a startup joins an incubator or accelerator, the bottom line is always a big concern. You need to know what resources the incubator offers so that when you sit down to make a decision, you can factor in your budget.
Internet access and the invariable bottomless pot of coffee aside, some of the more intangible resources, like face time with key mentors, will also affect your startup’s success. Find out ahead of time how you can make use of office hours, in addition to other resources. Perhaps the incubator hosts classes on important topics, like intellectual property management or regulatory compliance. Is there someone to offer help with accounting or financial management?
Not all incubators offer the same resources, so it is up to you to figure out your overall weaknesses and determine how the program can assist you those areas.
It is important to find out if there are similar startups in the vicinity. Young companies, especially in the tech space, thrive on working together to make ideas stronger.
Find out what the general population is like. In what stage are most of the startups–idea, prototype, beta, or revenue generating? Ask about group dynamics. What is the average startup size and talent composition? Maybe there are a lot of developers in the space. Is cross-pollination among the companies common? These types of questions will help to paint a better picture.
If possible, spend some time walking around the space, and cowork there for a while. Find out what current members think. Most importantly, see if you get good vibes and can picture yourself building a business there.
Whether you are a seasoned entrepreneur or setting out to build your first startup, I can tell you that based on my experience, you must take the time to research. Not only will you make a better informed decision, but you will also learn a lot about yourself and your startup in the process.
Terry Howerton is cofounder and partner of TechNexus, Chicago’s first technology and business startup incubator. Terry is also founding chairman of the Illinois Technology Association, a trade association for 700 growth-stage companies.
[Image: Flickr user Ikayama]