SocialStartups.com

This document is intended to describe all the different aspects involved with creating a Y-Combinator style startup incubator, sometimes called a startup accelerator. This should be considered a living document, to be shared and improved upon by anyone reading it. Edit the document here. I’ve attempted to break things down into discrete buckets: Sponsors and Investors, Investment Thesis, Application and Interviews, Founding Team, Investment Terms, Office Requirements, Mentorship, Partners and Advisors, Speakers, Demo Day, Post-incubator experience, Community Building, and When Things Go Wrong.

Read Part 1.

Sponsors and Investors, Business Model, and Investment Thesis

Unsurprisingly, discussion around creating a startup incubator needs to begin with the money. What’s the business model of the incubator? Who is sponsoring the incubator? Are their goals financial or otherwise? As an example of the latter, a governmental sponsor’s goal may be to create new jobs or grow the city’s reputation as a technology hub with a thriving startup community. For the former, what size returns are expected and over what time frame? How large is the fund? This impacts what kinds of startups are accepted and how much risk to take on.

Historically, the idea is to make 10 or so small investments and hope that one of the 10 hits a home run and returns the fund. If so, the profile of the ideal investment takes shape: VC-track company, extremely capable founding team, able to show traction (revenue or # of users) by the end of the program (typically 3 months), and with enough financial stability to last until the VC investment is made. Furthermore, the program needs to be attractive to the startup: the investment terms need to be reasonable and the program’s connections and mentorship need to be necessary and valuable. This discounts all kinds of otherwise attractive startups startups: those needing large amounts of capital, those who are already VC ready, those who are not targeting a large enough market ("the lifestyle business"), and those who have a great idea but wouldn’t be able to reach critical milestones by the end of the program or run out of funding.

At what stage should the companies be at the end of the program? This needs to align with your business model, taking into account the current investment climate. VC-ready? Angel ready? Shipped product? Revenue generating? What is their runway?

This point is worth repeating: the types of companies you accept need to be consistent with your investors’ expectations, the investment terms, and the length of the program. 

NYC Demo Day

The seven of us that are NYC-based and graduated from the TechStars (Boston), DreamIt (Philadelphia), and LaunchBox Digital (Washington, DC) startup incubators are having a NYC Demo Day at Pillsbury Law on 10/7 at 6pm. Email me at dave@postling.com if you want an invite. We only have space for 75, so email me quickly.

I’m in the process of writing up a document that outlines all of the things that need to be considered when creating a startup incubator (like Y-Combinator). When I’m finished, I’ll post it as an open document so anyone can go in and improve it.

Here are what I believe to be the five most important questions to answer:

1. What are the financial and non-financial goals of the program’s investors, and over what time frame? What is the business model for the program?
2. How mature do you want the teams to be at the end of the program: live product, revenue generating, angel ready, VC ready? This affects which teams you accept.
3. What is the ideal founding team and what is the minimum viable founding team?
4. What do you do (or not do) if things go wrong with a team or their product?
5. Will there be further involvement or investment at the end of the summer?

Obviously, there are other factors like investment terms, office requirements, speaker series, etc, but I think these are the top five most important. What do you think are the most important?

Looks like they finally got video up for my presentation at Demo Day! Sorry about the poor audio…

Postling from WizeHive on Vimeo.

Let’s remember two quotes, one by Google CEO Eric Schmidt and one by Amazon founder and CEO Jeff Bezos.

Eric Schmidt: "Let’s not check the rearview mirror, or else we’ll drive off the road."

Jeff Bezos: “A different way to organize your energies that can be very effective is to be competitor-focused. If you’re competitor-focused, you have to wait until there is a competitor doing something. Being customer-focused allows you to be more pioneering. We have found that, on the Internet, “me too” strategies seem not to work very well.” 

Yesterday, there was some ridiculous discussion about the death of RSS. It started with Steve Gillmor, moved on to Mike Arrington, continued with peHUB, and got so out of hand that Fred had to post about it. Read Fred’s post if you need more help understanding why it was a ridiculous discussion.

As a startup entrepreneur, there is definitely a lesson to be learned here: Understand who your real customers are and focus on solving their problems. Ignore the competition and ignore the tech mob. This is something we’ve taken to heart with Postling.

Obviously, Postling is a very young product. But we do have a clear understanding of who our customers are and what the problem is: Business adoption of social media is here to stay, but there is no unified interface from which to interact with all the different tools one needs. Businesses are spending too much time learning and using the ever growing number of social media tools and platforms. That time could be spent focusing on what they know best, which is growing their business.

When we launched Postling, a bunch of the comments we saw on TechCrunch, Mashable, and ReadWriteWeb were centered around "Ping.fm does this and supports all these other social networks" and "Posterous already lets me do this plus has all of these other features." Ping.fm and Posterous are great products, but they are solving different problems for different customers. So instead of playing "feature catch-up", we launched some unique features of our own:

• All comments left on your content are pulled into one place, regardless of if it is from your blogging platform or Twitter or Facebook or Flickr.
• You can publish status updates and photos directly to your Facebook Fan Pages.
• You can choose where you publish to, instead of ignoring community context and blasting it out everywhere.

It’s been one month since we launched Postling, and we’ve been overwhelmed by the response. We have more customers than we would have expected and have been working on various partnerships that will allow hundreds of thousands of people to benefit from using Postling. And we’ll keep listening to our customers and learning about what they need and ignoring the rest.