My first Christmas/New Years in HK in 12 years. Heavy entertainment schedule initiated by wife who got shortlisted to manage HK$ 250 million in high-tech VC fund. Talk of i-net plans permeate the ether. Some plans of known acquaintances from HBS underway are really laughable, but get funded by flush with cash US originated investors anyway ... site that 'promote' the promoter's name to create a branded series of goods, including apartments, cars, etc. Site that sell used underwear. I tremble and cower in the wake of the thundering herd and seek refuge in my 9984 incubator and live off of my Visio puts. Got one gift that is neat - a 1920s brass candlestick phone. We have come such a very long way. What fun!
A clipping ...
THE ECONOMIST: BUSINESS AND FINANCE: THE INTERNET : BRANDS HATCH
82% match; The Economist ; 25-Dec-1999 05:42:03 pm ; 1106 words
A new sort of firm is trying to steal some of the Internet action
GIVEN enough all-nighters, pizza and diet Coke, it takes slightly less than a year to create an Internet company. But even that is too long in a world where entrepreneurs and their backers think that the first person to get a new venture up and running will scoop the pool. Hence the idea of helping companies through those first difficult months - a job performed by firms called "Internet incubators". Such company-breeders have been popping up all over the United States and Europe. The first of these incubators now intend to go public themselves. In the coming weeks, Idealab! and divine interVentures are expected to do their bit to stoke Internet mania by filing for stockmarket listings.
Incubators, or something similar, are not a new idea. Thousands of them, mostly created in the past two decades, breed all sorts of new companies in all sorts of places. However, in recent years specialised high-tech incubators have emerged. Because so much money is pouring into Internet ventures, the other elements of a new company - managers, accounting skills, personnel, legal advice and so forth - are scarce. An incubator aims to provide them, in exchange for equity. New incubators breed roughly a dozen firms a year, minding each for about six months before the hatchlings have to make their own way in the world.
As well as accelerating the development of business, incubators also bridge the widening gap between venture capitalists and young entrepreneurs. In the past quarter, venture capitalists showered Internet-related start-ups with Dollars 5.2 billion, almost five times as much as during the same period a year ago, according to PricewaterhouseCoopers, an accounting firm. Venture capitalists now manage such large funds that they lack the time to bother with start-ups that need less than Dollars 1m in seed financing.
Idealab!, based near Los Angeles and created in 1996, was the first Internet incubator. The firm is mainly a vehicle for the ideas of Bill Gross - he is reputed to have "one a minute". One of the first Idealab! hatchlings was CitySearch, a website containing local information about such things as which places to visit and where to eat. Mr Gross started it after he struggled to find a barber in the New York Yellow Pages. A recent start-up is an online retailer called CarsDirect.com, the result of Mr Gross's frustrating experience buying a new car.
Unlike other entrepreneurs, Mr Gross hires a team before even turning his ideas into a business plan. To help it build a prototype of a new web service, the team receives up to Dollars 250,000 seed financing and the help of Idealab!'s executives. This help includes not only a fairly terrifying stint working right in front of Mr Gross's office, but also the attentions of his less distracted associates.
Whereas Idealab! mainly aims to give life to Mr Gross's inspiration, most incubators take proposals from wherever they come. They are typically launched by experienced Internet entrepreneurs, or by large companies and venture-capital firms. Softbank Venture Capital, the investment arm of Softbank, a Japanese Internet powerhouse, started an incubator in Silicon Valley, called HotBank, and now wants to set up a network of the things throughout America.
The founders of the dozens of recent incubators dream of repeating the feat of CMGI, which owns a stake in such popular websites as Lycos and AltaVista; or of the Internet Capital Group (ICG), which owns a portfolio of dozens of e-commerce firms. Both are now worth more than Dollars 20 billion. Idealab! will probably outdo that - particularly if Mary Meeker, a well-known Internet analyst at Morgan Stanley Dean Witter, joins the firm, as rumour suggests.
But the incubators are also trying to satisfy a genuine need. At one extreme, the Panasonic Internet Incubator, for example, aims to do no more than enhance the existing informal network of support services in Silicon Valley, where it is based, by helping firms find service companies and experienced entrepreneurs. At the other, Camp VI, of San Francisco, wants to cater for a start-up's every need and provides services in-house.
Some incubators are also trying to design a system for building firms. The offices of eCompanies, a Californian firm that boasts a "Henry Ford approach", look like a corporate assembly line. As start-ups move along the next L-shaped string of desk clusters from one "division" to the next, they are "fitted" with experts in strategy, finance or technology, as required.
eHatchery, an incubator based in Atlanta, has filed a patent application for a software-based guide for start-ups, called eCeleration. It breaks incubation into "phases" and "gears", through which a new firm must pass. If it hasn't, for example, developed an "initial marketing and public-relations plan" by a certain date, the chief executive will get a reminder by e-mail.
At the moment, incubators seem to be the answer to an entrepreneur's prayers. Yet systematically hatching companies can have disadvantages. One danger is that forcing start-ups to work within a tightly defined framework may limit creativity. Joining an incubator can also be expensive. In return for their services, most incubators want a higher stake in the company than do traditional venture capitalists - in some cases almost 50%. Some bring relatively little to the party other than a thirst for other people's ideas.
Will start-ups raised in incubators really turn out to be better than those that have grown up in the wild? Exposure to the harsh realities of business prepares budding managers for the graver crises they will encounter as their firms grow. Breeders might also find it difficult to pull the plug on poor performers - especially if they embody one of the incubator's own ideas.
Yet, despite those drawbacks, good incubators still have a part to play in the Internet economy - especially outside Silicon Valley, where appropriate support services for start-ups are scarce. Europe, in particular, suffers from the lack of both business-angels and early-stage venture capitalists with enough knowledge and experience to provide the "adult supervision" that most new dot.coms require. Six months ago, Europe had hardly any incubators. Today, there are at least 100, most of them based in London.
That in itself suggests a problem in the making. Too few aspirant incubators genuinely possess the skills they claim. Many have been started by smooth-talking consultants, eager to cash in on the Internet boom before it is too late, rather than by experienced entrepreneurs who have won their stripes in the trenches. Indeed, with so many fledgling incubators trying to get off the ground, some might usefully employ the services of an incubator themselves.
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