Shark Tank resident Mark Cuban recently spoke about the drastic rise of incubators. “There are too many incubators and that has hurt them all,” he tells Lauren Ohnesorge of the Triangle Business Journal. Cuban is absolutely correct.
Since 1980, over 1200 incubators have started in the United States according toNational Business Incubation Association, though it would not surprise me if that number was quite higher. Universities, co-working spaces, foundations, and fortune 500 companies have all taken to running incubators, business programs designed for young, usually pre-revenue start-ups. Each incubator has its own set of goals they push their portfolio clients to achieve over a defined amount of time.
Cuban continues to explain that acceptance into an incubator is being seen as a sign of success when perhaps none is warranted. More than that, it enforces a dangerous growing bubble in the entrepreneurial community. Far too often, founders are more concerned about raising funds and exiting their companies than actually executing their business.
It is a trend I experience firsthand almost every day. Working in the Cambridge CIC, a dynamic co-working space, I am always meeting new people and hearing pitches. I also make it a habit to attend as many pitch competitions as I can fit into my schedule. All too often the same chorus is repeated by new founders:
“We can’t focus on monetization; we’re only worrying about traction.”
“Revenue will come later.”
“Our chief objective is to raise funds at the present moment.”
Let’s be clear: There are a few, definite instances where these arguments may hold water. They tend to be the most risky ventures, and those that do succeed are propped up by millions in funding and a small army of experienced advisors. However, this model should not be relied upon by first time founders.
The second pitfall of many incubators seems to be the goal of the curriculum. Rather than pushing companies into selling mode, too many incubators seem solely focused on their demo days and next round funding.
This teaching methodology will ruin a generation of entrepreneurs.
Incubators should not help new ventures misstep common mistakes but rather should help guide companies through common mistakes. If we take the premise that learning happens through experience, it does little good to remove obstacles. And the majority of obstacles come when selling your product.