Last week I was reading an article about a successful entrepreneur that had started an incubator to work on multiple startups simultaneously. Incubators, now called studios or labs, were popularized during the dot com boom, and most failed to work, leaving a negative connotation for many people. Now, the cost to start is 10x cheaper and there are millions of people with mobile broadband connections, making for a different dynamic compared to 15 years ago. While it is still expensive to scale, getting started is easy.
Here are a few ideas why entrepreneurs are drawn to incubators:
- Timing a market is terribly difficult, so having multiple startups running simultaneously increases the chance of finding a fit
- For many (most?) entrepreneurs, the starting part is more fun than the scaling part
- Small, dedicated teams without a legacy customer base can innovate fast, making it more fun to see rapid progress
- When a startup achieves initial traction, it’s much easier to raise money from investors, making the entrepreneur’s own investment go further by bringing in other people’s money
Look for more incubators/studios/labs to popup as entrepreneurs have exits and want to work on multiple projects. Entrepreneurs know how hard it is to time a market and want to hedge their bets by taking more of a portfolio approach.
What else? What are some more thoughts on the idea that entrepreneurs are drawn to starting incubators?