An Incubator gives you real estate i.e table, chair, meeting room and power socket, internet connection, a coffee machine and/or a foosball table in exchange for rent. This has been the traditional model, and I believe the economics of this model does not work. You are trying to get rent from an Entrepreneur who is struggling to get his economic engine going. Some incubators actually take Equity + Rent for providing the above, that is just wrong!
To make a point, Iceland has a bunch of Incubators but no Accelerators! Most Seed/Angel investors when they invest in a Startup fund for all the above. I think that increases the risk to the Entrepreneur and the Investor. Think about it, every Entrepreneur needs to build a network, tinker with the Product-Market fit and build a business when operating in an environment of extreme uncertainty. This is what I believe increases the chance of failure. When I bring this topic up in Iceland, everyone comes to the defense of all the support that exists for Entrepreneurs, I don’t doubt that or challenge that but the help is in the wrong direction. I want to bring attention to the successful Accelerators of TechStars and Y-Combinator. Lets look at the numbers:
- Incubators, Accelerators, and Your Startup…Oh My! (growdetroit.com)
- Student entrepreneurs frustrated by lack of funding (guardian.co.uk)