More than 150 MIT alums gathered Wednesday night for a discussion of incubators/accelerators. Appropriately enough, we gathered in the about-to-open Synergy Business and Technology Center, Santa Barbara’s latest incubator. The panel had many kind words for the incubator concept, but generated some controversy around the investments made by some accelerators.
The Synergy Center is a restored lemon packing plant, with a cool industrial feel—the ceilings are 30 feet high, and the building is graced with many windows, bringing in lots of natural light. Apparently, the original architect had a grasp of green concepts when the building was designed early in the last century. Oh, and did I mention that it’s two blocks from the beach?
I joined a panel with Sam Teller, Managing Director of LaunchpadLA (www.LaunchpadLA.la) , Klaus Schauser CEO of Appfolio (www.appfolio.com) , and Michael Holliday, founder of the incubator and prominent architect in Santa Barbara, to talk about the pros and cons of the current incubator boom.
Sam caught the essence of the event in a single comment—“any change in the environment that creates more opportunities for entrepreneurs is a good thing.” There was a broad consensus among both founders and investors that the boom in incubators provides tremendous leverage for young companies. Klaus, who has started two companies in Santa Barbara incubators, pointed out that he gets great leverage from “outsourcing” all of the headaches of setting up phones, data lines, and office admin to incubators. As he put it “leasing an office is necessary, but adds no value. “ Just setting up the furniture in one new office cost his team three days when they could have been coding.
Only one controversial topic emerged—the portion of a company’s equity bought by some accelerators. Some accelerators offer a fixed amount of money at a low valuation to new companies that join them, while others take a more VC-like approach, offering negotiable amounts and valuations. This is a very real distinction in underlying business models, and entrepreneurs will have to comparison shop to get the best deal/fit for their business.
There is no simple way to view the varying terms offered by each accelerator without talking to each of them. Ben Kuo’s herculean attempt to list them all on SocalTech.com is a great resource, but many of the investments are on a deal by deal basis.
The takeaway? If you are looking for an accelerator, narrow the field by identifying those that focus on your vertical or type of company. You will get the greatest value from people who understand your business and can open doors for you. Then drive for the best funding you can get.
If you still don’t like the answer—separate the funding and location decisions. You can choose an incubator like LA’s Business Technology Center (www.labtc.org) and get funding elsewhere.