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Incubators in the New Economy MIT Sloan MBA Thesis 2000 By O. Mac Chinsomboon October 30-31, 2000.

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Presentation on theme: "Incubators in the New Economy MIT Sloan MBA Thesis 2000 By O. Mac Chinsomboon October 30-31, 2000."— Presentation transcript:

1 Incubators in the New Economy MIT Sloan MBA Thesis By O. Mac Chinsomboon October 30-31, 2000

2 Copyright O. Mac Chinsomboon, full report for complimentary download from What I Did Personally interviewed 80 incubators and related variances 35 VCs (all stages and verticals) Visionaries such as George Gilder, John Hagel, and Warren Buffet Analysts Entrepreneurs Investors (angel, public, private) 136 page MIT Sloan MBA Thesis 4 Sustainable Values Few incubators provide these values to the fullest, and they’re evolving

3 Copyright O. Mac Chinsomboon, full report for complimentary download from What’s my Perspective? Electrical and Computer Engineer by training Management Consultant in US (Chicago, Silicon Valley) Investment Banker in Europe (London) Founder/Director of a New Economy Internet firm (Silicon Valley) Founder of a boutique management consultancy in Asia (Bangkok) MIT: Significant exposure to the venture community 136 page, MIT Sloan MBA Thesis, conducted over 100 interviews, of incubators, VCs, angel investors, analysts, visionaries, entrepreneurs Currently an advisor to VCs, incubators, other financial institutions, startups, and professional services firms

4 Copyright O. Mac Chinsomboon, full report for complimentary download from What’s your Perspective? Sustainable Value in today’s New Economy as it changes Real value OR are they in it for the money/cachet? ? Question is then > What are those values? HOW WILL YOU KNOW?

5 Copyright O. Mac Chinsomboon, full report for complimentary download from Speed-To-Market Network: Synergies and Partnerships Disruptive Technology Innovation and Development Talent Cultivation Going Global Building Defensible and Scalable Technologies What it takes to Build Firms in the New Economy Incubators can Help Facilitate This! Are Incubators Meeting a Need?

6 Copyright O. Mac Chinsomboon, full report for complimentary download from Is there a Need for Incubators? Capture potentially successful deals missed by venture capitalists Facilitate idea creation (ideation) Enhance product and services Accelerate speed of implementation Ensure proper execution Provide supplemental management “hand holding” Give access to expertise in marketing, operations, human resources, technical, management, strategy, business development, financial, and others Facilitate business development and partnerships Help in finding clients and others requirements Facilitate sources of funding, early and later stage Portfolioize seed-stage ventures Provide additional deal-flow and vetting of deals for later-stage investors

7 Copyright O. Mac Chinsomboon, full report for complimentary download from Incubator Categories Venture Incubator Full-service organization that provides everything a venture could need Venture Accelerator Venture Accelerators are services firms that accelerate the process of starting a new venture. Also included are VC with with active partnerships Venture Portal Venture Portals are online websites or extranets that create a network of entrepreneurs, advisors, and investors Venture Network Mix between a venture capital firm and an operating company -- operate at later-than-seed stages

8 Copyright O. Mac Chinsomboon, full report for complimentary download from Point of Intervention

9 Copyright O. Mac Chinsomboon, full report for complimentary download from Infrastructure Legal counsel, for incorporation and IP issues Accounting staff Human Resources Recruiting Business Development Marketing and Sales Healthcare Website Design Technology Research Labs In house Engineers and Scientists Access to Corporate R&D CIO and CTO Facilities Real Estate Internet access/Telecom Databases Servers Computing Network Access Venture Capitalists Investors Strategic Partners Fortune 500/1000 companies Other Start-ups Experienced Management Team Former Entrepreneurs Specialists in their field Organizational Community Networking Synergy across Portfolio and more … Services Offered by Incubators

10 Copyright O. Mac Chinsomboon, full report for complimentary download from 4 Sustainable Value Assets Brand Equity: recognized name in their industry, important to maintain reputation in the market. Network Affiliations: a large and meaningful Rolodex of contacts, as well as established partnerships with VC’s, complimentors, and corporations Experience of Management: Experience with operations and execution as well as a deep knowledge of the industry Ideation Process: A process for coming up with new business and technology can save an incubator from falling into the Darwinian Theory of Entrepreneurs* (Office/Lab/Tech Space: sustainable asset in some areas) *From MIT Thesis available at

11 Copyright O. Mac Chinsomboon, full report for complimentary download from Industry Trends Greater vertical specialization Greater “true” strategic partnerships Corporate Service organization Name brand VCs University, research institute, and community Service consolidation: full-service entity M&A between service organizations Combining best of bread with true startup “operators” Backward- and forward- integration by VC and incubators Incubators without the four factors of sustainability will disappear (or perhaps get lucky) More Fortune 500/1000 companies will partner with incubators to incubate spinoffs/outs (incubators will facilitate the transformation of New and Old Economy) In a softening market, rethinking plans to IPO the incubator as well as companies

12 Copyright O. Mac Chinsomboon, full report for complimentary download from Risks and Pitfalls Darwinian Theory of Entrepreneurs Proximity within the incubator could enable poaching talent and ideas between incubatees One venture affecting another Risks in the public markets Busy going public Building to “flip” or to “last” Adverse development of the organization Competency trap May be seen as unnecessary intermediaries (hinges on execution/structure) Backward integration by venture capital firms increases competition Globalization of venture funds

13 Copyright O. Mac Chinsomboon, full report for complimentary download from Other Questions Answered in the Report Why are more incubators going vertical? How does an incubator ensure good deal flow? Why would an entrepreneur go to an incubator? How does an incubator accelerate a venture? Are incubated companies inferior? Are incubators good investments? How about in a softening market? What’s next? (see “In a Nut Shell”)

14 Copyright O. Mac Chinsomboon, full report for complimentary download from Download from the Web


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