Finding the Right “Unfair Advantage”
In the end, the unfair advantage is the key differentiator for both start-ups and incubators
Originally Published April 2014
Early stage start-ups today have more choices than ever when looking for investment and guidance. Increasingly, those start-ups are looking to incubators (defined here) to help them bridge the gap from concept to traction. The highly publicized successes of start-up incubators like Y-Combinator or 500 Startups has subsequently caused an explosion in incubators, accelerators and the litany of other names they go by. Incubators today have become like the venture capital firm explosion of ten years ago: everybody knows a few, every large corporate has one, and the success stories are the only ones that make it into the news. However, while incubator quantity has increased, the limitation remains the same: an incubator is only worth the cost of membership (equity) if it can provide your start-up with the right unfair advantage.
Incubators today have become like venture capital firm explosion of ten years ago: everybody knows a few, every large corporate has one, and the success stories are the only ones that make it into the news.
As I have attempted to make sense of the incubator space from a corporate perspective, I was struck by the similarities between choosing an incubator and selecting the right business graduate degree program. From the point of view of a candidate considering additional schooling to further their career or a start-up trying to gain traction, you’re evaluating the unfair advantage of each institution based on the same criteria:
What’s striking about the above is not only the similarity in criteria, but also the potential problems faced in selection. Like the explosion of incubators in the US, MBA programs have also scaled dramatically. However, from a reputation standpoint, not all MBAs are created equal. Many employers and advisors believe that because so many people are graduating from MBAs now that only degrees from top-10 institutions are worth the investment (tuition, opportunity cost, etc.). I would argue that incubators face the same stigma. If you’re not in a top incubator (Y-Combinator, 500 Startups, Techstars, etc.), is the tradeoff (equity, etc.) worth it? And if you’re not able to gain entry to a top name incubator, what options do you have?
Like many who are evaluating an MBA, for those that don’t get in to the schools of their choice, there are other opportunities in specialized graduate programs that can be even more beneficial than an MBA. For example, for many in real estate, a year spent getting certifications/trainings while staying in the market and expanding your network and deal sheet is time better spent than leaving the market for two years in an MBA program. Same could be said for the CFA for certain finance positions, or more specialized programs for developers. The economist even makes an argument that incubators and MBAs are potentially substitutes for each other.
Similar to the seeking MBA alternatives, those not accepted by a top incubator may want to consider other more specialized incubators or accelerators that better fit their needs. Unfair advantages can be found in all types of incubator programs, not just the brand name ones. For some software start-ups, larger corporate incubators offering better access to distribution may be a fit, especially if your product will eventually depend on a large corporate for distribution success. For others, smaller vertically-focused incubators may provide the right narrowness to focus on the core problem and gain access to a smaller network of similar minded talent.
The key to selecting the right incubator, is to be able to clearly identify the unfair advantage you are seeking. In terms of unfair advantages, one size does not fit all. Unfair advantages are often unique to each start-up, as the current life-cycle stage of a start-up plus the focus area may shift how they value resource access, funding, network, etc. The same principals hold true for those running incubators. I have spoken with corporations, government organizations or investors looking to start their own incubators and my advice is always the same: know the audience you are trying to attract and work like hell to identify and create the strongest and most unique unfair advantage possible.
As the incubator landscape evolves and actual success rates become more transparent, the true unfair advantages will become clear. Start-ups and incubators that best identify and articulate the unfair advantage they seek or provide will be the ones that rise to the top.
Gary Coover is a tech and startup business model junkie who honed his snark through years of strategy/BD work, co-founding a startup, and a few years in Korea and the Bay Area working for Samsung. Gary currently runs Global Operations for the Samsung Accelerator, helping architect, launch and scale the Accelerator and its startups in New York, San Francisco and Tel Aviv. His opinions are his own, as are his tweets, which are occasionally above average.
Additional content from this author:
- What Entrepreneurs Can Learn from Olympic Silver Medalists — The Importance of Market to Your Startup
- Let’s Stop Throwing Out the On-Demand Baby with the On-Demand Bathwater — Four tips for validating strong on-demand business models
- State of the Bot — where are we now and where are we heading?
- Design as a Differentiator is Dead — Long Live the Business Model!!!
- Frame Your Next Project for Success: a 6 Question Cheat Sheet — A former consultant talks about something other than hotel points and frequent flier miles
- The Startup Revenue Model Smell Test — Why Path may be in trouble
- The Lasting Tech Innovation of our Time: Putting a Price on Talent — Through the use of acqui-hires, Facebook, Twitter and Google have led the seismic shift in the way teams and talent are valued
