eHatchery offers a similar setup optimized for rapidly growing companies: low rates for accounting, HR, legal counsel, IT services. eHatchery is also about to publish an open-source ecommerce toolset called eBox, and has developed a process, called eCeleration, which gives entrepreneurs an automated business “blueprint.”
Simple enough. Before you know it, you’re in the fast lane, running with the big dogs.
What’s the big idea? What distinguishes a great idea from a merely good one? “The idea should be incredibly intuitive,” says eCompanies’ Dayton. “You can say it in one sentence.” “A good reaction is, ‘Why didn’t I think of that?’” adds Winebaum.
In order to speed the process of sifting through hundreds of business plan submissions, eHatchery uses a Web-based form, which has just five requirements: explain your idea in one sentence; summarize your idea in 300 words or fewer; what is the amount of money you’ve invested in the idea to date; list the name of each principal, schools attended, and companies worked for; and what makes your idea unique (again, in that magical yardstick of 300 words or fewer)?
Whether these incubator mavens are rolling their own high concepts or reviewing business plans submitted by third parties, hyper-entrepreneurs usually exhibit a preference for certain opportunities. At idealab!, for example, most of the companies that have been hatched so far show a strong consumer orientation. “I think that will continue, though we’ll also be looking at business-to-business increasingly,” says Brian Steel, managing director of idealab! Silicon Valley. “And developing ideas that have intrinsically viral capabilities.”
“We focus on companies whose primary revenue stream is commerce, who are technology-enabled rather than technology-driven,” says eHatchery’s Levy. “We’re not trying to find the guy who has a black box that will deliver DVD-quality video over a twisted pair. Also, we are unlikely to invest in companies who are creating original editorial content as a mission-critical aspect of their business. It’s very difficult for startups to compete with the Time-Warners of the world.”
In addition to great ideas, incubators also want great people who will make them happen. If you have an idea, but don’t necessarily want to build that idea into a business, chances are an incubator won’t be interested. “It’s just far more likely that a CEO is going to be completely committed to the idea when it’s his own, when he’s the founder,” says Levy. “In the early stages of a company, there’s not a lot of due diligence to be done, other than on whoever’s leading it. So you look at the competitive environment out there, and you ask yourself, ‘Is this the person who can lead the charge?’”
But wait. Before you start thinking, “Hey, I’m that person, I can lead the charge,” you have to be aware of one thing. Whether your idea is business-to-business or business-to-consumer or intrinsically viral, hyper-entrepreneurs are really only interested in one thing: home runs. They want ideas that can be IPOed into billion-dollar market cap businesses in less than a year, if possible. If you have such an idea, welcome to the club.
Nurturing the startups takes many different forms. At idealab!, for example, newbies feel the wide-open layout of their Pasadena headquarters, which features bright yellow, low-to-the-ground partitions instead of walls or cubicles, is so important to the collaborative energy idealab! tries to foster that it isn’t showing the Sunnyvale offices to visitors until it receives a similar treatment. In the case of eHatchery, CEO Levy trumpets the company’s streamlined idea submission process, an open-source ecommerce platform called eBox that it has developed for its portfolio companies, and “eLogistics” support (warehousing, picking, packing, shipping, etc.) from eHatchery investor and strategic partner UPS. Levy is also bullish on eHatchery’s Atlanta location. “This city is best place in the world to build an Internet business,” he exclaims. “It has incredible infrastructure, a very good supply of labor thanks to large companies like Coca-Cola Company, BellSouth Telecommunications, UPS, and Turner Broadcasting System, and yet a relatively small number of startups. So competition for labor supply, getting press, and rising above the noise of everyone else is so much lower here than anywhere else. And the burn rate is probably 30 percent of the typical burn rate on the West Coast or in New York.”
In the end, though, what really matters most in this market is relationships and execution. Who can you recruit for management teams? Who can you sign on as partners? How fast can you get it all done? It’s not so much that we think we have better ideas than anyone else, although we’re pretty proud of the ones we’ve had,” says idealab!’s Steel. “But we feel that the differentiation is far more in speed and the ability to execute quickly, bringing things to market with quality much sooner, and therefore being able to lead a given category.”
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