I was hanging out with Tom Rodgers of Cambia Health the other day and we were discussing the seemingly unrelenting trend of the formation of new technology incubators and accelerators, designed to help catapult the weird and wonderful ideas of entrepreneurs into actionable companies. The idea is to take these entrepreneurs and the lightbulbs that have formed over their heads, put them together with each other (often in a physical location with loft-like qualities), wrap them in a burrito of high quality resources and experienced mentors and cook for about three months until what comes out is one big yummy pile of companies ripe for gobbling up by venture capitalists.
This trend has been longer lived in pure technology and medical technology fields (YCombinator, Tech Stars, The Foundry) and more recently has come to the world of healthcare IT in a pretty big way with the formation of Rock Health, Blueprint Health, HealthBox, Janssen Labs, Start-Up Health and several others founded and in process. One can only imagine that, somewhere near MIT, there is an incubator for incubators in the works. I have, my own self, been approached by three, count them three, newly forming incubators in the healthcare area over the past few months. When they ask for my advice I find myself saying, "Are you sure you want to do this? Does the world really need another one?"
Don't misunderstand me. There are some phenomenally smart and succesful people involved with some of these incubators. In the healthcare IT versions in particular, the young and creative minds that have come together have brought energy and excitement to a space that has made people yawn and run away screaming for years. If you think watching paint dry is boring, hang out at HIMSS for a few hours--it's the ultimate cure for insomnia. But the demo days at the current crop of healthcare IT incubators are energy-laden, dripping with hip, smart people, and virtually free of pocket-protectors--unless there is an app for that.
The worry I have however, is that it's getting a bit out of hand. As I have said before, it has become almost too easy to start a technology company. All you need is an iPhone, a Starbucks card and a golden retriever and you can declare yourself a cloud-based offering that has declared war on the way things have always been done. I recently heard Jody Holtzman, Senior VP of Innovation at AARP say something like, "Who knows if there are too many incubators? There is certainly no shortage of companies." True, but are they all worthy of being hatched?
I saw a recent article in which YCombinator, generally lauded as the gold standard for incubators, said that while they have had over 200 companies matriculate through their program, the vast majority of their value was derived from only two: Dropbox and Airbnb. If this were baseball, that would be a really questionable batting average. I think one of the problems with too many of the incubators overall is the way they measure success: namely by seeing companies come out the other side funded as opposed to creation of lasting market leaders.
As we VCs all know, just because something got funded doesn't mean it's good. If that were the case, we would have a much higher rate of success in our own portfolios. In fact, the youngest companies have an exceptionally high failure rate, most believe over 80%. Thus a network of incubators that must continue to feed itself by finding hundreds of new companies every three months or so has to make a few compromises, even if they don't realize it at the time. In a perfect world, incubators would be judged not based on the rate of company funding post-graduation, but on those companies' ability to survive to produce a positive return on investment.
And so it was, Tom Rodgers and I drinking a beer and talking about this trend, when he told me he had seen an article about a new incubator/accelerator being launched on a boat! I couldn't believe it so when I went home I went to The All Knowing All Seeing Google and looked it up for myself. Lo and behold, I found this article describing a new incubator called BlueSeed that will sail the Pacific like Spongebob Squarepants "to create a visa-free, floating incubator for international entrepreneurs off the California coast near Silicon Valley" for those foreign entrepreneurs that aren't able to spend their time on US terra firma. To quote from the article:
"Blueseed's co-founders, Max Marty, 27, and Dario Mutabdzija, 31, envision a seaworthy, 1,000-passenger hothouse for entrepreneurs from around the world, moored 12 nautical miles offshore — just outside California’s territorial waters — with enough appealing amenities to make it a “Googleplex of the Sea.” Passengers could take a day trip by ferry to the mainland on temporary tourist or business visas, returning to sleep in cabins that would rent for $1,200 to $3,000 a month."
“Blueseed is a way to connect Silicon Valley with the amazing founders and entrepreneurs out around the world,” Mr. Marty said. “Existing visa policies were designed for a different era. The nature of business has changed, and what’s lacking now is an avenue for people to be able to come in and create great companies.”
Oh Lord, I thought, as I fired an email off to Tom saying something like, "Holy cow. You were right, there really is an SS Minnow incubator."
And here's how I know there may be just a few too many of these incubator things.
om emailed me back saying, "That's not the incubator on a boat I was talking about. There is another one."
You gotta be kidding me.
The one Tom had read about is featured in this article and is called Unreasonable at Sea. To quote the article:
"Unreasonable At Sea, a new program aimed at creating technology to solve big problems, will put 11 teams of hackers, scientists and entrepreneurs from 16 countries onto a ship in January to see what bright minds in a confined space can come up with..."
This ship is going to hit 14 world ports of call and spend four months letting these hackers hack and meet local business and government officials, hoping that when they disembark, the hackers will have hatched into entrepreneurs who have come up with more than just an app to replicate Captain Hook's ticking crocodile.
The article goes on to say:
"Entrepreneur Daniel Epstein, who's spearheading the project, calls it "a grand experiment in transnational entrepreneurship."
"To help fuel their innovations, the ship will house a number of influential mentors at various legs of the journey: Archbishop Desmond Tutu will board for eleven weeks, Wordpress founder Matt Mullenweg plans to jump on the boat, and Behance founder Scott Belsky will drop by for the China leg of the trip."
I don't know about you, but I can't stop thinking about that Andy Samberg/TPain/Lonely Island short from Saturday Night Live called, "I'm On a Boat!". A sample lyric:
I'm on a boat and it's going fast and
I got a nautical themed Pashmina afghan
I'm the king of the world, on a boat like Leo
If you're on the shore then you're sure not me, oh
No word on whether those who fail to innovate on the S.S. Gilligan's Brain on Stock Options will be forced to walk the plank. Note to would-be sailors: almost all of the people who end up in these incubators are men, so this is likely to feel a lot more like the Pequod than the Love Boat. If this many incubators are taking to the sea, does that suggest the idea has literally jumped the shark?
What's next after a boat? With a goat? On a plane? On a train? In a tree? Seems like a lot of incubators if you ask me.
Lisa Suennen is Managing Member of Psilos Group. She blogs regularly at Venture Valkyrie.