I'm On a Boat! The Rising Fleet of Incubators

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.