The startup incubator: economic policy panacea or money-pit
Does Y Combinator’s unquestionable success justify using ‘startup incubators’ as the basis for strategic innovation policy?
The world is saying to itself: “Innovation will solve our financial problems. Silicon Valley knows how to do innovation. We need our own Silicon Valley. Silicon Valley does incubators. Look at how successful YCombinator is at incubating successful startups. Let’s do incubators”.
Ironically, if they took a closer look at YCombinator, they would see that it is not a typical incubator. Look closely enough, and you might wonder whether it should rightly be called an incubator at all.
Incubation is for life-forms too vulnerable and weak to survive without life-support. Give a startup a place near a university, little or no rent to pay, free laptops, Wi-fi, phones and electricity, put a bunch of other startups in the same building, offer a bit of investment advice and hey presto! you’ve got yourself your very own YCombinator, with (you hope) a steady stream of exciting new businesses to crow about.
However, rather than take startups who need to be coddled and protected in order to improve their chances, YCombinator instead takes a more Darwinian approach.
It naturally selects startups that have already shown serious ‘survivability prospects’. If anything, it puts them through an even tougher obstacle course than ‘the real world’ to see if they are worth putting more money into. ‘Incubation as we know it’ is not YCombinator’s recipe for success.
Startup industry veteran Vivek Wadhwa has been observing “tech clusters” (the other big idea in ‘innovation facilitation’). His skeptical take on developments in this field shows that governments attempting to copy Silicon Valley (without understanding how to do this effectively) is questionable. My view is that using YCombinator’s success as an argument for ‘conventional startup incubation’ is equally suspect.