C HAPTER 4: I NCUBATORS : A N A NGEL I NVESTOR ’ S B EST F RIEND ?
Incubators, especially those run on or by universities, have unique access to research talent. This opportunity to build relationships with faculty and to raise the profile of business creation on campus often encourages researchers in the lab to create new businesses. This synergy is illustrated by the number of large and successful incubators located adjacent to campuses in Boston, North Carolina, California and elsewhere. Simply being close to the source of the discoveries, and connected with the research community, encourages the creation of new businesses and investment opportunities. The second way that incubators develop a strong pool of investments is by providing training and resources to make the new businesses “investor ready.” Incubators assist start-ups in developing a coherent business plan and offer presentation training, which can transform a lab researcher into an articulate businessperson. In some cases, they will find the right person, other than the inventor, to lead a technology company. Some angel investors say that this preparedness means that they pay more for investments coming out of incubators, as the business owners are more savvy and have thought through the value they bring more clearly. But this training is also reflective of their overall management skills and development, which makes them better deal partners than the average new business owner. FACILITATING THE CREATION OF WIN-WIN RELATIONSHIPS BETWEEN ANGELS AND ENTREPRENEURS Incubators serve investors by bringing them together with a hub of pre-screened investments. The creation of this unique “marketplace” facilitates deal flow and allows angel investors to identify investment opportunities that have received and will continue to receive training and support. The incubator can also provide guidance on technology or market development to angels with limited experience. Many incubators even offer customized presentations, which introduce the angel to a set of potential investments that meet the angel’s criteria. This pre-selection allows the angel to achieve a higher deal conversion rate per presentation and makes the deal-making process more efficient. Such synergistic relationships between incubators and angels are just beginning to develop. Both sides can do a lot more to encourage this natural partnership. ACCESSING A LARGE COMMUNITY OF INTERESTED PARTIES WHO CAN PROVIDE NETWORKING OPPORTUNITIES FOR THE NEW COMPANY Incubators, given their role as a hub and their linkages to universities and research facilities, are in an excellent position to elicit partnerships with many organizations. For example, the Exceler@tor has strategic partnerships with Microsoft and HP, which enable it to provide more sophisticated technology solutions and a ready partner for early stage commercialization. Such partnerships also allow incubators to help their tenants by arranging for technology evaluations and collaborations and by putting these new companies in touch with prospective partners and even acquirers. These relationships bring considerable value to the early-stage company, as do the interactions that incubators facilitate with the investment community, potential employees and the academic community. Start-ups operating outside incubators are unlikely to have the same level and number of relationships available to them.
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