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1. Invest in good teams, before they prove their businesses and see how they maintain the pace of learning.
- Invest in teams that are coachable (who don’t know everything yet), that have thecapability to build (this will be different depending on the business), that demonstrate commitment and drive, and that will be engaged membersof the Incubator community.
- Be open to different business types. This Incubator supports entrepreneurs, whether they run scalable tech startups, product companies or even boutique businesses. There is plenty to learn while operating each type of business. The program supports selected entrepreneurial teams regardless of their interest or attractiveness to typical investors.
- Set milestones to track progress, based on learning objectives (data from running experiments etc) rather than milestones better suited to a stable business (increase sales by 20% etc). Based on achieving learning milestones, bring in more resources to help the teams.
2. Teach skills that will serve the entrepreneurs well in any economic climate or business stage they may find themselves.
- If you are a current student building a business that depends on raising a large amount of financing but the market tanks by the time you graduate, that’s beyond your control but also a risk that you could have defended yourself against.
- Teach skills and give repeated practice in bootstrapping, how to do customer interviews (and get good at them), develop and test business models, understand customer segments, get distribution, generate revenue and present the opportunity. The word “teach” is probably misleading given that the founders apply these skills directly to their work. We really look for change in behavior. This is workshopping plus time plus business application, coming together to equal experiential learning.
3. Do not judge potential Incubatees by perceived market size, at least not too soon.
- There is a lack of awareness of how markets could develop. Often founders are told both to have niche focus and to also build massive companies. When you look at the historical assessments of Facebook or Uber, the two companies originally seemed like small opportunities because by looking at original market sizes we ignore growing past university students and changing passenger behavior, resulting in markets larger than anticipated.
- The explanation that there is a baseline market size ($100M or $1B) below which a business is too constricted is an investor-centric worldview and one in which companies are only either highly scalable with good ROI or “lifestyle businesses” (profitable for the entrepreneur, not for the investor). I once heard a judge tell a student founder that his $8M business was too small to be interesting. If I were 20 years old, like the founder, I’d really like to run an $8M business.
4. Shorten cycle time, especially in these key areas.
- Shorten the discovery cycle. Connect entrepreneurs to potential customers and train them (see point 2) in how to interview and learn from these potential customers, use metrics to learn from data and learn to assess what they need to build. Make connections to alumni and others in the community who may guide this process.
- Shorten the development cycle. Connect entrepreneurs to developers, designers and business talent for specific project work or to team members who can deliver on these functions full-time. Connect throughout the university.
- Shorten the operational cycle. Provide legal, corporate structuring, tax and other resources. Help entrepreneurs do the things that they don’t need to be good at personally, but which if ignored lead to problems later on.
5. Bring in mentors selectively.
- Where there is specific domain expertise needed, bring mentors in to meet teams one-on-one. I find that the level of communication that takes place when mentors dive deeply into business issues outweighs the benefits that the group gets from shared general advice.
- Where there is common needed business knowledge, bring people in, but sparingly.
- Avoid building a long list of mentors unless they are actively involved with the program. There are long published mentor lists at many programs, yet these lists are often there more to attract entrepreneurs rather than to show the activity of (often rarely engaged) mentors.
6. Avoid activities that are quick, easy and which attract a lot of attention if they do not produce stronger founders and businesses.
- Getting (and measuring) results requires time but parading Hollywood versions of a new business is relatively easy. That means that the market often defaults to doing the things that get attention – events that may attract big crowds, but which do not do that much for the entrepreneurs they are there to serve.
- As an entrepreneur with a limited number of hours in the day, I believe that you should spend your time with customers and working on your business, rather than attending many gatherings (unless the events are packed with your customers).
- Avoid feel-good celebrity visits that produce no lasting effects. If you need inspiration, I suggest you get it from looking at how delighted your customers become when you deliver and make their lives better. Or, find local heroes that will still be around and invested in your success.
7. Build around the strengths and needs of USC and Los Angeles.
- Develop a program that benefits from the strengths of the area, eventually tying in with local industry and problems / opportunities.
- Build for what will strengthen USC and Los Angeles even more.
- In the future, add a “looking for people building solutions to —” component of the application to fast track certain types of businesses.
If this perspective moves you, join us!