original brief for the incubator

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original brief for the incubator Meng Weng Wong 5/19/09 10:20 AM

The Mengcubator

(working title, previously HatchHouse)


Mengcubator is more than just an incubator: startups work and live together in an atmosphere of unusual intensity and structure.  During a 4 month bootcamp, we help Internet startups take an idea to prototype, launch, and revenue, so they can meet milestones necessary for Series A funding. Founders may enter Mengcubator with little more than an idea; we define a goal, ease the path, and minimize distractions. For example, we help them quickly raise S$50,000 startup capital and we provide a community of engineering and business talent. Short half-day courses by experts remind founders of the bigger picture. An entrepreneur-in-residence acts as a coach to keep companies focused. We are for-profit, and we offer a co-operative ownership model so each company in a batch owns a small portion of its peers. At the end of the term, we convene investors for a group pitch.

IHL involvement:

  • Phil at INSEAD has offered to design the academic component of the curriculum.
  • EIRs, alumni, students, and faculty are invited to give half-day classes.
  • Companies that win business plan competitions are invited to participate
  • Any alumni who want to do an Internet startup after graduation are informed that Mengcubator is one available resource among many

Model Validation

HH was inspired by Paul Graham’s Y Combinator.  YC has, by analyst estimates, already broken even through acquisitions. YC differs from the traditional VC-run incubator through its batch-mode intensity, and by the presence of PG as YC’s full-time coach.  We follow this example and extend it with a co-operative ownership scheme. 

Customer Model

Startups can come from anywhere in the world.  We expect half to be from SG and half foreign.  Typically, 2 to 3 founders, with a mix of business and technical skills.  The concept should be fundable by iJam.  Each batch will have six to twelve companies.


Competitive Landscape and Differentiation

Singapore contains a handful of Potemkin incubators: they are typically organized by disinterested bureaucrats in fulfillment of policy mandates, and amount to little more than cheap office space in poor locations.  Startups experience minimal pressure to deliver, and complain of the lack of guidance they receive from the incubator. Many incubatees are fresh out of college with little idea of where the snakes and ladders are. Often they drift into consulting and never recover.

By contrast, HH’s organizers are lifelong entrepreneurs, not government employees.  Culturally, we aim for an atmosphere consistent with the FOSS movement, exemplified by BarCamps and Silicon Valley SuperHappyDevHouses, which attracts what Richard Florida calls the Creative Class.

HH will coach startups through an intensive term; at the end of the term startups either get funded or get failed: they are given tacit permission to give up and disband.  We expect that failures will fertilize the startups that did get funded, so talent is conserved.

We hear that Azione Capital are providing above-average levels of coaching.


Cost Model and Funding

This model assumes each batch will have 6 startups with 3 staff members each.  The following numbers describe half a year of expenses, during which a 4 month semester will run.  For yearly costs, double the total.

    in 000s

    60        2 FT staff to assist with admin.
    60        1 FT EIR
    20        fees paid to course lecturers
    300     building rental at $50,000 per month
    24        utilities including internet connection
    32        food ($15 lunch provided daily) and entertainment (occasional dinners out)
    60        legal and accounting services provided to HH directly and to startups also
    21        workstation expenses e.g. chair, table, monitor, lighting
    4          other facility expenses, including whiteboards, meeting room

Total expenses are $581,000 per semester or approximately $1.2M per year.

We charge each startup approximately $20,000, from their iJam funds.  We apply to IDA/MDA/IDMPO for an infrastructure subsidy grant of $460,000 per semester to cover the rest.

We will apply to SLA for free use of one of their buildings, under the Ideas Tender Scheme or moral equivalent.

Re: original brief for the incubator invinzee 5/20/09 7:02 AM
Nice....120K per year for 2 fulltime staffs to do admin....do you
accept foreigner? And $15 allowance for daily lunch....must be
delicious :) Just kidding, ha. I can understand the need to set that
amount e.g. staff welfare, training and such.

but why charge 20K from the miserable 50K grant from startup? And what
happen to those that did not get funded?

The investment according to the cost model is about 70K+ per startup
for this form of coaching. Do you think that is worth it?

Since HH is for-profit, what is its business model?


On May 20, 1:20 am, Meng Weng Wong <mengw...@gmail.com> wrote:
> The Mengcubator***(working title, previously HatchHouse)*
> christoph.zren...@insead.edu
> mengw...@pobox.com
> 20090520
>
> *Mengcubator is more than just an incubator: startups work and live together
> in an atmosphere of unusual intensity and structure.  During a 4 month
> bootcamp, we help Internet startups take an idea to prototype, launch, and
> revenue, so they can meet milestones necessary for Series A funding.
> Founders may enter Mengcubator with little more than an idea; we define a
> goal, ease the path, and minimize distractions. For example, we help them
> quickly raise S$50,000 startup capital and we provide a community of
> engineering and business talent. Short half-day courses by experts remind
> founders of the bigger picture.** An entrepreneur-in-residence acts as a
> coach to keep companies focused.** We are for-profit, and we offer a
> co-operative ownership model so each company in a batch owns a small portion
> of its peers. At the end of the term, we convene investors for a group
> pitch.*
>
> IHL involvement:
>
>    - Phil at INSEAD has offered to design the academic component of the
>    curriculum.
>    - EIRs, alumni, students, and faculty are invited to give half-day
>    classes.
>    - Companies that win business plan competitions are invited to
>    participate
>    - Any alumni who want to do an Internet startup after graduation are
>    informed that Mengcubator is one available resource among many
>
> Model ValidationHH was inspired by Paul Graham’s Y Combinator.  YC has, by
> analyst estimates, already broken even through acquisitions. YC differs from
> the traditional VC-run incubator through its batch-mode intensity, and by
> the presence of PG as YC’s full-time coach.  We follow this example and
> extend it with a co-operative ownership scheme.
>
> Customer ModelStartups can come from anywhere in the world.  We expect half
> to be from SG and half foreign.  Typically, 2 to 3 founders, with a mix of
> business and technical skills.  The concept should be fundable by iJam.
> Each batch will have six to twelve companies.
>
> Competitive Landscape and DifferentiationSingapore contains a handful of
Re: original brief for the incubator christop...@gmail.com 5/20/09 9:01 AM
Hey invinzee, my take on the mengcubator:

2009/5/20 invinzee <se...@phokki.com>


Nice....120K per year for 2 fulltime staffs to do admin....do you
accept foreigner? And $15 allowance for daily lunch....must be
delicious :) Just kidding, ha. I can understand the need to set that
amount e.g. staff welfare, training and such.

but why charge 20K from the miserable 50K grant from startup? And what
happen to those that did not get funded?

The 20K fee generate commitment and ensure that participants are serious. Things that are free are perceived as worthless and tend to be allocated to people who are good at filling in forms and jumping bureaucratic hoops rather than those who truly want or need them.

Not getting seed funded in Singapore (especially if we help them!) is hard and means that the founders either don't want/need the money or are (very) easily discouraged by perceived difficulties. So they probably shouldn't be starting a business and mencubating them would be doing everyone a disservice.
 
The investment according to the cost model is about 70K+ per startup
for this form of coaching. Do you think that is worth it?
 
Worth it to whom?

- For the government to spend an additional $50,000 per Singapore based startup on top of the iJam funding to make sure that is properly mentored in a suitable environment? Yes beyond doubt.

- Worth it for each start-up to pay 20k? I'd pay. But if I thought it wasn't worth it, nobody would force me to.

- Worth it for everyone else involved to put their energy into this? Depends: It's all about the people, no? And if the right kind of raw material comes together and reaches critical mass without too much nuclear poison around... then it's worth being a part of this story.

Since HH is for-profit, what is its business model?

Same business model as that of the incubated start-ups: Somehow cover the operating costs (fees and grants in this case) and if it's a success, have everyone who contributed (since we assume that start-ups collaborate and benefit from each other, this includes all incubates in a semester) participate. For this to work, there needs to be some for-profit entity to pool equity.

Beyond the shared participation, the thing is, if the mencubator was not for profit, it would set the wrong tone. It might be able to incubate social ventures. But not start-ups.

Best,
Christoph

Re: original brief for the incubator Wong Meng Weng 6/18/09 9:49 PM