Question
How can iStrategyLabs build a better DC and world?
Answer
I have to disagree with Zvi (and therefore with what you guys might actually do, Peter).
It is time to acknowledge that the Y-combinator model has become a victim of its own success by spreading resources too thin. The entire "Super Angel Bubble" phenomenon is due to far too many small-seed efforts starting out and finding that the embattled VC industry cannot fuel them for the next stage when they need millions instead of 10s of 1000s. Extinction/infant mortality rates end up being far higher after the seed stage than they need to be. BABIES ARE DYING!!!! :)
The more people emulate the Y-combinator model (as you guys seem to be planning to do) the worse the problem will get. Increasing numbers of talented people will waste their time working on tiny good ideas that have no hope of making it in the fierce fruit-fly competition.
Early exits will help solve some of the problem, but that's a band-aid available only to a few "built for flipping" efforts. The shrinking VC world will still pick up many of the investments. But overall, much of the wealth-creating potential of low-cost entrepreneurship will simply be lost.
Overall, there is a structural problem of money getting spread too thin, with too few single efforts having either critical mass or enough fuel to get somewhere.
Perhaps iStrategy Labs can be the first to start bucking the trend and exploring alternatives. If it works, you will truly start forging a distinct identity for DC startups, rather than a me-too emulation of whatever Silicon Valley thinks is the next best thing after sliced bread in entrepreneurship.
My proposal: get the talent aboard as other incubators do. But put them together in LARGER (but modular) teams, not tiny "2-people/case of red bull/50k for 1 summer" packages. Find 10 talented people. Lock them up in a room and tell them they won't be allowed out until they fiercely debate a bunch of ideas and come up with a modular set of independent but interlocking ideas that can go in multiple different directions. Then unlock the doors, give the whole gang 1-2 million instead of 100 gangs 10-50k.
What does this accomplish? You still get the focused smaller teams working on individual minimum-viable-product ideas. But due to the prework in mapping out potential links between the modules AHEAD of time, you've created the possibility of bigger emergent rewards. If you've ever faced the frustrations of creating biz-dev deals between startups, you know the costs of not laying collaboration groundwork early. Just defining a couple of common data model elements/interfaces can create a million-dollar coupling that might not happen if it is attempted after the fact.
Example for DC. If "civic infrastructure plays" emerges as the overall theme in the locked-room brainstorm, and modules proposed include parking meter stuff, parking garage stuff, and metro related stuff, get these 3 teams thinking about a holistic system design upfront, but with each piece having stand-alone potential as well. So if all 3 succeed, you've got a "sum greater than parts" thing that has greater hopes of attracting VCs, and can share customer development resources.
If only 1 does, you still have the YC model open to you. Best of all, if one turns into a cash cow and another into a traffic cow, and a third turns into a slow-growing IP asset, well, you've got a golden portfolio right there that can pay for it's own growth and avoid the funding game altogether.
One way to think of this is a counter-trend "fat startup" model that still has the tactical advantages of lean startups without the financial problems. See Ben Horowitz's excellent piece, "The Case for the Fat Startup"
http://trailmeme.com/walk/The_Ul...
You don't have to accept this specific idea of course, but my broader point is that you are not going to build a better DC by trying to create a poor-man's San Francisco. You need strong local differentiation for the startup culture. That's how NY, Austin, Tel Aviv etc. have carved out unique identities distinct from the Bay Area.
It is time to acknowledge that the Y-combinator model has become a victim of its own success by spreading resources too thin. The entire "Super Angel Bubble" phenomenon is due to far too many small-seed efforts starting out and finding that the embattled VC industry cannot fuel them for the next stage when they need millions instead of 10s of 1000s. Extinction/infant mortality rates end up being far higher after the seed stage than they need to be. BABIES ARE DYING!!!! :)
The more people emulate the Y-combinator model (as you guys seem to be planning to do) the worse the problem will get. Increasing numbers of talented people will waste their time working on tiny good ideas that have no hope of making it in the fierce fruit-fly competition.
Early exits will help solve some of the problem, but that's a band-aid available only to a few "built for flipping" efforts. The shrinking VC world will still pick up many of the investments. But overall, much of the wealth-creating potential of low-cost entrepreneurship will simply be lost.
Overall, there is a structural problem of money getting spread too thin, with too few single efforts having either critical mass or enough fuel to get somewhere.
Perhaps iStrategy Labs can be the first to start bucking the trend and exploring alternatives. If it works, you will truly start forging a distinct identity for DC startups, rather than a me-too emulation of whatever Silicon Valley thinks is the next best thing after sliced bread in entrepreneurship.
My proposal: get the talent aboard as other incubators do. But put them together in LARGER (but modular) teams, not tiny "2-people/case of red bull/50k for 1 summer" packages. Find 10 talented people. Lock them up in a room and tell them they won't be allowed out until they fiercely debate a bunch of ideas and come up with a modular set of independent but interlocking ideas that can go in multiple different directions. Then unlock the doors, give the whole gang 1-2 million instead of 100 gangs 10-50k.
What does this accomplish? You still get the focused smaller teams working on individual minimum-viable-product ideas. But due to the prework in mapping out potential links between the modules AHEAD of time, you've created the possibility of bigger emergent rewards. If you've ever faced the frustrations of creating biz-dev deals between startups, you know the costs of not laying collaboration groundwork early. Just defining a couple of common data model elements/interfaces can create a million-dollar coupling that might not happen if it is attempted after the fact.
Example for DC. If "civic infrastructure plays" emerges as the overall theme in the locked-room brainstorm, and modules proposed include parking meter stuff, parking garage stuff, and metro related stuff, get these 3 teams thinking about a holistic system design upfront, but with each piece having stand-alone potential as well. So if all 3 succeed, you've got a "sum greater than parts" thing that has greater hopes of attracting VCs, and can share customer development resources.
If only 1 does, you still have the YC model open to you. Best of all, if one turns into a cash cow and another into a traffic cow, and a third turns into a slow-growing IP asset, well, you've got a golden portfolio right there that can pay for it's own growth and avoid the funding game altogether.
One way to think of this is a counter-trend "fat startup" model that still has the tactical advantages of lean startups without the financial problems. See Ben Horowitz's excellent piece, "The Case for the Fat Startup"
http://trailmeme.com/walk/The_Ul...
You don't have to accept this specific idea of course, but my broader point is that you are not going to build a better DC by trying to create a poor-man's San Francisco. You need strong local differentiation for the startup culture. That's how NY, Austin, Tel Aviv etc. have carved out unique identities distinct from the Bay Area.