A tech incubator is typically backed by one or more venture capital (VC) firms and is used to test out different startups and their teams, usually with a time limit of some kind and specific goals, after which they proceed to a round of funding or do not pass go or collect $200. Prior to the past decade, these incubators were scarce and exclusive and almost entirely limited to Silicon Valley and its top dozen venture capital firms on Sand Hill Road. However, in the past decade, venture capital firms have gone beyond Silicon Valley and, with tech partners like Google, Microsoft, and more, began setting up incubators at universities across the country. Let’s quickly look at how we got here.
Opportunities to pitch or demo software, products, or even pitch business ideas in a higher education setting to venture capital firms simply did not exist before this shift. If you had something to pitch or demo, your professors in computer science would typically tell you to reach out to a venture capital or angel investment firm. The chances of a college student being successful in this were slim to none so for a long time, the venture capital world was shielded from a majority of the products and businesses that college-aged entrepreneurs were developing. In rare occurrences where VC firms did find these groups, it was always after they had achieved critical mass and gained a massive amount of users.
With incubators and hackathons now at most major universities across the country, more startups than ever, and the college students who founded them, have the opportunity to speak with the powers that be in tech. This is a seismic shift in the way venture capital has traditionally worked and the results will be seen in the next decade to come.
Downsides to Venture Capital
There are some downsides. Because the venture capital firms can access these startups in early stages, they typically get less favorable deals than startups that have already gained traction. Further, the incubators they sponsor do not have the same quality of participants as the major incubators in Silicon Valley as masses of college kids rush to found the next major startup to bring overnight money and fame. However, there are far more pros than cons when it comes to tech going to college. There is more competition and the playing field has been leveled so more and more college students can compete against the likes of Stanford and Harvard students who have traditionally had a leg up on most colleges in terms of access to venture capital.
The Rise of the Incubator
The rise of incubators across college campuses has also led to a new culture at each school where there are mini Silicon Valleys at each campus where startups compete with one another and the incubator programs and hackathons are the places to shine or fail and go back to the drawing board. This helps students learn faster if their idea or product is viable or if there are factors they didn’t consider that this new expertise from incubators can provide. This will lead to increased success for startups born out of college incubators in general because they can iterate earlier. When this new wave of students graduate college, they will be more prepared than any previous generation to get into entrepreneurship since they had four years of college to fine-tune their abilities, skills, and understanding of business.
For colleges that have yet to join this movement, it is a major factor in attracting students who plan on majoring in computer science, engineering, medicine, and more. These ambitious students are much more likely to attend a college with an incubator program than a college without one. Further, this movement will change the landscape of Silicon Valley and break down the barriers of exclusivity held by the Ivy League so that viable products and businesses, regardless of the university they came from, can sit down with the big Silicon Valley players and get the funding they need.