A New Model for Startup Incubators

Check out this post from Steve King about an effort to build a new model for startup incubators called The Founder Institute. It’s being launched by The Funded, Adeo Ressi’s site for entrepreneurs to rate and compare investors (more on The Funded here). The selective four-month summer program for early stage startups will run in the Bay Area and online, and they’re accepting applications through May 10.

Here’s what interests me most from King’s post:

The Founder Institute has come up with a novel economic model that includes all of the participants in the program sharing in the upside of the entire group. They’ve also created a new class of stock - called Class F common - designed to better protect the interests of founders.

Here’s part of the philosophy behind it, from the Founder Institute site:

The Institute shares upside from all participating Founders and Mentors in the program, creating a pool of shared value for everyone involved. When one of the participating companies does well, everybody benefits. And when the Institute’s Mentors help the participating companies, they share in the upside as well.

Last month we asked whether incubators were the best route for companies looking for funding. That’s what Rod Underhill (founder of MP3.com) suggested at a lecture during NYC Entrepreneur Week titled “Is Venture Capital Obsolete?” Last year Ressi told BW’s Spencer Ante that “venture capital definitely needed a kick in the pants.” The Funded has already ruffled some feathers — not all VCs appreciate the anonymous reviews. The Founder Institute looks like an effort to make the VC model more friendly to entrepreneurs — one worth watching.

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