HitForge, a new twist on incubators

29 Comments

Naval Ravikant, who in his past life co-founded Epinions and Vast, has started HitForge, a San Francisco-based outfit that is a unique twist on the incubator model.

HitForge is an entrepreneur cooperative composed of independent small teams, where people can apply with their ideas, join the team, and see their idea go from idea to product in a few weeks, largely with help of an offshore engineering team.

If it works, then the product is turned into a company. If it doesn’t work, the product is killed, and the team moves onto something new. HitForge is out of a few thousand dollars. The team whose product got killed still gets to share in the hits that come out of the cooperative, Ravikant says.

Ravikant argues that the start-up creation model – have an idea, start a venture, raise capital and then release a product – might have worked in the past, but now it doesn’t, at least when it comes to consumer web start-ups. In the world of consumer Internet start-ups, only the hits win. Today while it takes less capital to start and launch a company, it doesn’t necessarily mean it is going to be a hit. As Ravikant says, “Web businesses are unpredictable despite the best of intentions and execution.”

“What these are, are products that needed to be tested out in the market before becoming a company,” says Ravikant. Only the hits should become companies, since hits are the only ones that get consumer adoption, and have some sort of an exit event. Hedge funds use this “momentum investing” philosophy, and so does Sequoia Capital, that has done well by betting on growth.

The concept is very similar to that of Ev Williams, who has established Obvious to try out new web products, spinning out the ones that show sufficient adoption into companies — as he did last week with Twitter.

Others will argue that the smaller projects being snapped up by Google and Yahoo shows that it’s about hitting singles, not home runs. But like in baseball, it is the homers that fill the stadia and line the pockets. HitForge hopes to take the two approaches and mash them up with current industry trends – offshore developments, using Amazon S3 and EC2 services, open source, and new web marketing strategies.

Ravikant, when we met with him said,”Give me your tired, your poor, your huddled engineers yearning to code.” We thought he was joking. Instead he was dead serious. “But that’s how I feel about engineers with great passion who can’t raise money, usually because they were born in the wrong country or under the wrong circumstances. I want to create an abstraction layer that allows them to be entrepreneurs.”

Will it work? I am no expert on this, but given the success of YCombinator, it has a fighting chance. When thinking about this over the weekend, I remembered a similar experiment was tried in the music industry in the 1990s. Jimmy Jam and Terry Lewis created a hit factory that churned out R&B hits by the dozen and gave us stars like Janet Jackson. In England, Stock Aitken Waterman did the same and brought to us musical acts like Kylie Minogue. But there was Sonia, Sabrina, and Samantha Fox.

So question to all the readers: you think this twist on incubator model is going to work?

29 Comments

Shanti Braford; On Web Apps

Jerry – point taken. I will gladly take advice from someone who’s been there and done that. Do you blog or have any URLs outlining your successful projects?

Jay – From reading your blog, we’re probably on the same wavelength on many points.

My feeling is, one shouldn’t take advice from people who haven’t done it yet.

You wouldn’t want a doctor performing surgery on you if it was his first go around, or if he had tried this surgery 3 times before and failed / “broke even” on his previous attempts, now would you? =)

Mod +1 “Founders at Work” too.

Ravi

One word answer: ‘Less probable’ that ‘incubation with a twist’ might work, because passionate tech entreprenuers are looking for things beyond incubation given the fact that the resources (primarily) provided by the incubators are easily gettable these days. They would want to do things that they are good at and they need strong support in areas that they are not good at.

Secondly, I feel the success factor for “incubators with a twist” could be a little shift in focus from ‘resource provider’ to ‘accountability/responsibility sharing’ in making the product/idea a success.

Do all what it takes to market/sell/develop the product well and make it a success rather than giving resources to the entreprenuer and making him responsible for the success or failure.

Nilesh Trivedi

Something like this would be great for India. Although I don’t agree with one getting benefits if his own idea failed in the market. Let meritocracy prevail.

cheers
nilesh

Jerry Auerbacher

Yes, Shanti, I am.

If you have a good idea, the moxy to make it happen and just a little luck then you don’t need any direction from me.

Good luck to you, Obvious and everyone involved in the combination of Combinators.

Shanti Braford; On Web Apps

Jay (living in First Life), Jerry –

You guys are obviously millionaires then from hitting it big on your own successful startup or venture, right?

Please direct us, oh masterminds, to the proper place we should learn how to properly build a startup.

ps. re: the post… who knows? Obvious Corp seems to be doing pretty well for themselves. YCombinator also has an impressive record, even though they are nothing like an incubator at all, simply angel investing on a micro scale.

schmo

@jay – do you have a blog? would luv to read your take on tech news each day…

Soum Paul

There is another trend that’s starting to emerge – in the last three weeks, I have met at least three different entrepreneurs (and heard of a few more) who have come down from the valley with funding to India, and are creating their prototype here. There are small and large companies which are starting to offer teams to help prototype a first demo-able version of one’s idea (with an hourly rate model).

And from India side, the entrepreneurs here are hungry for collaboration and access to capital. And the market itself is ripe for testing a first version. I wonder if we will see more such startups emerge…

Jay (living in First Life)

Jerry and Jason – thank you for the kind words. I’m by no means an expert but I am an internet entrepreneur running a real business that generates revenue through paying customers.

What concerns me more than anything about most Web 2.0 companies is the focus on “free”. It is very difficult to have a large enough userbase to make a pure advertising play work. What ends up happening is that potentially profitable niche internet services are not developed and everyone goes for the “TechCrunch/GigaOm” readership as their market since they can get quick adoption. Well think again, we’re also very fickle. We check out a site and forget about it. If it doesn’t give us immediate value, we won’t be coming back. Chances are that if it’s completely free, it’s not that great either.

Jason

Jay

Love the comments. In perfect agreement with you. The tech blog space is in dire need of a skeptical/realistic voice. I’d gladly sing the praises of Arrington or Malik (more so that I do already – one cannot reject their solid contributions outright) if I felt that they would demonstrate a little more discrimination and even a touch of skepticism in their reviews.

Henri Duong

So here is the dilemma…there are a lot of young talented coders but not a lot of young talented entrepreneurs.

If you are an entrepreneur you know the keys to starting a business and any business for that matter.

What would be nice is see an incubator that matches MBA business entrepreneurs with talented coders. Match them up and help them with a few thousand dollars to start things up and guide them when it makes sense.

Allow them to be unique and show them the importance of when to share ideas and when to hold it back and close to the vest until it is time to share.

Maybe i should start in incubator…lol

Jerry Auerbacher

I agree with Jay 110%.

No real entrepreneur with a real product goes for these types of YCombinator’ish setups.

It is absolutely amazing how much hype is going on around Twitter. It’s pure hype because continued public adoption and monetization has not been proven or even shown to be a possibility. It may be used as the basis for some future apps but that’s about it.

There’s too much hype about worthless companies in the web 2.0 blogosphere. Now add to that: hype about companies that incubate worthless companies that will only get more hype.

I think that hype, not the wild investment capital, is the signal for the bubble.

And another thing, give Jay a column. Tech blogs needs balance. A voice of reason if you will.

Jay (living in First Life)

Ajay – thanks.

Om – I’m happy to write for your blog :)

Tod Whipple

I have been in private beta for about 6 months, remaining steadfast and true to my new startup launch StartupAddict.com. If there is one thing I have learned equally from my successes and failures, it is to draw on the experiences as a serial entrepreneur. I believe that the one true incubator model (and this is something Jay the commenter can agree) peer-to-peer funding is the undiscovered business model. It’s not the VCs or the Y Combinators of the world that will prevail in the end it will be fellow believers. Welcome to the haven for entrepreneurial superheroes thwarting the forces of convention StartupAddict.com. Dream Big. Be Great.

Ajay

Give Jay (no second lifer) his own column. He’d be better than Robert Young and his pontificating.

SFGary

If what the people in the web community say is true and there is a huge amount of open source code and tools available the time and cost of development is low, a few smart technical people can form a dev group and invite entrepreneurs to bring in projects.

The team picks the projects using some criteria and works with these entrepreneurs in bringing it to market. This model may have as much of a chance of success as the YC, Techstar or the Hitforge model.

Jay (living in First Life)

This is even worse than the Y-Combinator scam. This isn’t a scam but it’s like socialistic entrepreneurship. Incubators didn’t work in the past and they won’t work today.

The revolutionary entrepreneurs aren’t going to be interested for two reasons:

  1. Real entrepreneurs don’t design free me too consumer apps that add little value to the world (e.g. Y-Combinator companies, social networks, etc.)

  2. Real entrepreneurs do it to win big. If you just want to get rich, you go work at a hedge fund, not join an incubator where even if your me too product fails, you can share in the success of another one.

Do you really consider Obvious a success? Twitter is thriving in the Echo sphere and no one outside it cares.

I’m amazed at how much attention on TechMeme, GigaOm, and TechCrunch is dedicated to worthless start-ups that are easy-to-replicate, violate IP, have no real technology or value, etc.

Om – at least you do some real stuff. Can you differentiate yourself from the fluff on TechCrunch a bit please?

Steve Morsa

Om: While more options for more innovators (of all strips, backrounds, experience, specialty, etc) is always a good thing; SFGary is correct.

On the one hand, if a coder/programmer proficient guy/gal (or team) can write their own app; given today’s super low costs of getting “the thing” on the web; what do they need HitForge for?

Then on the other hand, since they; apparently, from what their website says; only want submissions from the programming folks, anyone with a great idea who’s looking for app writer/creators need not bother contacting them.

Frankly, their site reads more like a job board for coders than it does for innovators.

While their “everyone shares” approach absolutely sounds like a great additional option for the marketplace; were I them; I’d instead invite anyone with a great idea to submit it to them (with the full knowledge that such IP-unprotected submissions come with some risk to both parties); approached from the standpoint of “you bring the idea, if we like it, we’ll build and launch it for you at no upfront cost, and we all share if it takes off.”

That’s the kind of approach that’ll bring them the home runs they’re looking to create.

sharpshoot

Naval Ravikant is hardly a nobody. By bringing his expertise into the product i think we have a scheme to generate some very interesting products.

Don’t knock this as a back-of-the water effort by any means.

James Nicholson

I really like this idea. Clearly placing lots of small bets and seeing which ones pay off is the way to go.

My only question is how the various engineers will integrate, if at all. Is HitForge building a team like Obvious who create products and then spin them off into separate companies? Or is it a constantly changing group that enters and exits as projects are finished?

What’s also not clear is whether HitForge has the management side in place. As another commenter mentioned, there needs to be at least a few business types in there to complement the hackers.

Moataz

I think this model of “Web site/app Publishing Companies” is going to become a main stay of the industry. With the low costs of turning an idea into a web service, a LOT of crap comes to the market and to rise above the crowd, start-ups need credibility. If a big name publisher is behind the company, it automatically gets a lot of press and has a better chance of catching on. For example, if Obvious Corp were to release any new web service, it would doubtlessly be on top of Techmeme with loads of people writing it up. The same wouldn’t happen if CompanyXYZ were to release the exact same web service since they wouldn’t have the credibility.

I think this is the same model used in the videogame industry.

Leechers

Are these the same bunch of folks who had a fight with their investors in the previous venture? I can see a trend here. What is it baiting/leeching?

This anyways looks like a ripoff of cambrianhouse.com

Stay away from all these amateurs and do it on your own. You’d be better off.

Leo Iyer

I agree. Technical skillsets alone cannot make a product. What about the rest?

Hasan Luongo

I’m going to veer towards no, but I really like the idea.

It feels the concept turns the key intangible elements of new venture creation into commodities, and focuses only on building products.

SFGary

Sadly, they are restricting themselves to technical founder applicants only, it seems non-technical people cannot be entrepreneurs…

Sam Daoud

They had better have a good management team. I can see the environment becoming chaotic with all the different projects and hungry engineers.

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