Innovation and entrepreneurship are two of my favorite foods for thought, so naturally their intersection grabs my attention. Pushing entrepreneurship forward–whether by getting more people excited enough to try it, lowering the barriers to reasonable success, bringing more investor money to bear on funding great people with good ideas, or attacking the challenge from any other angle–can have some of the biggest impacts achievable on the rate of innovation and progress.
Reading through the online essays of Paul Graham, leader and co-founder of Y Combinator (and whom I talk about a lot here), and the blog of James Currier, leader and co-founder of Ooga Labs (my previous post mentions Medpedia, their biggest about-to-release project I know of), convinces me that both these guys have an understanding of how to achieve the biggest impact they can imagine doing something they love. Despite what I think are similar goals and understandings about entrepreneurship and value creation, they use fairly different approaches. Both, I think, will create tremendous value, but their different models will have a big effect on the businesses they develop.
Google and Apple are both great companies, and I have tremendous respect for their leaders. What they do, they do well. But they go about their jobs differently. Larry and Sergei have from the beginning seen themselves as the ones with an eye on the vision, looking for the best creators they can find, and helping them unleash their creative energies towards the Google mission. The “20% time” engineers there enjoy, the fact that the wide world knows quite a lot about the general day-to-day goings on of the googleplex, and the amassing of talent and technology through dozens of acquisitions all point to a pair of leaders who see themselves as curators over designers. Steve Jobs falls into the opposite camp, managing the direction of the organization much more directly. Not to say that apple doesn’t acquire companies at all, but the roughly $1B Apple has put into the effort (compared with Google’s unknown but numerous billions), over a much longer history and with a recently fairly equivalent valuation, says that Apple’s acquisitions seem more designed around profit than innovation. They prefer to innovate from within. Even though the companies aren’t even in the same market, their familiarity and success draw these kinds of comparisons.
The same contrasts can be drawn between the self-incubator model of Ooga and others, and the pre-seed model Y Combinator has pioneered. Both companies aim to create as much wealth and value as possible by starting and/or growing startups to tackle what they see as important problems. There’s a bit more emphasis on social value over profit at Ooga, but aside from that, the main difference I see is that of incubating in-house (aka designing) at Ooga, versus finding tiny startups with tons of potential, bringing them into the fold, then unleashing them (aka curating) at Y Combinator.
Which is better? I’m personally right on the fence: I’m in love with both models. On one hand, I love making things myself (the Steve Jobs way), and though I’m not foolish enough to think I’m the best at it, I’m smart enough to know that in many cases “just good enough” is good enough. On the other hand, I love being a part of others’ success, and if I can create more value by helping others succeed, then that could be an even more compelling offer.
But which model is better, as in the one that will “win out”? Not in the sense that they’re actual competitors in the marketplace–both models can coexist and take nothing away from the other. But both are shooting for the same goal: generating value and propelling entrepreneurship. And both have similar requirements to getting started: you need a lot of startup smarts and credibility, and some relatively deep pockets, to really get an incubator or a pre-seed funder off the ground.
So far the evidence is too slim to be very telling as to which can produce more value, just between Ooga and Y Combinator. Ooga is more recent, supposedly having 5 projects under way about a year ago according to this article, but the Medpedia project looks phenomenal. Y Combinator has already helped launch dozens of companies (see ‘investments’ here), many of which are widely known already (loopt, reddit, disqus, justin.tv, snipshot), and a few of which have already been acquired (reddit by conde nast, omnisio by google). Of course, it makes sense that Y Combinator will have more and larger successes–since it picks up, pumps up, and pushes out startups, it scales to a lot more companies and is responsible for a much smaller share of the value created. And that is the real difference, in my mind–incubators invent and develop companies; microfunders just help with the developing.
It’s also worth noting that these two companies don’t necessarily represent their entire breed. Y Combinator perfected the pre-seed funding model, but TechStars and a few others belong there as well. In the incubator camp, Ooga is hardly the first. IdeaLab is widely credited with pioneering the idea incubator model in the 90s (see their massive list of insanely successful spin-offs, including citysearch, commissionjunction, compete.com, overture, …). Not included in the category with Ooga and Idealab are the nonprofit “business incubators” that offer counseling, shared office space, and business services to pre-existing startups. Y Combinator actually looks a lot like these nonprofit business incubators as far as the basic services provided and the startups targeted, but where the nonprofits are usually funded by regional government and incented to just provide support as needed, Y Combinator gets paid via ownership in the startups and does everything it can to make the startups as valuable as possible upon leaving the program at the end of 3 months.
A more abstract way to compare the underlying designer and curator models of starting and growing new companies to drive innovation is to look at which better fits the big trends that seem to be dividing strategic winners and losers recently–here are a few I can think of: open beats closed, listening beats talking, good beats evil. I don’t have the answer to that, but rest assured I’ll keep working on it, and let you know as soon as I’ve got the answer. =) In seriousness, though, if you have thoughts on this, I’d love to hear them. If you’ve seen a discussion on this elsewhere, please point me to it. I care a lot about this stuff, as you can see from the incredible length of this post.
Blake Borgeson, in blog form 