The presentation outlines the parameters a startup should consider when evaluating an offer from an incubator - independent study

1. How to evaluate an offer from a Startup Incubator 1 Made by Shailendra Singh

2. Calculate valuation & Determine value Scrutinize the Investment Structure Research the Mentors Inspect the Office Space & Incubator’s End Class Date Search for the Incubator’s PR & Marketing Efforts Determine the Opportunity Costs Conclusion 2 Made by Shailendra Singh

3. Calculate Valuation & Determine Value Incubators offer very little pre-money valuation Measure equity percentage (not monetary value) to all intangibles and tangibles Equity % of an incubator in an startup = equity % on seed capital – equity % of intangible Intangibles are mentorship (equated to advisory board) + convertible debt with no cap/conversion discount An incubator’s offer of $25,000 at 6 % equity should be revised to include equity % of intangibles to calculate pre-money valuation 3 Made by Shailendra Singh

4. Scrutinize the Investment Structure Incubators may structure their investment in a startup to get high return across the portfolio This may include taking preferred stock, protection against dilution or setting an option pool Incubator’s can play the option pool shuffle card that can dilute the pre-money valuation for the startup The question most important is whether the incubator’s T&C can hinder future financing from VC firms 4 Made by Shailendra Singh

5. Research the Mentor Incubators put their onus on providing mentorship, so research them to assign the right intangible value in terms of % equity! Relevant questions to ask: do they fit into our team and product? Do they know our space? Would we get to choose our mentor group? How often would they be available for advice or drop ? 5 Made by Shailendra Singh

6. Inspect the Office Space & End Class Date Being sure if the startup can be productive in the office space provided Is the office space private or shared! How is the conference room and how hard is to schedule calls! When does the benefits of mentorship and office space end (mostly post demo-day) What kind of support are the incubator’s willing to provide post-demo/engagement 6 Made by Shailendra Singh

7. Search for Incubator’s PR & Marketing Efforts What does the incubator does to market itself and its incubated startups Startups should check for media coverage/photos of demo-days of incubators! Startups should check with previously incubated class of startups that can give feedback 7 Made by Shailendra Singh

8. Determine the Opportunity Costs The trade-off is sometimes in choosing b/w an angel investor or an incubator The advantage with incubators is that they run with measurable goals with a set timeline The option to go with an incubator will be with lesser money but better quantifiable intangibles that they can put together best 8 Made by Shailendra Singh

9. Conclusion Incubators’ T&C should never hinder current valuations or future financings Incubators’ intangible contribution should be more useful than option to choose to work with cash Incubator should be the best springboards to future mentors but also have a great office to work! Startups should choose an incubator assuming that they will amply fit an as its PR/marketing partners 9 Made by Shailendra Singh

10. Shailendra Singhshailendras@langoor.net 10 Made by Shailendra Singh