Are Boston’s incubators a path to prosperity for tech startups?
It is too soon to say, since the incubators are relatively new, and it takes years for startups to achieve a business model that generates growth.
But money raised is an interesting enough early signal because most startups need funding during their early stages.
As best we could, we tallied grant, debt and equity reported raised by companies after joining Dogpatch, TechStars and the Venture Development Center, three incubators showcased by the Angel Capital Association during their annual meeting in Boston. The following is a rough progress report, as of July 5, 2012, on the Class of 2011:
What the chart doesn’t show is the Class of 2011’s momentum: $41,677,091 of the total raised was added during the first three months of 2012, almost all by companies at Dogpatch Labs and the Venture Development Center. In other words, it took at least one year to raise significant investment.
Overall, Boston’s Class of 2011 has a 74% fundraising success rate. Average raised was $1,981,048.
By comparison, only 18% of all tech startup companies that submitted information to CrunchBase have received some sort of funding, and most raise $500,000 or less. On popular fundraising site AngelList, Massachusetts startups average $776,000.
Coming through incubator programs doesn’t guarantee success. But, it obviously helps, at least with investors, which may be harder to find than customers, because there are so few of them.
Going through an incubator is nearly always a recipe for success. The mentoring and wisdom imparted to entrepreneurs is invaluable. The lessons learned helps the business owner be better equipped to stand in front of a potential investor and come away successful.