Reply-to: indiaentrepreneurs@egroups.com Subject: Re: [IndiaEntrepreneurs] : Need help in comparing Incubators, Angels and VC's.

It'd be nice to have Rajesh Jog or others also add to or correct this answer. Here is a very general, rough outline, to the best of my knowledge, of what incubators, angels and VCs do - and want.

INCUBATOR: An incubated company is, classically, one that physically resides, along with other startups at the incubator's location. Typically, incubators provide real estate, bandwidth, often even computers, and sometimes common back-office functionality: HR, MIS, Admin, Finance and such. Many incubators also provide access to experienced heads in the network or in the business community. Some provide cashflow financing too. An incubated company 'hatches' when it grows bigger than 8 to 15 people and moves to its own location. Typically, incubators take upto 50% or more in stock for their services. This can be a good move for people who have no assets or 'rich uncles' but an idea and the willingness to own what will eventually turn out to be a minority stake in (hopefully) a large company. Some of the world's better known incubators are Idealab, Divine Interventures. Advantages are: fast time to market, no hassles with organisation and day-to-day stuff. The disadvantages are: you usually end up owning less of the business

ANGEL: An angel, typically, is a high-net-worth individual who works directly with entrepreneurs and funds them for a stake in the business. Real estate and other support services are usually not part of the deal. Angels usually provide start-up level funding to allow a company to come to a point where VC or other funding can be obtained. (Very few VCs will invest less than US$1 million in a business - so if your idea needs to be built up to a stage where you want to get $1 million but want to give away less of the company to the VC, you might look at going to an angel, building up your valuation, and then going for additional funding at a higher valuation.) Hundreds of Silicon Valley millionaires, Michael Dell, Bill Gates, Jim Barksdale et al are among the 'angels' startups have 'touched'. This is usually a good move for people who can get an idea off the ground themselves, but need a jolt of adrenalin to take it to the next stage. Advantages: money without the hassles, no management interference, sometimes you get from-the-frontline advice and contacts. Disadvantages: usually not enough $$ to take you to IPO.

VC: A money manager who typically invests funds they've raised from banks, corporates, FIs etc in high-risk ventures where there's little or no collateral. VCs nowadays have huge warchests ($1 billion and upwards in some cases) and tend to work on the principle that some of their investments will fail, some others will get phenomenal returns - and on an average, they'll do much better off than being in any post-IPO stock market. Many VCs today bring contacts and relationships that are immensely beneficial to entrepreneurs - the now-legendary Kleiner Perkins Caulfield Byers (http://www.kpcb.com) is a case in point. This is usually a good idea (actually not too many other alternatives) for anybody who needs significant funding in the $1-2 million plus range. Advantages: lots of money, in some cases, good contacts and relationships. Disadvantages: VCs need to show a return on investment and may push you to a liquidity event (merger, IPO, buyout etc) sooner than you might think. They're also usually more active on your board (this could be a plus or a minus).

Also wanted to add that these are just three ways to go - there are others. Further, there are also firms who fall into the cracks somewhere between these three.

Hope this was useful.

Just my $0.02

Mahesh