Top 10 things I learned by building the Startup Tunnel incubator

A year ago we had a long thin space in South Delhi, a network of mentors and a clutch of willing startups. Today we have a budding incubator and four successful startups who’ve gone on to seed-round funding. Altogether, we’ve been involved in the creation of US$50 million of new value over the course of nine months. Here’s what I’ve learned along the way:

10. Most startups fail

We named our incubator-accelerator Startup Tunnel as a joke about eventually seeing the light at the end. But I now think ‘Startup Funnel’ would have been just as appropriate. Most startups fail. That’s a truth that one hears often, but can’t really appreciate until one has gotten wet with this game.

Between December 2014 and February 2015 we interviewed 220 startups, and made 14 offers of incubation. 12 Startups accepted and began working with us. In April 2015 we graduated just 5 startups with our credentialed seal of approval. 4 of those are now closing term sheets at valuations between US$6 million and US$25 million.

What of the rest? I’ve seen teams working together for nine months just up and give in.

A boy-girl team with a retro-cool idea go separate ways. Promising businesses go cold when the users never arrive or don’t stay.

We don’t really keep up with those we didn’t accept, but I would guess that more than half are no longer around, and many more will keep folding over the course of the year. The odds of coming through with your original team and idea intact are very very small. This is why I encourage teams to keep their ear to the ground and to stay nimble, be open to reacting to new opportunities and options as they may reveal themselves.

9. What’s in the pitch has to be in the product

When you’re starting out all you really have is your vision, which you must get across through your pitch. It is on the strength of your pitch that you get into Startup Tunnel and you will graduate into seed-round funding the same way.

We spend a lot of time helping startup teams with their pitch, because what you envision and articulate will actually describe the business you go on to build.

But what’s in the pitch must eventually translate into your product as well. So we look for teams who have the ability to describe what they want to build in detail, in ways that show they know with precision and clarity what they’re going to try to do.

Pitch and product have to hang together, else the startup will sputter and fail. That translation will only really happen if the founders have great clarity around their product vision as well as the ability to actually execute. Unfortunately, there is often no way to know if that conversion will actually happen until it happens, and that’s why an incubator is always a live experiment, operating with hit and trial, where we must wait to see which eggs crack and which ones hatch.

8. The best startup pitches aim to help people in real ways

I don’t know how many on-demand service pitches I’ve sat through.

People are serving you groceries, hot food, half-cooked food, coming over and making drinks for you at home, giving you massages and perms and doing your make-up, checking your teeth, fixing your car, watering your plants, and really taking over every aspect of your life.

At this point, there are just too many teams trying to take over smaller pieces of the on-demand economy and a big rush to get in and try and command that small market. There are already well-funded companies in the space, like Timesaverz and UrbanClap, who are working hard to offer increasingly differentiated services off of their existing platform.

7. Data has to be part of the story

6. Growth is to be hacked not bought

5. Teams win over even the most gifted individuals

4. Being in an incubator actually improves the quality of a startup

3. Incubators can help with seed-round funding

2. There’s a lot of punter money out there

1. Funnels mitigate risk