15-month-old Hatch Labs is but a baby compared to incubators like YCombinator, but CEO Dinesh Moorjani has a very different idea on what an incubator should look like.
The “sandbox”, as Moorjani would call it, is a joint venture between IAC and Xtreme Labs, and aims to grow mobile startups that are scalable and move beyond being minimally viable, and actually offer the user a sense of delight. How very Microsoft of them.
Moorjani says what makes Hatch really different from other incubators is that it finds the middle ground between seed funding/accelerators and VC.
On the accelerator side, says Moorjani, there is a significant problem being solved. Programs accept talented entrepreneurs for three to four months and help get the product off the ground. We can all agree this is necessary.
But Moorjani says that of the usual $25,000 in seed funding exchanged for up to a 10 percent material stake in the company, most of it goes to office space, bandwidth, a community of entrepreneurs and access to mentors.
On the venture capital end of the spectrum, entrepreneurs typically have to bootstrap their money. VCs weed out entrepreneurs because some may have a family or not be in a position to afford financing a new company. They have to finance themselves from anywhere between $25,000 to $500,000 through friends, family, and their own finances, and may end up in a Series A if they’re fortunate enough, according to Moorjani.
“We think there is a big hole in the market where entrepreneurs who are proven, who are repeat entrepreneurs, who are extremely talented and want downside risk protection and equity in what their building, can come and build something great,” said Moorjani. “We believe that the hardest problems to solve are around building product and marketing,” which is what Hatch Labs funding is centered around.
He says this model helps entrepreneurs who haven’t been addressed by accelerators or venture capital.
The secret sauce is that each startup has equity in Hatch Labs as well as their own product, so each individual is encouraged to help grow the success of Hatch as a whole.
Hatch wants its startups to focus on two areas: improving mobility with existing products and transformation. Improving current mobile technology is pretty self-explanatory. Hatch takes technology that may be a decade old, and turns it into something that meets consumer expectations for mobile products. Transformation, on the other hand, is a bit more cryptic.
So what did Moorjani mean by that?
“We take a bet on a hypothesis and it’s unclear if users will engage with it or whether or the ecosystem will build around it, but we’re actually trying to transform the experience to be more fun, more innovative, and make our lives more convenient,” explained Moorjani. “And that’s about transforming mobility.”
Expect at least six startups to come out of Hatch before the end of 2012.