THE GREAT IBM GIVEAWAY
By Lawrence Aragon [email protected]
Red Herring On-line, 08 November 1999
Copyright (c) Red Herring Communications
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When was the last time you used the word "cool" or
"innovative" in the same sentence with IBM (NYSE: IBM)?
Unless people have taken to calling you "gramps" behind your
back, it's probably been a while. You can imagine my
surprise, then, when IBM told me about its new technology
incubator. It is -- dare I say it? -- a cool idea.
Before you lump it in with all the other incubators
littering the VC landscape, let me clarify that what IBM is
doing is quite different. In fact, I hesitate even to call
it an incubator, although its name is the IBM-Conxion Dotcom
Incubator Program.
Here's how it works: IBM, in partnership with the Internet
service provider Conxion, is providing up to $1 million in
Internet technology and services, including servers,
software, Web hosting and managed services, tools, training,
and round-the-clock support for six months to selected
Internet startups. Startups will also get technological help
from IBM partners Vignette (Nasdaq: VIGN), Servicesoft
Technologies, and Mercury Interactive (Nasdaq: MERQ).
NO BURNING, MAN
The idea is to help the startups get to the proof-of-concept
stage without burning through all their cash. At the end of
the six months, the startup can buy or lease the equipment
or walk away altogether. No strings.
IBM and its partners are giving the startups a couple of
choices on ways to maintain the relationship. They don't
have to buy all of the equipment outright. They can set up a
monthly lease through Silicon Valley Bank for the equipment.
Or, if Conxion likes the startup's prospects, its Conxion
Edge Fund will offer to pay for all of the equipment and
services in return for an equity stake. Other financing
alternatives are under discussion.
Pretty wild, huh? The only hitch is that the one way to get
into the program is through an IBM/Conxion partner
organization, which picks the companies. Silicon Valley Bank
chose the first 25 guinea pigs, er, startups, primarily from
its 800 emerging technology customers. Another
yet-to-be-named partner will pull together the next class of
25.
STARVING ARTISTS.COM
Among the first group of companies are Nonameart.com, a Web
marketplace for burgeoning artists; Qoses, an application
service provider for object-oriented development tools; and
Ienvironment, which provides environmental compliance
support for small and midsize businesses.
IBM and Conxion aren't certain where the program will go
after the first two groups of companies graduate, but their
plans are ambitious. "We're testing the premise here," says
John Seamster, marketing director for Conxion. "We believe
firmly in this program, and if it is successful the
intention is to roll it forward in virtually monthly
increments." That means, at least in theory, that 300
dot-com startups could go through the program annually.
Mr. Seamster emphasizes that the IBM/Conxion incubator won't
compete with existing incubators or VC firms. "We actually
may look to some of these physical incubators to be feeders
into our virtual incubator," he says.
The first two groups of startups in the IBM/Conxion
incubator will come exclusively from Silicon Valley. If the
venture takes off, the corporate duo plans to expand it to
other dot-com hubs, such as Atlanta, Austin, Boston, and New
York.
BACK IN THE OVEN
As much as I like the concept, I think IBM should have let
it cook some more before the launch. One of the central
elements in a startup's success is the help it gets from a
venture capitalist or active angel investor. If you combine
the IBM/Conxion incubator with a traditional VC incubator or
startup breeder, such as Garage.com or Divine Interventures,
then you've got a whole new genre of incubator that is more
powerful than either one by itself.
Michael Kiyosaki, an IBM VP who works with business
partners, says IBM and Conxion are talking to VC-type
partners. But I'm worried that it might not get the VC
expertise quickly enough, and that its 25 startups will
sputter. If that happens, it's very possible IBM will return
to its conservative ways and pull the plug on the project
without really giving it a chance. That would be a shame.
The first group will be given some startup help, in addition
to hardware and software. For example, when the program
formally launches on November 16, the 25 startups will go
through a day-long series of seminars and panels.
IBM/Conxion also will set up threaded discussions for the
companies to talk to each other regularly and, with Silicon
Valley Bank, will establish a "community" for the startups
to work together.
It's a really good start. Let's hope Lou Gerstner has enough
vision to give the concept a fair shot.
Interested? Go to
www.conxion.com/promo/incubator/Incubator.asp to go inside
Conxion's Web site, where you'll find an application for the
program. Let me know if you get in, and, more important, how
it pans out.