Virtual Incubator to All, nReduce Adds Mentors and Demo Days -- Is It the Pre-AngelList?

By Sarah Lacy , written on July 27, 2012

From The News Desk

Originally when we wrote about "N Combinator," it was an incubator in reaction to Y Combinator, founded by some well-meaning entrepreneurs who didn't get in. Playing off the fact that the "Y" clearly didn't stand for "yes," they came up with "N Combinator" as the name of a virtual, open source, loosey-goosey incubator where everyone could get in. As the founder told us at the time, at a minimum, the whole experiment would end with entrepreneurs meeting up at a bar.

Several months later, the project has turned into something far more substantial. NReduce -- as it's called now -- is helping guide some 200 startups through the daily blocking and tackling of company building in a novel, distributed way. It just launched a list of 50 mentors whom entrepreneurs can reach out to for guidance, and will host its first demo day on September 5. Yet nReduce still clings to its idealistic roots: Everyone is still welcomed in, and unlike "real" incubators nReduce doesn't take any equity.

One of the keys to the N Combinator idea actually turning into a thing was the eventuality of someone else taking it over. After all, the original founders were busy with their own startups (those that had gotten rejected to begin with). Enter Joe Mellin and Josh Schwartzman who decided to make the idea behind N Combintor an real startup in its own right.

Mellin and Schwartzman are trying to do for incubator hopefuls what AngelList did for startups looking to raise a seed round-- who didn't have half of Sand Hill Road in their address book: democratize the shit out of it. "Incubators are great, but only about 2 percent of the startups get helped," says Mellin. "We want to help as many as possible."

Part of the benefit of being in a real incubator is getting some cash, things like office space and admin support, and the prestige. Because nReduce doesn't invest, is virtual, and everyone gets in, it doesn't have those attributes. But what it aims to do is guide startups through the process of company-building efficiently, pair them with mentors, help them launch loudly and proudly.

Most importantly, nReduce gives a swift weekly kick in the pants to entrepreneurs to keep the company moving. Participants file weekly video updates -- friendly pressure for those who like to endlessly whiteboard before they actually start building. Those videos can be shared with the team, advisors, and mentors or they can "friend" other startups in the system which can peer-to-peer mentor.

Typically sites that rely on anything having to do with video have a hard time taking off. But that's part of the point: While Mellin is fine with anyone coming in, he wants there to be enough pain that only serious companies hang around. And to access things like the mentors, the bar is higher still. You have to meet certain thresholds of updates, comments, and activity to be able to ping the mentors, and you can only ping one a week. He's worked hard to make sure mentors don't regret the decision to help out.

For the demo days, the bar is even higher. Unlike traditional incubators, there isn't a set time you have to be "in" nReduce to get to demo, but you do have to apply. You can apply after two months on the site; you can apply after two years. Mellin and his team pick the companies based on whether they seem investor-ready. Like traditional incubators, success in fundraising is the near term goal of how valuable the program is.

There are two other big differences with nReduce's demo days. Instead of having them in a physical place, they will host them completely online, and instead of "classes" of companies demoing a few times a year, they'll just do them monthly. The first demo day will be September 5, and anyone can log on and ask founders questions in real time.

While this strategy is undoubtedly novel, I'm not convinced it will work. There's a lot of value to the in-person aspect of these things, and I think monthly is way too often. Mainstream startups will only want to be part of nReduce, if they can tangibly see it delivering results in a big public way. Major investors and the press just aren't going to tune in that often, particularly given its an unproven brand that anyone can be a part of. But the beauty of being a nimble team and an unknown brand is they can change it up if it doesn't work.

nReduce started simply with an announcement on HackerNews. 300 teams signed up -- which is impressive because, by design, they don't exactly make signing up easy. You have to submit a good bit of information about your company and do a video introducing your team and concept.

Of those 300, 200 have kept up with it two months later, posting weekly video updates and give feedback to other startups that they've "friended." There are group chat features and the ability to post questions for the whole network around a startup to see. Instead of "likes" startups enthusiastically collect "awesomes."

While the concept may sound like yet another doomed social media vertical -- this time for entrepreneurs! -- Mellin has thought through a lot of the challenges to creating companies, and how his platform can alleviate some of them, the same way AngelList did on the funding side.

The weekly status updates are for instance a great way to keep existing investors, advisors and mentors apprised of how things are going. Anyone who has started a company knows keeping investors up to date is time consuming -- particularly in those key early days when there are usually not enough hands to put out all the fires. Entrepreneurs have little time to go to lunches, and give 45 minute updates to each investor or advisor to get that golden 10-15 minutes of advice. This shortcuts that.

I'm not sure I'd want to do video updates on my company. (I mean, aside from these.) But I can relate to the problem: I have about a dozen investors, and I'm not sure I've spoken with half of them since PandoDaily launched six months ago. As the business grows, it's increasingly hard to even keep the more active ones up to date. And that sucks, because I raised money from people who'd built huge things for a reason. I'm probably not getting as much value out of them as I could.

Mellin knows he will have succeeded, when he sees repeat entrepreneurs coming back to nReduce to use its tools to build their next companies, the way we've already seen some entrepreneurs go through Y Combinator multiple times. He sees the company as an adjunct to AngelList rather than a competitor, helping companies at the very, very earliest phases, getting entrepreneurs from that endless white-boarding stage into actually building something and getting feedback. (If I were Mellin, I'd stay out of AngelList's way. That thing is a juggernaut.)

The value for something like this seems most pronounced the farther you get from the Valley's or New York's epicenters of power. Put another way: The entrepreneurs who need this most are the ones who can't walk outside look at the person next to them and have heavy odds that that guy is also starting a company. And yet, half of nReduce's early members are based in San Francisco -- with many Y Combinator grads among them.

Because it doesn't take any equity or money from the startups, it has that classic Valley approach of figuring out revenues later. "We think we have the potential to disrupt a lot of the industry like deal flow and due diligence," Mellin says. "We're going to collect a lot of data that is valuable." So far they haven't raised funding for this. Like a lot of the startups they help, they want to make sure they have something first.

A small team, and an oddly named startup with almost no brand, disrupting something as entrenched and established as venture capital? I'd say it was crazy if Naval Ravikant hadn't already proved it was possible.