What We Look For In Incubator Applicants

Here at the Ynext Incubator we just wrapped up our Cohort 2 Demo Day last month. It was a great event: our companies killed their pitches and the many investors in the audience were duly impressed. But no resting on our laurels here. Instead, we just opened up incubator applications for Cohort 3. We want our next class to be even better than the current one, which is a very high bar.

When I talk to entrepreneurs about the program, they often ask what we look for in incubator applicants. So I thought I’d describe a little bit about how we review the companies that apply. None of this should come as a huge surprise; think about typical incubator criteria mixed with a Yodlee data platform play. But still, laying it out may be helpful to entrepreneurs thinking about whether to apply.

From an investment standpoint, we look at our incubator applicants through the same lens as any incubator or VC: we are assessing the probability of the company becoming a big success. Is the entrepreneur attacking a large market, or a nascent market that will become large? Is there a real pain point being solved? We look at the product being built to solve that pain point; we want awesome products. We assess the strategy and marketing plan behind the product. Even an awesome product usually fails if you have no way to get it to customers. And of course we look at the team. We need to believe that this is the right set of entrepreneurs to execute on the product plan set down in the application.

Pretty much any investor would tell you that they look at similar things. But as an incubator fueled by the Yodlee data platform, we have a Yodlee slant. When we assess the awesomeness of a product, our assessment includes how it implements Yodlee data. Our judgement of the team includes ability to get up and running on the Yodlee APIs in a timely fashion. That Yodlee lens doesn’t replace our VC lens; it is additional.

Another Yodlee slant: when we think about how big a company can be, they don’t necessarily need to be billion dollar companies. We don’t take equity in our companies, so we’re not always looking for home runs. We can be happy with an occasional single that pushes the envelope of what you can build on the Yodlee platform. But no strike outs…we’re definitely not happy with strike outs.

There are some criteria that are specific to how we like to run our incubator, and that probably don’t apply to non-incubator investors. We operate the Ynext Incubator with a cohort structure: 8 companies start at the same time, work together for 6 months, and then graduate. That structure works best if the companies collaborate; ideally the companies will learn more from each other than they will from any mentor or speaker we bring in. To encourage that sort of teamwork, we select the class with a bias toward camaraderie. Prima donnas start the process with a mark against them.

We also make sure that the class is spread amongst the various verticals that can leverage the Yodlee platform. We try not to overweight any particular vertical; we certainly don’t need 3 PFM companies in any class, or 4 alternative lenders. That would hurt our camaraderie. It would also be contrary to one of the goals of the incubator which is to support innovative use cases. So we prefer to spread the love around categories, although not, of course, at the expense of lowering our standards on any of our other criteria.

At the end of the day, we are looking for great entrepreneurs with great ideas and great execution. But that’s not very helpful, because everyone else is looking for the same thing. So to recap at a more granular level, we look at applications in two ways: as a typical investor, and as a Yodlee-specific incubator. I summarize our criteria this way:

  • General investor criteria: market, product, strategy, team
  • Specific Ynext criteria: Yodlee implementation, interesting use case, camaraderie

If you’re a developer working on a data-driven application and you think you meet those criteria, than we encourage you to apply.