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UK gets IT incubator inspired by US Techstars

The UK now has an IT start-up incubator modelled on a successful US initiative known as Techstars, which will give good internet-based ideas funding and mentoring with the aim of turning them into profitable businesses.

Techstars has already taken 30 internet-based companies from initial idea to major investments or acquisition.

The Difference Engine, as the UK organisation is known, will be based in the North East of England, with start-ups receiving mentoring, £20,000 seed funding and a 16-week training and support course.

The Difference Engine, like Techstars, will use a model that focuses heavily on mentoring. Also in the same way as Techstars, it will attempt to build a community around the programme, where there is always a high-profile tech business executive to turn to for help after the course finishes.

The programme will accept 20 teams a year, with 10 attending a 16-week course starting in February and another 10 starting in July. Each company will get £20,000 seed investment in return for 8% equity and will be supported by mentors from the digital industry. Application is through the company's website where applicants have to answer 20 questions.

It will be open to ideas from anywhere in the world, said venture capitalist Jon Bradford, who founded The Difference Engine. "We will take teams with ideas and drive it forward and create a business from it."

He said an existing UK programme, known as Seedcamp, has been a success but is only able to deal with a fraction of the start-ups that apply for support. "Seedcamp got 1,500 applications for eight places. What is happening to the others?"

There is a need for something in the UK to help turn a wealth of good ideas into successful businesses, according to Bradford. "There are lots of people that sit around and have good ideas and do nothing about it. We are looking for developers that do stuff."

Bradford said the programme is open to digital businesses ideas but he said they need to be able to build a product, service or prototype that can be demonstrated by the end of the 16-week period.

The mentors will initially be digital entrepreneurs from the North East of England but this will expand to the rest of the UK.

Bradford said the ideal candidates will be teams made up of about three people, two of which have technical skills and another who can bring something else to the team.

The US Techstars programme is based in Boulder, Colorado. It was set up in 2006 and runs camps where groups with internet-based ideas are given help and advice about taking an idea to a successful business by mentors and advisors from successful IT companies and investors.

Mentors include IT executives from Facebook, Microsoft and Google and venture capitalists.

Out of 39 ideas in three years 30 have gone on the receive angel funding or be acquired.

Three have been acquired. One example is a company called Socialthing which went from an idea to being acquired by AOL for $10m in 14 months.

One UK-based developer who has been through the Techstars programme is Kevin Mann. He created a digital marketplace for comics, which enables users to buy and view them online. It also has a social experience and enables users to share comics and comment on them. It also converts print versions of comics to digital.

Mann had some initial financial support from a government initiative in the UK known as Northstar. Mann attended the Techstars programme and created Take Comics. He has now received venture capitalist funding, signed a deal with a major publisher, is preparing a private beta of the service and is being supported by Microsoft.

He said that if the Difference Engine takes the approach of focusing on the mentoring it should be a success. "This is more valuable than funding."

"The mentors help you understand how to set the business up and introduce you to other people."

He said the challenge will be to get the same level of mentors involved as in the Techstars programme.

According to one of the founders of Techstars, David Cohen, when Mann approached them with his idea he had a great technology but no customers or publisher.

Techstars, which recently announced a new programme to be held in Boston, usually invests between $12,000 and $18,000 in each company. Another founder Brad Feld, runs a $250m investment fund.

Cohen was an Angel investor who decided he did not like how it worked and created a new model. He said the value is in the mentoring and teaching the people with the ideas about business. He also said the community spirit that has grown around the programme is an key part of its success.

Cohen said the companies typically being supported fall into three categories. There are lots of software-as-a-service orientated teams targeting businesses; there are start-ups with technology to improve the web experience, and digital marketplace builders.

He said the trend for digital businesses is moving away from advertising-supported business models. "Rather than relying on eyeballs and advertising, it is towards providing applications that people will pay for," he said.


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