Incubators: the new mothers of invention Analysis/Commentary A new kind of enterprise begins to take hold in American business, especially in California. "Incubators" spawn Internet companies, and help develop those companies in exchange for stock. With venture capitalists as their collaborators, incubators serve as angels to newborns, furnishing legal advice, management, network access, and sometimes even office space, equipment, and furniture. But they charge up to 30% interest on investment. Incubators like Idealab and eCompanies generally nourish their chickens through initial public offering (IPO), then go on to trade the stock on public stock exchanges. Idealab -- yet to become a publicly traded company itself -- has helped start thirty or more ventures since March 1996. Public hatchlings include eToys, Goto.com, Ticketmaster, and Netzero. One of the new proteges, Jackpot.com, allows Web users to play games on the Net in the hopes of winning a million dollars in prizes. Most start-ups earn income from selling advertising. But incubators are not averse to having start-ups make money the traditional way, by selling products or conventional services. This explains why incubators sometimes acquire old, stable, and recognized brand names. The recognized names bolster credibility for the whole network of start-ups, and flow user traffic to new sites. Cross-promotions between incubator fledglings also weave intricate, yet harmonic patterns. Often, start-ups that start out as "pureplays" (Internet only) develop real-world ramifications, such as catalogs and a presence in malls, ATMs, or gas stations. Some even develop exclusive real-world identities as coupon distributors, direct marketing channels, and telephone-supported "stores" on Intranets or within associated real-world businesses. Incubators foreshadow the shape and scope of the New Economy, where distribution channels follow the customer rather than requiring the customer come to them. They also extend commerce into areas and activities that were once pristine, perhaps economically sterile, but otherwise unhampered by commercial flurry. May 10, 2000