Originally, there were incubators, which were venues that provide office space and a variety of business office and infrastructure back office services to startups. The idea was that by providing these specialized needs to startups they could focus the startup on what they do best, create and sell a product. The result would be rapid growth.

The biggest weakness of incubators was that while they treated all startups the same and did not provide them much in training, mentoring, and/or coaching. Also, the startups themselves did not necessarily recognize they needed anything other than a place and support. The reality is that startups have a different mix of skill sets and experience levels. Some need more help than others in their core competency: creating and selling a product.

In comes the accelerator. Accelerators took the incubator idea one step further. Accelerators would also provide two key elements: some funding and a lot of coaching/mentoring to the startups. The startups joining would take the money and be receptive to the idea of being coached.

More recently, the microseed accelerator is emerging. These companies or portfolio management firms differentiate themselves by invest a small amount of money, focus on idea/prototype stages, focus on specific niches, and provide very customized support to a small team. Some of them, such as the one I interviewed, have a program that puts the startup through a “boot camp”. The boot camp helps them complete out the rationalization of their business plan: make it even more focused on what customers need (not just want) and put them in touch with prospective customers. Rather than “hope and pray” as the earlier incubators, they stack the odds in their favor by fostering growth and success proactively.

To read more about check out the article at www.firstascentventures.com titled: New Venture Capital Models – The Rise of Business Accelerator Seed Funds (Part 1) – 01/13/2009. Check in later this week to learn more about one starting in Dallas: Tech Wildcatters.