I m actually in the midst of doing one right now. I think people historically have gone to the friends and family for two reasons. I think the second reason they often use friends and family is they felt they couldn t break into the venture capital market. So they want to put the work off and invest a lot of money at one shot. So instead of putting in a million or two million in a seed financing, they ll put in five, ten or fifteen million and recognize that the entrepreneurs still need to have a significant ownership interest as good VCs do.
Incubators are of two sorts.
As an example, Panasonic has done this, and I think that s aimed at a corporation trying to nurture people that might have some synergy with them, and they provide services. For instance, they may provide office space, which by the way is extremely valuable in Silicon Valley right now. Crosspoint Ventures brought him in to the company as an entrepreneur in waiting. He comes up with an idea. He then incubates it right as he s sitting in the office with a venture capitalist.