While there are many incubators out there today, Tandem focuses just on mobile startups, which is one way it differentiates itself.
Founded in 2007, Tandem is also unlike some other incubators in that it works with a smaller number of companies--12 per year so that each company can get close attention from the program. It takes in three new companies each quarter. And each company stays in the program for six months, whereas many other incubators have three month programs. Both features are designed to give each company more attention and assistance than other programs, providing "muscle capital," said Tandem co-founder Doug Renert. The six month length of the program ensures enough time to get a company on track and to market.
"Our model is to provide startups with funding and give hands-on support into very early stage startups," says Renert.
Tandem's previous first fund was a much smaller 8-figure fund that invested in about ten companies. The new larger fund will enable Tandem to invest in more companies and also do follow-on funding in some of its companies. Tandem's investing approach in that sense is also different from other incubators. Some such as Y Combinator, only invest in through the initial funding ($15,000 to $25,000) invested in each company. Others such as TechStars have the leaders of their group, in TechStars' case, David Cohen who have a separate fund that invests in certain companies that graduate from the program. With the new fund, Tandem is also bringing in two new partners.
The other difference is that Tandem invests $200,000 from its fund into its companies, in exchange for a 10% common equity stake. Y Combinator typically gets about 6% to 8%. In addition, Y Combinator companies get $150,000 but from a separate entity Start Fund, which is funded by Yuri Milner, SV Angel, Andreessen Horowitz and General Catalyst. Tandem invests directly from its own fund.
Limited partner investors in the new Tandem fund, who are all strategic investors, include: Dan Cooperman, former General Counsel at Apple and at Oracle; Rick Thompson, former founder and CEO at Playdom; Ram Shriram, original angel investor in and current board member at Google; Dan Warmenhoven, chairman at NetApp; Vikrant Bhargava, co-founder at Party Gaming; and Doug Bergeron, CEO at Verifone; and Jeff Wilke, Amazon SVP of consumer business.
The firm has had three classes of startups with nine companies so far. Companies that have gone through the program include ZumoDrive, which was acquired by Motorola in 2010; Attassa, which was acquired by YouSendIt last year; game monetization startup Playhaven, and casino game maker BitRhymes. All but one of the companies have gone on to raise funding or be acquired.
