In December I wrote about how some successful entrepreneurs are starting incubators in a post called The Rise Of The Gentleman Hacker – “I’m hearing more and more about people who are simply setting up an office somewhere close to their multi-million dollar home in Silicon Valley or San Francisco, hiring a handful of hackers, and just building stuff to see what happens.”
“It’s called Churn Labs because that’s what we’re doing, we’re churning through ideas,” says Hamoui. “Some of them are silly,” he says, but adds that their goal is to spin off one or two real businesses each year.
Churn Labs currently has five employees in two offices – one in Irvine California and one in San Mateo, California (Silicon Valley). They hope to average around twelve employees and will spend around $2 million a year on operations. As companies are spun off, they’ll take employees with them and new engineers will be hired. Only Hamoui and Rewehl will remain at Churn indefinitely.
The rough target is to give the employees around 60% of the equity in the spun off entities, and Churn will retain 40%. That’s quite generous compared to how similar incubators like Idealab and Minor Ventures have operated in the past, keeping up to 90% of equity and giving employees just 10% or so.
Sequoia Capital will get a part of that equity in each new startup but won’t have any other rights in them. “We’re doing this for a year and then we’ll meet with Sequoia to see if both sides are happy,” says Hamoui. Currently they’re splitting costs 50/50 between Hamoui and Sequoia.
So far the company is being pretty quiet about what they’re working on. There is one project, which Hamoui says is definitely NOT a spinoff, the mobile app MoodFling. “We did that for fun, and to get things rolling,” he said.
Having fun seems to be a big part of these types of ventures. But don’t think there isn’t a serious business angle, too. These guys are doing this to create new companies, and make money.