Should you join an accelerator? It depends

accelerator

I’ve posted previously about how accelerators don’t have a lot of value for serial entrepreneurs. But for newbies, that’s a different story.

Shourjya Sanyal‘s article in Forbes, 5 Reasons Why Your Startup Should Join An Accelerator does a good job of outlining the benefits. As usual I’ll annotate his points.

1. Provides an ecosystem of support

This is generally true, but entrepreneurial ecosystems are to be found around the country from Silicon Valley, to Austin, to New York and Boston and places in between. However, the support can certainly help first time founders. Other startups and mentors may well be willing to give your product an off-Broadway tryout before you try to take it to the Great White Way. And new founders, don’t underestimate the time an effort saved by providing infrastructure, though new co-working spaces like WeWork do an even better job than accelerators. In fact they can be co-working spaces can be a good alternative to an accelerator, which are often quite selective. Where accelerators can really add value is when they are designed to focus on a particular industry like  Dreamit HealthLuminateRebelBio.

2. Develop skills for the founding team

The one skill I do believe accelerators develop in founders is how to pitch, as most accelerators culminate in a demo day. But otherwise it’s BYOS – Bring Your Own Skills. If you don’t have engineering or sales chops you won’t develop them in the three to six months you spend in an accelerator. What you will find out is what skills and experience are lacking in your management team and how to recruit to find those necessary complementary pieces for the startup puzzle. And don’t underestimate learning how to pitch. Most people are terrible at it. Founders need to pitch from day zero to an exit, be to a potential acquirer or to bankers on the IPO roadshow.

4. De-risks future investors

In my experience in the startup world, no one likes to go first. By gaining a modest investment from an accelerator your venture gains more than money, it gains credibility. The accelerator goes first, even if that first investment is only in 5 figures. Angels and early stage VCs may follow on, depending on how your demo day pitch goes. There’s a reason VCs like founders who went to Stanford, Harvard, MIT or other elite schools. It’s a stamp on the founder’s startup passport that they have been chosen by a highly selective institution. And VCs are highly selective.

5. Funding

Not only do accelerators invest actual cash for a small amount of equity, they provide non-cash value by providing office space, discounts on cloud platforms and software tools, and other amenities – all saving founders not just money, but also the time it takes to spin up necessary tools and infrastructure for a new venture. According to the author accelerators can also help with grants. MIT does this with its I-Corp program, a program of the National Science Foundation.

In addition to pitching to traditional VC firms, accelerators often mentor founders on how to apply for government grants (Such as Small Business Innovation Research grants in U.S. and Horizon2020 in EU). Such grants are often the seed round of funding for technology or social startups. In-fact business accelerators and incubators based out of universities are particularly designed in helping startups to secure these grants.

Way back before anyone but Bill Gross of Idealab had heard of the concept of an accelerator or incubator I was running one with my friend Kevin Donahue, called HyperVest. We even had VC money from Morningside, the venture arm of Chinese billionaire Gerald Chen, an acquaintance of Kevin’s. The .com bust busted us, but I did learn a bit about accelerators, including that our idea of finding CEOs to run with Kevin’s startup ideas was not a good model. Founders generally want to found and follow their own vision, not follow someone else’s vision.

Observations from 2018’s mentoring sessions

All the year-end wrap-ups have inspired me to do a wrap-up of 2018 from the viewpoint of a mentor. Here’s a few observations:

  • Engineers continue to dominate the founders group – not surprising as MIT is a technology institute after all. However, I see relatively few Sloan business school students. Occasionally they are brought on to a startup team, but I see very few Sloan founders.
  • Many one and dones. I do a lot of first meetings and for a variety of reasons these would-be founders never schedule a second meeting. Some realize that their idea isn’t really venture-ready, others decide they aren’t cut out to be entrepreneurs. Perhaps a few decide that they don’t need mentoring or find it elsewhere.
  • The rate of new MIT-affiliated companies continues to rise. This data may be confidential, so I won’t share it here except to say that I’m doing more first meetings than ever.
  • Sales still gets short shrift with new ventures. Almost never do I see a sales person as a founder or co-founder. The founders I do see don’t put a lot of thought or effort into customer acquisition. Typical teams have CEO, COO, and VP of bus dev – no sales, marketing or finance executives! Perhaps as these companies grow they will realize the importance of sales, but early stage companies are virtually all product-driven.
  • A large number of startups are social impact ventures. I’ve even seen a few non-profits (501c3 companies) for the first time. It’s admirable that the vast majority of founders are not wannabees, nor focused on trying to get rich quick. To the contrary, most are working to make the world a better place – very inspiring for mentors.
  • Mentoring continues to be popular. Several new mentors this year and very few leave, usually because they are relocating.
  • Developing pitch decks is SOP for founders. Very rare to see a new venture without a deck. Unfortunately many fall into the same PowerPoint-driven trap of being text-heavy, bullet point-laden and better designed to be read than as an aid to presentations.
  • I catalyzed a new program for MIT VMS – pitch scrubs on demand. I don’t have any data on how popular this new service is, but I was pleased to see how quickly the idea was pursued.
  • Founders continue to ignore founder’s agreements. Deciding who gets how much equity is not a pleasant task in a startup. Obviously it’s a zero-sum game. However, mentors are very good about reminding founders of the necessity of forging a founder’s agreement early on to prevent problems or misunderstandings down the road.
  • Too many founders are fixated on raising money, not acquiring customers. Most will find that they are far from venture capital ready. The rule of thumb for VCs is that they  are looking for grand slam home runs – companies with a billion dollar market cap. That usually translates into yearly sales of $100 million or more and a hockey stick growth rate. I’d like to see more founders realize they have something to contribute but since they don’t fit the traditional VC model either licensing their tech to another company or selling it outright. Only a tiny percentage of startups reach unicorn status, just like very few baseball players make the major leagues. That shouldn’t discourage entrepreneurs.
  • The best source of financing continues to be customer revenue. I’ve been glad to see a few bootstrapped ventures. Generally the founder/CEO of these ventures has real sales ability to accompany their technical chops. A very rare combination!
  • This year saw a strong interest in incubators and accelerators. MassChallenge dominates the New England accelerator scene as it continues to grow in size and influence.
  • Mentoring has become SOP for startups, though many may look to their investors, their professors or other sources of mentoring than formal organizations.
  • Virtual mentoring continues to be a non-starter, as the very few instances I come across are aimed outside of the entrepreneurial world, mainly for students or minority groups. There seems to be no substitute for face to face mentoring sessions for founders.

While this has been a challenging year for me personally as I had to stop mentoring at the MIT Sandbox fund due to health problems it’s been a rewarding one psychically. Helping entrepreneurs succeed is fun as well as rewarding.

Boston continues to play second fiddle to New York and Silicon Valley. The local politicians refusal to do away with non-competes will continue to handicap us. Not that doing so would magically turn Boston into the hub of entrepreneurship, but it would result in more spin offs from existing companies, which is the life blood of new ventures.

A CEO’s history of mentoring

 

mentorOne of my interests is virtual mentoring. I have a Google alert set for the term, but I rarely get a result. However, today my alert returned the story on Inside Philanthropy by of Keith Krach, who is just  now stepping down as CEO of Docusign.  He’s a very successful serial entrepreneur, having started and sold two high tech firms before joining Docusign as CEO in 2012.

After he leaves Docusign he is planning on focusing on philanthropy, mentorship, and education. Mentors played a critical role in Keith’s career:

“I look at my career after General Motors. I came out and, my God, I just had so many great mentors,” Krach said. One of those mentors was John Chambers, the former CEO of Cisco Systems, the tech giant.

“He was saying, you know, ‘Keith, you can ask my any question, any question you like.’ Which I did,” Krach said. “And about a year into it, I said, ‘Why? Why are you doing this for me?’”

Krach said Chambers told him that when he first came out to California, another CEO had done the same for him. “And so he goes,” Krach says, “‘Keith, I don’t ask for anything in return. I just ask that you mentor the next guy and pay it forward.’”

Mentoring the “next guy” will be the focus of Krach’s second—or third, depending on who’s counting—act. In addition to his support of City Year, an organization dedicated to mentoring vulnerable kids, Krach plans to start the Virtual Mentor Network. He hopes to nurture the next generation of leaders through a free, online mentoring network that will connect young people with leaders in different fields.

The vast majority of mentors I’ve met and worked with have achieved a degree of success and believe it’s their turn to  “pay it forward.” What different about mentoring today from when Keith Krach transition from the automobile industry to the high industry is the formalization of the process via incubators, accelerators, and academic mentoring programs like MIT VMS, which has now created 87 sister programs around the world!

It appears that the Virtual Mentor Network has yet to launch, but Google will be keeping an eye out for me. In the meantime, I’m sure there will be plenty of stories of interest about the mentoring of high tech entrepreneurs and there’s something to be learned from all of them.

 

More on the 4th type of risk – regulatory

Blue_DetailI posted previously that government regulation has become the 4th type of risk that investors and founders must evaluate and try to mitigate: The four types of startup risks and how to mitigate them. 

 

The story When the “best” busts: the spectacular rise and fall of smart luggage startup Raden by Chavie Lieber on Vox has the perfect example of a company that got hammered by government regulation. It’s about the rise and fall of a smart suitcase company.

Three years ago, Josh Udashkin decided that the luggage industry was yet another market ripe for disruption. Luggage accounted for $30 billion in annual global sales at the time, yet was pretty underwhelming as a product category. There were a few luxury brands in the space, like Rimowa and Tumi, but nothing more affordably priced that also had memorable design and branding that could appeal to millennials, a demo that loves to travel and is willing to shell out for their wanderlust. If Casper could build brand affinity in the unsexy mattress space, couldn’t Udashkin do it with luggage?

Unfortunately neither Josh Udashkin nor his investors thought about the fact that luggage is part and parcel of the travel industry, which due to the terrorism scare, is the most overly regulated industry in the world.

What made Raden’s smart luggage smart relied on what all smart devices rely on: the lithium battery. While Raden made other mistakes the killshot was the FAA:

December 2017, the Federal Aviation Administration announced passengers couldn’t fly with smart luggage whose batteries weren’t removable. (A couple of years earlier, major airlines also banned hoverboards out of concern their batteries were a fire hazard.)

Their competitor, Away, raised a lot more money and was able to redesign their bags and weather the storm. Raden was not. So there are two morals to this story: one, know your industry, including current and possible future regulation; and two, raise more money that you think you will need, so you’ll be able to survive those unforeseen events like the FAA regulation concerning lithium batteries.

They say you learn more from failures than successes. What they don’t say is that you should try to learn from other’s failures, not your own! Read the full Vox article for details on how a founder who seemed to be headed for outer space blew up on the launch pad.

 

Telementoring in healthcare

telementoring

An email alert I have for “chronic pain” generated a result for “telementoring.” Evidently that’s the term for virtual or remote mentoring that is used in medical care. However, unlike virtual mentoring or in fact any mentoring for entrepreneurs, the medical world takes a scientific approach. That translates into studying the efficacy of telementoring.

Telementoring is now regarded as a best practice in pain management and safe opioid prescribing according to the article Pain Management Telementoring May Cut Opioid Prescribing on the site Clinical Pain Advisor.

The researchers found that primary care clinicians participating in ECHO Pain (telementoring had greater percent declines than the comparison group in annual opioid prescriptions per patient (−23 versus −9 percent), average morphine milligram equivalents prescribed per patient/year (−28 versus −7 percent), days of coprescribed opioid and benzodiazepine per opioid user per year (−53 versus −1 percent), and number of opioid users (−20.2 versus −8 percent).

So what is telementoring, how does it benefit hospitals, and what does this have to do with mentoring of entrepreneurs?

And what problem is telementoring solving?

Today, experts estimate that all human medical knowledge doubles every 18 months. The pace of progress in surgical innovation is so fast that some surgeons have expressed serious concern about patient safety as technology diffuses throughout the real world without proper training.

Keeping your organization up with surgical innovation is imperative for growth, but surgical programs can be slow to adopt because surgeons are worried new technology may result in poor patient outcomes early in the adoption cycle. Because of these fears, some providers are seeking out telementoring.

An article Advisory.com provides some answers:

[telementoring] is procedural guidance of one professional by another from a distance using telecommunications, such as audio dialogue and video telestration (video tablet and pen). This valuable tool can help your surgeons and clinical teams feel comfortable adopting the latest procedures.

It’s clear that telementoring is a form of peer-to-peer education in the medical world. Surgeons are the early adopters. Telementoring reduces travel time and time away from work for the surgeon and provides expert counsel on the latest surgical procedures. Telemementoring has been embraced as a form of continuing education/training for surgeons.

The article concludes with this takeaway:

Telementoring should be on your radars as you think through how to boost adoption in your surgical service portfolio. While medical centers with access to advanced OR technology will likely lead the way, telementoring can reduce barriers to surgeon upskilling for all types of hospitals by lowering associated costs and improving surgeon comfort.

My takeaway is the telementoring could be used as a peer-to-peer training in domain specific areas critical to the success of a startup: how to get your venture investment ready; how to use social media to market your product; how to build your cap table and financial statements; and how to raise capital. Perhaps current in-person seminars for entrepreneurs could increase their reach and impact by adding telementoring. MIT Venture Mentoring Service has seminars in sales, marketing, and human resources.

However, telemarketing needs domain specific mentoring expertise and new and different guidelines for both mentors and mentees. Building up a network of telementoring experts seems like a natural extension of accelerators and incubators. This is especially true for market-specific incubators, such as focused on fintech and healthcare. A more rigorous program of both mentor selection for domain expertise and a more structured program of mentoring will differentiate telementoring from virtual mentoring.

Whatever the terminology, both mentors and founders can learn from how hospitasl and surgeons are participating in telementoring as an educational and research activity. Currently little research is done on the mentoring of entrepreneurs beyond a yearly customer satisfaction survey.  And founders may be even more hesitant than surgeons to participate in domain-specific educational virtual mentoring or telementoring be anxious about taking time away from running their startuip.

I will be adding “telementoring” to my Google Alerts list and studying up on how best practices in telementoring in the medical arena can be adopted or adapted for the virtual mentoring of entrepreneurs. In the field of virtual mentoring it appears that surgeons may be way ahead of entrepreneurs. Check out the article System for Telementoring with Augmented Reality and be sure to watch the video!

 

 

 

Life imitates art imitating life!

waveone

The WaveOne team doing their company wave. WAVEONE INC.

If you haven’t watched the TV show Silicon Valley you are totally missing out! I loved every minute of the show, which seems more like a documentary than fiction, except for all the hilarity. By far the most accurate fictional depiction of the tech world I’ve ever seen.

If this was April 1st I would think that The Wall Street Journal article Actual Silicon Valley Startup Gets Inspiration From HBO’s ‘Silicon Valley’ Startup subtitled Richard Hendricks’s Pied Piper, which is realistic but fictional, has inspired a company, WaveOne, to tackle its technology was an April Fool’s joke! You have to read this article to have any chance of believing it.

Supposedly the two founders of WaveOne, Lubomir Bourdev and Oren Rippel, decided to try to do what the HBO’s fictitious startup, Pied Piper, was attempting to do on screen – creating a breakthrough compression technology for sending information through the Internet, faster, better, cheaper.  The twist is using AI – and what startup these days isn’t using AI? – to improve on current video compression technology. Check out their site WaveOne. Talk about recursion!

This has to be one of the strangest and funniest stories about tech I’ve ever read. All I can say is read it and weep – with laughter! And maybe you too can find a video series to inspire your next great idea.

Demo or die!

livedemo-1

This directive was issued by Nicholas Negroponte, the founding director of the MIT Media Lab as a great contrast to the typical academic edict, publish or perish. The Media Lab’s support came, and probably still comes, from very large companies who want a front row seat at the Lab’s inventions and innovations. The ticket price is high, but so is the return on investment.

Joi Ito, the current director of the Media Lab, quoted this phrase to a TED audience:

“The demo only has to work once because the primary mode of us impacting the world was through large companies being inspired by us and creating things like the Kindle or Lego Mindstorms. But today, with the ability of to deploy things into the real world at low cost, I’m changing the motto now. And this is official: deploy or die.”

What brought this to mind was my major takeaway from Ken Kocienda’s book Creative Selection, about his 15 years of experience designing and developing products at Apple. His major accomplishment at Apple was developing the keyboard for the iPhone. He provides a fascinating inside look at how a major feature comes to life at Apple. There was a lot of concern about the iPhone keyboard, actually more like fear that users just wouldn’t be able to type efficiently and accurately on the glass screen. Ken became the DRI – Directly Responsible Individual – for the iPhone keyboard through a bakeoff process amongst 14 other developers in the iPhone software group conducted by the departed VP of Software Development, Scott Forstall. The demo is the core modality of feature development at Apple. If you are in charge of a particular feature or function, like the keyboard, your first task is to create a demo to show what the feature would look like to a user. Once you have a demo that works to your satisfaction the next step is to show your demo to your teammates. You next incorporate that feedback and get ready for the weekly meeting with your manager to show him the demo. If it passes muster the demo goes right up the chain of command. Scott Forstall was the ultimate gate keeper to Steve Jobs. Only when Scott was satisfied that the demo represented the best way to implement a feature like the iPhone keyboard would he arrange a meeting with Jobs and other members of the executive team.

According to Kocienda, Apple was very focused on the concrete and tangible. Brainstorming sessions were extremely rare. Even white-boarding sessions were used primarily in a problem solving, not presentation mode. Engineers were largely left to their own devices to develop their demos uninterrupted by management.

So while Nicholas Negroponte’s demo or die was focused on his patrons, Apple’s demos were used to refine a feature until it’s ultimate green lighting by Steve Jobs. Only then would the engineer begin to turn the demo into actual functioning code.

Joi Ito plainly was highly influenced by Apple’s culture, as he said:

Less planning and more presence in the moment can accelerate innovation, he argues. Getting objects out into the real world is the point. Don’t be a futurist,  he urges, be a “now-ist.”

This is great advice for founders. Along with get out of the office and talk to prospective customers it’s probably the second most important piece of advice – don’t leave your office without a demo.

The distance from a presentation to a demo is enormous. But starting to actually code before you have a demo that been subjected to both internal review and customer review is going to waste time and effort. Premature coding is more dangerous to a venture than premature fund raising.

So “demo or die” is a motto well worth bringing into your corporate culture. But it needs to be an integral part of the product development process, not a sidetrack to please marketing or impress investors.  At Apple during Jobs’ and Kocienda’s time:

Demos were the catalyst for creative decisions. We found that the sooner we started making creative decisions … the more time there was to refine and improve those decisions, to backtrack if needed, to forge ahead if possible. Concrete and specific demos were the handholds and footholds that helped boost us up from the  bottom of the conceptual valley so we could scale the heights of worthwhile work. Making a succession of demos was the core of the process of taking an idea from the intangible to the tangible.

There are many important milestones in the life of the startup but none is more important that turning your idea into demo, the mission critical step in product development, when your baby who has been gestating for months is finally born for the world to see.