Focusing on activities over results


What the critics and supporters of any accelerator or incubator program often discuss are activities backed by some calculation of ‘results.’ It makes it difficult to talk about the good things (and the bad things that are actually bad) because often the activity is seen as the result to some people and to others it’s not.

To complicate this some more the public funding often asked for metrics that are tied to activities and celebrates them (e.g., funding events, number of people attending an event). This isn’t just in the accelubation space, pretty much all government funding for any agency or service wants to see numbers that are tied to activities that reach the highest number of people over a few people that do very well. The public likes those numbers and can understand those numbers.

Think about health care. The media constantly points towards ‘wait times’ in the ER and number of beds in hospitals. The real results we would like to see would be something like the percentage of successful diagnoses, treatment success, and some number on the quality of life after treatment.

If wait times in ER are down to 5 min by giving everyone a placebo would that be better? Maybe? But a lot of people would probably be a lot worse off. Thankfully doctors and nurses take the time to provide proper care to everyone. They look for efficiencies while working inside regulations and maintaining (and improving) the overall quality of care. The numbers that speak to the meaningful results are hard for the public to consume as they all require a deep dive to fully understand them.

With accelerators and incubators there is a similar difference between what the public can consume and the numbers that point towards growing more successful companies. There is an expectation to report on the number of companies, demos, number of jobs, and the number of people expressing interest in ‘tech’ by attending events.

To drive those numbers you can just run a big events company that pack event spaces and generate media attention. That might help produce energy but it also creates noise and consumes people’s time. The numbers that would be more interesting are company growth numbers, the time it takes to grow, can these companies find the right people (how long are jobs posted before they are filled and do they stay filled), are local investors investing, etc. The interesting metrics are a long list but it takes a deep dive to fully understand, evaluate, and act on them.

Metrics are just numbers. They require context.

Success looks different for each community. What is a result and what is an activity depends on what you are trying to achieve. If the success is simply getting 50 people in a room to talk about startups, then that is what it is. There is underlying expectation that events lead to a connection that leads to a company that has 20 employees.

The trick (or the art) is to focus on achieving the metrics your stakeholders care about (number of people for example) and the important result that will help you make a difference (company meets key funder at a small event).

The events and the energy is important but what will add the most value to improve quality is something else. That something else boils down to something simple but there is a distillation process (activity) that is necessary in order to get there…

Connecting the right people at the right time.

My favourite example of this is my own experience with Communitech. There were two key ‘moments’ that gave my company a chance it would not have had otherwise.

  • The first moment – an EIR hosting a brainstorming event that allowed my cofounder and I to meet at the right time in the right context. This happened in January 2009.
  • The second moment – An EIR that just started pulled up our company profile and sat down with the founding team. We were trying to figure out if we had something real. From that inspirational conversation he became an invaluable advisor/investor and board member right until the exit. This happened over the period of January 2011-November 2013.

There were lots of other things – events, services, etc – that support meeting the right people at the right time. I don’t feel like those two key moments were ‘chance’ collisions. They were indirectly designed.

Connections like that aren’t random enough in the wider business community outside of places like the Valley (although even there you kiss a lot of frogs). There still lacks the concentration and that is where accelerators, incubators, and the larger organizations become essential community ‘distilleries.’

Over the last 10 years I have seen key ‘moments’ or a series of those moments for many founders. Sometimes the timing is off or the personalities don’t match. You just keep trying as things find a way to work themselves out.

You can’t just expect to have events and have those chance connections happen and turn into something valuable. The event is the activity, the result is relationships that are forged and what happens next. The activity can be measured on the short term but the results are measured over a much longer term. The big results take time!

Activities and their metrics are the health check but everyone needs to keep focused on the results they want to achieve. We spend a lot of time discussing how we are pushing the car out of the snowbank. The important thing is the car gets out of the snowbank.


What if accelerators and incubators went away?


Accelerator and incubators have popped up in almost every city in Canada that is supporting its ‘innovation ecosystem.’ This economic development strategy gained interest after the stock market crash in 2008. But it wasn’t until around 2012 that this strategy has gained popularity as more startups find success.

If you updated this data collected by MaRS in 2013 I would bet more than 50% would be 2012/2014 ‘founded’ years.

There is a increased profile for young entrepreneurs today as a result of the market for credit that these organizations compete in. There are also many companies that have grown with significant VC investment or had lucrative exists that were more than just paying back the investors. The challenge is that little is known on what specific role incubators or accelerators have played in these companies success.

What did they do that helped? What has changed since that company was in the program? What has changed in the larger community?

With a new government in Canada there is now a focus on an election promise that was directed at this economic development strategy – funding accelerators, incubators, and research. Recently published articles written by Marcus Daniels along with features on Jim Balsillie and John Ruffolo’s lobbying efforts to provide a ‘voice’ for technology startups focus on the need for change in the accelerator and incubator landscape in the country

Marcus sums an observation and challenge shared by many.

Across Canada there is too much duplication and isolation at the accelerator level. Solving this problem begins by recognizing that the needs of founders in both tech and other high-growth areas have changed.

While some some accelerators have evolved, many have failed to adapt and are creating initiatives that keep the lights on, as opposed to new programs to incentivize the best entrepreneurs on the planet to build their ventures in Canada.

I think the key message  from Marcus is that accelerators have failed to adapt to the things that have a meaningful impact on building companies in Canada. Instead, they focus on the activities that provide them the funding they need to keep the lights on.

Balsillie’s quote from his article focuses a lot more on building a set of business metrics for accelerators and incubators:

“If you’re going to give more to incubation, create an accountability framework that’s based on real business output,” Balsillie said.

“We’ve never had any performance metrics — there’s a lot of spin and hype. Which part of it is real outcome and which part is pixie dust?”

Great! A call for metrics that matter — but what are they? I tried to figure that out with post on startupnorth but those assume they operate as a business with a focus on profit. I posted a more detailed look at metrics that matter as well.

What we are talking about are government funded programs that are tasked to ‘hack the market’ and give early stage companies a better chance than they would have normally in Canada to grow.

The challenge, as I see it, is that it is much harder (and simpler) than most people have generally estimated. It is also a longer term commitment to the founders than most organizations are currently tooled for.

The programs are all increasing in size as they try and tackle any and all activities that might help build an ecosystem. The hard part is understanding or believing that it is much simpler to help founders (see note at the end). There are just a few key activities or opportunities that an early stage founder can use and not find themselves. But for each and every founder it takes the care and understanding to deliver personalized services/support.

Balancing services is hard and only a few have figured out how to do this well.

Helping companies exist, grow, and be successful is an Art not a Science.

The challenging in understanding this Art of building companies is likely rooted in a misunderstanding of startup ecosystems and what/who/where/how they can be manipulated.  That is where metrics for programs can get messy.

For fun, read this post on ecosystems for a perspective from Europe.

‘Ecosystem’: the problem is that the very term has become a bit of a cliché. Everyone uses it. For most people, its meaning has been lost along the way. It has become irritating to hear everyone talking about the damned ‘ecosystem’, all the more so because in reality it’s often not an ecosystem but a toxic environment for startups.

The emphasis of the post that follows the above quote is the that ecosystem is forged by entrepreneurs that are out there building companies. That is something that Brad Feld states in his Boulder Thesis as well.

Can ecosystems be forged by accelerators and incubators or by the entrepreneurs participating in them? Do those entrepreneurs require those programs? Do they slow things down or speed things up? Do they make businesses better than they would have been without the program?

No one knows with any certainty and I don’t think it will be easy to figure out because founders enrol in everything that is available. All the programs will promote their success but it is challenging to find out what is really going on because 2+ programs will be promoting the same success. Read The Market for Credit and Supporting Entrepreneurs.

Over time successful entrepreneurs will give back to the community (funding, advice, connections) but unless we know what is currently working (and not working) then it makes it possible for critics and point out the burning money.

What would happen if all the programs stopped? Would any of the entrepreneurs that will find success notice? If the truly successful programs are indeed successful should they not now be obsolete given that there is now a successful group of founders re-investing time and expertise?

My guess is that if all the government backed programs shut down the following things would happen:

  • Venture Capital firms would fund a few (1-3) as a way to optimize their lead generation.
  • Higher Education would continue to develop programs and tie them in tighter with education and their overall fundraising initiatives. But many schools might not try which I think would hurt students.
  • Less people would attend startup events and conferences in Canada (which is actually a bad thing).

In Canada we are not at a stage were shutting down programs is a wise course of action. But I think with the next phase of investment there are a few things that should be discussed or changed:

  1. Give government funded programs the goal to be obsolete in 5-10 years. How do they achieve that (it is not that they have to be)? That would help them identify what success looks like.
  2. Enlist a research group from the Rotman School of Management (or a collaboration of top notch research driven business schools) to collect, clean up, analyze, and report on the data across all programs. Graduate students are designed to do this better than anyone. Then everyone is better informed on what works and we can do more of that.
  3. Fund co-operative education for all undergraduates across the country. That experience creates entrepreneurs, open students up to products/customers, and builds global networks all young people can use to be successful.

Note: The Creative Destruction Lab is demonstrating how a program can operate on a shoe string budget and have a significant role in educating students. Metrics wise it has ~36 Alumni companies that have collectively achieved ~$200M in value in a few short years. No program in Canada comes close to that but many other programs in Canada are connected to those companies. EDIT: No program should take credit for a company’s success but they should celebrate it. Also, I had the wrong value for CDL.

Another note: This post isn’t about organizations that have a longer term vision and are trying to solve bigger problems. They may have accelerator or incubator programs as part of their larger offering but overall they are something different.


Short-cuts, Unicorns, and Startup Culture


In a post by Mark Suster entitled “Why I Fucking Hate Unicorns and the Culture They Breed,” there is a message for everyone in startup land that isn’t just about the rise of Unicorns… its about believing in short cuts. The ballooning valuations that are set by investors and not the larger market encourage a gaming mentality to take over startup culture in a more intense way than normal. Founders think the game they are playing is measured in raising money and valuations.

It’s not about being on stage at a Demo Day or featured in an article in TechCrunch or closing a $20 million round. It’s about continually shipping code. It’s about putting our menacing bugs. It’s about a 6:15am flight to a customer in Detroit in Winter for a $200k deal to hit your budget for the quarter.

I would argue the “lean” everything movement along with accelerators desperately looking for positive returns (or PR in the market for credit) contribute to this. They glorify the ‘Unicorn’ and try to ‘hack the system’ to get bigger/better results faster than what is ‘normal’ with hard work.

There is no repeatable process for building a company that is specific enough to be a step by step manual to success. There is no short cut to building a great product or team! StartupWeekends, accelerators, incubators, courses, workshops, and Lean X get you on the path but you still need to spend the time to learn things.

I always tell new founders it takes 2 years to get started, 5 years to know if you have anything. There is nothing I have seen in the 10 years I have paid a lot of attention to startups that makes me think my generalization isn’t accurate 4/5 times 😉

Suster’s posts are almost always good to read – this one is great because he pulls together a commentary on politicians behaviour and a guy with a broken heart. Read it and be reminded that hard work is the only way to get real results.

Accelerators and incubators are not growth companies

More than a few accelerator or incubator programs have quietly wound down their operations or merged with other programs over the last 6-12 months. This isn’t a surprise. Even with what are essentially successful programs to most, they have a hard time maintaining momentum let alone generate any revenue to sustain themselves. The math is hard to make work.

The upside for all the people involved simply isn’t there in most cases. It takes a huge amount of effort and resources to make a program successful.

I think this highlights two potential issues that many of the organizations that support startups could have.

  1. The program operators start to think like the startups around them and they think they need to grow or scale to help more companies. As a result the things they do are focused on the good of the accelerator instead of the companies in the program.
  2. Incentives are not aligned. Program operators/coaches do not share in the upside of the successful companies. They are instead rewarded for the popularity of a particular program.

They grow. They generate PR. They position themselves as experts on early stage companies. They do all the things they know you should do to build a successful company. When you are around startups all the time there is a tendency to see the world through the lens of the startup – growth, lean, pivots, MVPs, agile, metrics, etc. What they don’t focus on is the companies they are trying to help. All those other things tie up a lot resources.

Achieving optimal effectiveness of a program

I have a theory that the optimal effectiveness (cost vs return) of an accelerator or incubator is at a very small scale. They should provide a service that benefits the founders and the company without PR/Marketing/Events/Space. There is one exception, Y-Combinator. Its scale is huge but I would argue its allowing a lot of waste because the returns are so big and there is a lot of inherent value in the alumni base that offers a ‘fraternity’ type social network.

…and YC started really small. It didn’t have a marketing or communications team. It doesn’t appear to have sought out PR to recruit or host big parties.

There are things that do scale (space to work, creating a big club house full of energy and people, etc) but the effectiveness to truly ‘accelerate’ a business is limited in terms of the ability of the organization to help companies grow faster than they would have without the program. What a program that does space and events may help is to create an ecosystem that is more accessible. It creates an environment were peer mentorship can happen. It is impossible to say whether that would happen naturally or not.

In many cases the community needs a kick start so its great accelerator programs do that.

In all cases the founders need a personal and professional kick start that only very focused coaching can provide. Each founder/company is different as well. There are some general things that can help but nothing is as effective as knowing the people, situations, and having credibility in a given founder/funder network.

Space, club houses, and events are a different business model — it isn’t company acceleration, it is community building.

How to combat this tendency to operate on a growth trajectory is to separate the business operations (space, etc) from the support directly offered to the companies. Keep something totally focused on the companies but don’t hang the success of the business operations on the success of the companies.

What a startup community needs for long term sustainability are local investors that can add more value that just dollars plus are invested in the community. Along with a few other things according to the Boulder Thesis.

If you have a great community with mediocre slow growth companies its hard to argue the investment was anything more than a community development activity.

If you focus on building successful companies the returns will go into the community. That is the optimal return on investment where incentives become aligned – investors (accelerators) see a return, founders gain wins and become investors, early employees gain experience and opportunity.

I do not believe all accelerators should just stop all that other stuff but I think they should be very clear what value they are creating vs capturing (for self promotion). Accelerators should ensure they are on the side of creating value. They need to take the time to know the founders and that is hard to do if they are out promoting their program.

Theory: Wearable tech (hardware) company is a software company

There has been an explosion of interest in wearable tech or hardware companies in general lately. From meetup groups to accelerators specializing in hardware to a playbook for wearable tech on TechCrunch, everyone is trying to figure out if this new trend is a big new opportunity or at the very least a fad to capitalize on.

I have the following theory:

Wearable tech (or hardware) is connected physical (usually plastic) user interfaces (input devices) to web based software or apps that try to be more a sticky (or natural) way to input useful data and/or interact with software on a mobile device (phone). Without advanced software, there is no value in the hardware.

Wearable Tech solves a problem with web based software — you have to use a mouse (or touchscreen) and keyboard to input data. Phones are better than laptops or desktops as they are more portable but essentially they aren’t ideal. Popular apps like Foursquare which can be incredibly useful to both marketers and customers have been limited because ‘checking in’ has a terrible workflow.

I have to pull out my phone, open an app, type or tap on stuff, then put it back in my pocket.

Why can’t my phone stay in my pocket? Enter Pebble. In the very early days Eric would insist that people really don’t want to pull out their phones every time they wanted to check why it was buzzing. A quick glance at a watch would be a huge improvement. A lot people agreed (I love my Pebble).

What Pebble (and other wearable tech) can do is create that sensor enabled connection and data collection/consumption that is a more natural or low cost interaction. It still requires software. In fact it should be built on software that adds value and the hardware is the sticky part people can’t live without.

Nike Fuel Band, Fitbit, etc.

Update April 21, 2014: There isn’t a lot of information yet but it appears Nike is at least scaling back its Fuel Band and focusing on software. Not sure that should be taken as failure but rather pointing towards the fact this class of wearable tech is experimental. The band wasn’t Nike’s core product but it has allowed them to understand how sensors, software, and their shoes can interact with customers.

Hardware companies that ignore the software and overall User Experience (UX) are in trouble

RIM (or Blackberry) is an easy example to pick on but if you think about it they gained popularity not because they had great hardware but the way Blackberry OS manages messages is arguably still ahead of everyone else. Apple focused the overall UX parts that RIM didn’t focus on: how the customer interacts with the brand, device appearance, apps, carrier billing, photos, and music. For managing messages iOS is still terrible. But the entire User Experience is important.

For upstart hardware companies the UX is super important and should not be ignored. Just because your hardware does something novel does not mean someone will buy it (and use it). Your hardware interacts with software and you need to think about how that happens, always.

Companies like Kiwi are offering products that will enable hardware companies to spend more time figuring out the UX than how to get working hardware prototypes. More useful tools are on the horizon.

There are a lot opportunities in wearable tech and the internet of things

The number of hardware companies that are in trouble because their software only runs on their hardware and isn’t networked is a lot. The opportunities created by having a very powerful and connected ‘brain’ in a phone changes the focus to the UX advantages you can design, the software to enhance that, and spend far less time on extremely complex (and costly) development of hardware that needs to do everything. The low hanging fruit in wearable tech and hardware is building the software that lets you use your phone as the brains behind an array of sensors.

Also, what is being missed in all this hype is that things like hearing aids are the original “wearable tech” and the technology built into them along with how they get to consumers is way ahead of everyone entering the space now. Highly advanced devices in the larger medical space are likely where the big wins are going to be. 

The first round of wearable tech was medical. Then the landscape changed with powerful mobile computing devices (phones). This next round is about people building highly advanced hardware that connects to software for something with more than an incremental improvement in User Experience.

Advances in connected devices brings us one step closer to ubiquitous computing. Exciting times!

10 years of blogging: coder to dad to entreprenuer

In April 2004 I started blogging. When it started, I wrote about things that I would have posted on uw.general (the wild west of amazing backchannel at U of Waterloo once upon a time) – status updates on the main web page, standards, and other interesting things. That evolved into an interesting timeline of life events over the years. In looking back I can see my transition from a coder working away at web stuff to a dad and entrepreneur. What I learned going back over my blog’s 10 years:

  • Writing more means I have become a better writer or expect more from my writing which means I blog less.
  • Going through my old posts reminded me that startups need community more than anything – that is what gave me the confidence to build one.
  • It is fun to build things. I don’t want to ever stop doing that.
  • I need to shift back to a balance of sharing life events and writing about things I am passionate about.

This is my current top 10 in the last 10 years.

  1. Back then I was really excited about web development, this is when I first started thinking about Ruby on Rails in January 2005.
  2. It wasn’t until the summer of 2006 when I really got excited about development — that summer was a big with the development of some interesting things on rails.
  3. January 2007 my first son was born (and it was mentioned in the Daily Bulletin at the bottom!) – I posted about the next 3 kids but this one was the first.
  4. January 2007 started the mobile project that became VeloCity. As part of that project we built a twitter clone, UW Chatter. It didn’t go anywhere but it was cool.
  5. I started a new job in with the Special Projects Group and I was President of the University of Waterloo Staff Association – that work inspired TribeHR for me.
  6. StartupCampWaterloo was launched. It was small. In early 2008 we hosted the second one at it was big, over 100 people attended including the infamous David Crow and future CDL G7 member Jevon MacDonald. Then in the fall of 2008 we got really excited about the Startup Community in Waterloo at StartupCampWaterloo3 even though the economy was falling apart.
  7. TribeHR was unveiled at DemoCampGuelph – that demo had a bad connection to the projector, lots of laughing, and 4 years later it was acquired by Netsuite.
  8. IgniteWaterloo started and I did the opening presentation as a last minute stand in!
  9. The moment I truly felt VeloCity was successful and the startup community in Waterloo is heading to an awesome place with the amazing 7cubedproject.
  10. I learned how important things like fishing with kids are.

In 2013 and 2014 so far my posts have almost been entirely focused on the work I am doing. The last 2 years have seen a big shift in my focus to family but that doesn’t come out in my blog at all. I will work on that.

The next 10 years are going to be fun!

The Market for Credit and Supporting Entrepreneurs

Over the last few years of growth in Accelerator or Incubator programs, the overall media coverage of early stage tech startups has increased in Canada. The lack of coverage before the programs existed made media coverage a metric of success. For any entrepreneur support program to be relevant there is a requirement to be mentioned in the media resulting in the Alumni Success Metric as a key metric used to identify success of any program.

I think we need to find a better way to measure these programs and the effect on the problem they are solving.

As more and more programs compete on this metric they spend more on marketing to rise above the others which results in an increase in the costs to deliver a program. I believe competing on this metric can foster animosity between programs and hurts collaboration between a large number of extremely talented people.

What is the problem?

Founders are taking advantage of everything offered to them (as they should) which results to this common scenario in Canada (not based on any particular company).

  • Founders went to University of Toronto (and/or Waterloo and/or Ryerson and/or WLU and/or insert school here) and worked out of Banting and Best (and/or the Garage and/or the DMZ and/or any coworking space).
  • Someone else on the team took a pre-accelerter or some other community education program.
  • They are clients of MaRS and Communitech and Halton Innovation and…
  • OCE has awarded them a grant., MaRS IAF will invest in them, IRAP might have had a role.
  • They might get into another accelerator program before they finally get a few key investors at the table and start to grow.

When they get VC funding or something big worth a media push, what happens? Up to 10 organizations want to be listed and each of them release a story about how proud they are. Few if any list the other organizations or programs or people that helped (because the list is huge).

How this may hurt entrepreneurs?

Funding and product announcements aren’t success, they are a milestone that is blown way up in the local media as a result of everyone getting excited (excitement is good, celebrate the good things). It is possible that the positioning of programs media releases could confuse the market that the company needs to reach.

That said, the media coverage froth is likely localized to Canadian media so it probably has no effect on where the companies market likely is: the United States.

This intense market for credit can be frustrating for everyone who delivers programs. In reality it takes a community to raise a startup. From funders that have done it before to programs designed to focus attention, lower the risks associated with getting started, and build peer groups. We should all celebrate the entrepreneur and collectively be excited there is so many people out there helping them.

The metric is good for something.

Where I think the Alumni Success Metric does work is that helps inspire new founders. Knowing that good things have happened for those that come before them in the same program is the same metric Higher Education uses to recruit undergraduate and graduate students.

How do we avoid the zero sum game around credit?

The metric is not useful for defining the success of any program as most of the support happens in parallel in accelerators or incubators. It is extremely difficult to know what helped and when and where or what made the difference. It creates something for programs to compete over when they should be collaborating.

The stories about companies growing shouldn’t be “x program’s y company has done z” but instead be about how the company achieved this milestone and all the people that helped along the way.

A metric needs to exist that can demonstrate how effective a program is without having each program battle it out with marketing.

Step #1 is that we have to stop thinking of service organizations or accelerators or incubators as startups. They aren’t. They are philanthropic organizations offering a support group and networking services for founders, funders, and service providers.

The main goal is not to build sustainable models around these organizations (how can most realistically generate revenue outside of an education or philanthropic model?) but build a sustainable ecosystem that doesn’t require the current level of philanthropic support. Every philanthropic organization should hope that one day the problem they are solving is no longer a problem. That should be no different with supporting entrepreneurs and everyone should work together to achieve that outcome.

What is the problem accelerators are solving?

There is currently a preoccupation with accelerators in the entrepreneur world resulting in a large increase in programs.  Arguably, the result of this frenzied growth is that ‘entrepreneurship’ is as commoditized as college. Unlike college, it is extremely hard to know which programs are adding value and which ones are wasting everyone’s time. This doesn’t mean investors aren’t in the know and they are favouring the programs they like – example, YC or TechStars.

It could become (or has already become) virtually meaningless to be an accelerator born internet entrepreneur so why would you give up 6-12% of your company to do it? For investors it is really hard to cut through the noise. I think this is because few people actually know why accelerators exist at all. In some cases I fear that the people that are creating new ones aren’t likely clear on why they are creating these programs either.

How does anyone know which ones work? What problem are they solving? What metrics should they be tracking in order to get better at what they are doing?

Defining the problem(s) accelerators solve.

There are three problems I think accelerators are trying to solve:

  1. Investors need to identify talent.
  2. Talent needs to find the right investors and coaches.
  3. Education system failure.

The first is a relatively easy problem to solve. It is hard for investors to identify talent at an early stage, accelerator programs offer a filtering tool for investors as they can take the top talent that applies and narrow it down to those that have the highest potential based the criteria of the particular program. If an investor trusts the filtering job done by the accelerator than that accelerator is providing value.

A suggested metric for this: measure how many alumni of a program receive funding, from what type of investor, and in what time span?

The second problem that talented people and teams have is finding the *right* investors and coaches. By the right investor I mean someone that will give you enough money and coaching that you can slowly de-risk your startup a little more and build momentum as you grow towards being a sustainable business. Founders need coaches to apprentice under while they build their company. The right investor is someone who will put in enough of their own money and time and they can help you get your business through the major milestones it faces. This likely means that party rounds are bad. What I think should be the goal are 4-6 investors and/or an individual (not a VC) has a 1/2 to 1/3 of the total round.

This should result in the person(s) who put in significant capital also have a board seat and have their sleeves rolled up ready/able to help.

A suggested metric: track who put in the most personal money in the round and are they on the board of directors or some other significant role in the company? How much time a week/month do they spend with the founders?

The failure in education is a much harder problem to solve. Is it the traditional silos that are limiting education or is it the expectation that you go to school to be trained for a job or a bit of both or something else? Is the failure the education system (K-12) or is it the students or both?

In higher education you have environments that are designed to encourage independent thought that is backed by facts and thinking. You should be exploring and developing your networks. At no other point in your life will you be surrounding with that much leading edge research and thinking. Just because a school doesn’t hand you your first startup with funding and office space does not mean the education system is failing entrepreneurs!

There is also already a process for very smart people to apprentice under others that have already developed their ability to take massive amounts of information and focus it on an outcome. It also happens to come with a filtering mechanism built right in that improves the likelihood that the person that finishes is relatively in the top few percent. It’s graduate school.

The process is not perfect but it is a process that works. Educating people is hard. Coaching people is harder still. If an accelerator is going to solve the failure of the education system in educating entrepreneurs it should take that part very seriously and not dismiss the education system as having nothing to offer.

A suggested metric: Does the accelerator have qualified educators and coaches that put in a significant amount of time (more than 1 hr a week) with each entrepreneur? Are there measurable outcomes expected on the entrepreneur? Are there consequences for not meeting expectations?

Accelerators should be more than marketing to the entrepreneur and placing them in a zoo for the public to see them in action. Education is serious business and it is about people’s future. Entrepreneurs need to have realistic expectations and enter with a clear idea of what they want out of the opportunity.

Everyone around accelerators is still learning about how to make them work and for whom. It is an exciting time in education — just be sure to track stuff that matters while you run the experiments!

A Perspective on Investor/Mentor Whiplash

The other day Fred Wilson posted an opinion and some tips on Investor/Mentor Whiplash. He took the position that that is a big problem for accelerators as well as early stage and seed environments. Brad Feld took this as a bit of a misunderstanding on accelerators, he insists that TechStars creates an environment where early stage companies can learn to manage the whiplash. Brad Feld states:

I disagree with Fred. It’s not a big problem. It’s the essence of one of things an accelerator program is trying to teach the entrepreneurs going through it. Specifically, building muscle around processing data and feedback, and making your own decisions.

On the surface this seems correct. A problem (one of many) new founders face is the overwhelming barrage of mentorship (good and bad) and information mixed with the inability to filter. An accelerator should be able to provide the environment where a strong group of peers with some guidance can help to build the “muscle around processing data and feedback.” In the last 6 years I have noticed that is a common problem founders face and their ability to manage it is important to their success. It wasn’t until I experienced the whiplash myself a 2nd and 3rd time that I fully appreciated the damage it can do even if you are prepared for it.

Generally what I tell early stage founders:

  • Only talk to customers once you have something to show them — but that shouldn’t take you a long time, don’t go heads down for months. Asking people what they want and not focusing on something specific they can touch/feel is a path to busy work and infinite sadness.
  • Avoid the mentor parties/socialization. Find two (or three) good people with opposing views and bounce specific data off them but only when you have done something that requires fresh eyes to advise you how to interpret the results.
  • Focus on what isn’t working when getting feedback from mentors. Founders need to be positive but you need to focus on the bad things when talking to your close mentors that have been through it already. If they can’t help you with the tough stuff why are you spending a lot of time with them?
  • Don’t expect a direct answer. Experienced mentors know you are the best person to run your company, not them, and they have developed a way of not telling you what or how to do things but instead challenge you to figure it out in a positive way.

Whiplash from mentors doesn’t just happen in startups, it happens everywhere people are giving you advice or have something to gain by influencing the decisions you are about to make or the opinion you develop on something.

Being prepared and learning to manage the whiplash isn’t just the essence of accelerator programs, it is the essence of education that culminates in the top level you can achieve to filter information – a phd program. At the phd level the filter muscle is almost too strong but that is a topic of a whole other blog post.

The scary thing for entrepreneurs is that accelerator programs are too often run by people that don’t know how to effectively educate people and/or they have something to gain financially by the decisions founders make.

I think this *is* a big problem in accelerators. I wonder if the ability to teach that skill to founders (or select founders that already have that skill) is the difference between a successful accelerator (which is really only TechStars and YC) and one that isn’t (pretty much everyone else)?

What is the Value of the ‘Alumni Success’ Accelerator Metric?

There is a rapidly growing number of support groups and organizations that fit into the category of accelerator or incubator. What is the value one of the core metrics many accelerators use today ‘Alumni’ success and what does success mean? That success metric can be a funding event, exit, or some other significant milestone that has been made public. Each has a different value but the purpose is to say something positive about the accelerator which is, for many, a key ‘metric’ used to report back to those that back the program.

Why is it a metric at all? After all, shouldn’t accelerator/incubators be focused on making money? The role of accelerators in Canada according to Mark MacLoed:

…these programs are not meant to help investors discover the next giant. They are there to help investors and mentors identify, nurture and develop talent. In smaller markets like Canada’s, we are sorely lacking in proven, been there, got the t-shirt talent.

I generally agree with Mark as the purpose of all these programs is to build a funnel of qualified talent which has a value to those that back the accelerator. That could include investors and/or the government (the tax payer). I will add that what happens with all this support is self guided experiential ‘business education’ but that is another blog post.

When an accelerator releases something that states “congrats to cohort company x on raising money from y” how should future applicants weigh those releases when the company is an alumni of more than one program? How should the people that support these organizations value those announcements?

As a recruiting and reporting tool I can certainly see the value in getting the organizations name out there. The problem is that it starts to sound like a ‘party round’ where so many people have been involved in some way it is impossible to say who made the difference. The truth is they all helped. The value for any one organization is not as high as it would be if the company only worked within a tiny controlled system. That simply isn’t happening and that is a good thing. It takes an early stage business ecosystem to build more frequent and bigger success which includes all points between here and the valley.

This is something very similar to the education system where every school at all stages of education can share in celebrating success of their alumni. If a higher concentration of success is coming from a particular school then that won’t go unnoticed and it should be supported and enhanced.

What I hope will happen peacefully and relatively unnoticed by the entrepreneur is that the organizations that have more success grow, those that low success fail, and new ideas are injected into the process as everyone keeps learning.