Who You Calling a Jesse?

Why I think Higher Education should experiment with an incubator model

In Canada the rise of the incubator choices is quite noticeable. The success of the Y-Combinator (YC) model is hard to ignore, it seems to be the accepted way to grow young tech companies at the moment. However, it isn’t clear if the model works anywhere but YC and TechStars, these programs cost a lot of money to run so does the math hold up for everyone?

How many companies make it a big enough exit (assuming you need a $30 million exit per incubator) and in what time frame? In Canada there is a trend that shows some crazy growth in exits but how many are in that ‘big enough’ range or more that haven’t been around for 5-10 years or more? I think one maybe two. It isn’t just Canada though, how many exists are there in a year for any tech startup anywhere? Likely not enough to sustain the current number of incubators globally.

The talent pool is half empty

The limits on size, depth, and overall health of the talent pool is a problem for incubators if you assume that they simply tap the current talent base and help them be successful faster. If the number of exits isn’t currently there then you have to look at ratio of incubators to exits and figure out how many companies it takes to fill the gap (what is the current market and what do you have to create? Yup, it is basically a product you are creating). At a guess, the current level of incubators needs to create a lot of brand new entrepreneurs from those that would normally go work for someone.

There is talent out there but they aren’t being developed in any sort of formal educational process. A VC backed/run incubator might not be the best place for young guys and gals to receive this education for the first time. Not saying it couldn’t work, I think Y-Combinator was initially successful not because of the money or location but because an educator runs the program. In 2008, Mashable was claiming that “Y Combinator is the premier university of Internet startups.” I agree. What motivates YC though? Paul Graham’s comment on my post in StartupNorth offers a bit of insight as well (also with a bit more on why in his Why YC post).

When we started YC, the returns seemed completely unpredictable. (They still do actually.) What allowed us to do it was that we didn’t care if we made money.

An incubator that is about educated the ‘student’ is a lot like higher education and should not be about profit. That might be a values based statement but it is something I believe. If you are measured by the success of the student and not by the profit margin, the student has a better chance at success.

Herein lies the opportunity for Higher Education. Not unlike engineers or scientists, there is a demand for entrepreneurs (or if you are Richard Branson you want intrapreneurs). It isn’t good enough that students have the technical chops, they need to be creative and look at solutions to problems in a way that is willing to take more risks. This is soft skill development we are talking about — you can’t engineer an entrepreneurial process. Being entrepreneurial pretty much requires you laugh at the limitations or restrictions and find a way to succeed. You can engineer an education process that offers some perspective on that but that requires some entrepreneurial thinking to design and implement.

Higher Education needs to look outside of courses and modules, entrepreneurs shouldn’t be measured

Traditionally to address a skills gap in a student a course would be created and the student would receive a credit. This just increases the cost of education for students and if you have been paying attention, there is a bit of higher education bubble according to Peter Thiel. What I have seen from students is that they absolutely are against another course that is outside their specific discipline for various reasons. Enter the incubator model in higher education (or in VeloCity’s case the dormcubator).

Create an environment where innovation, networking, competition, and experience is shared as well as celebrated. Create it  outside of the traditional academic course model. Support it institutionally so the quality and knowledge is passed on (doesn’t disappear when students graduate). Then try to connect it back into the classroom. Leverage institutional Alumni networks for mentors and other forms of support. Don’t be afraid to fail a few times.

There is no set way to execute on this model but you need to try, iterate, and keep going. My belief that in order for higher education to remain relevant it needs to experiment with these different ways of learning. Students will not only appreciate it, I bet they will have a better experience and years later the institution will benefit by having them re-engaged.

Footnote: the incubator model

For those unfamiliar with an incubator or accelerator model, the easiest way to explain it: an incubator is where a group or individual provides resources (money, mentorship, space to work, expert services, a network of people) to an early stage company in exchange for equity or another arrangement. Generally it is always equity but in Canada we have publicly backed models (the Accelerator Centre for example) that charge rent for services or in the case of VeloCity you pay what you pay anyway to live in residence and it is a service offered to students.

The entire explanation of the VeloCity model is another post.

More on incubator in Higher Ed: To Be or Not To Be: University Incubators

Incubator Math thought

Last week I had a guest post over on Startupnorth about trying to understand incubator math. It generated a bit of interest but most notably was on Hacker News where Paul Graham shared a comment:

As in startup investing generally, the expected value comes mainly from a small chance of a big hit, multiplied by lots of investments. You’re hoping that if you invest in 100 startups, one will be a Dropbox or Airbnb.

For this to work, you have to (a) invest in a lot of startups and (b) they have to be drawn from a pool that could include big winners.

The latter could actually be a problem, if you’re not founders’ first choice. If you lose the big winners, your returns might be orders of magnitude smaller, even if you get everyone else.

Yes, you do have to invest for years before you end up in the black, even if things go well. That’s also true for startup investing generally.

When we started YC, the returns seemed completely unpredictable. (They still do actually.) What allowed us to do it was that we didn’t care if we made money.

What I have been thinking all along is that beyond the obvious “good for the community” argument (which I think has more to do with highlighting activity then building real companies) an incubator is a numbers game. The most important thing might that although they should be about making money no one should start one thinking they will. Do it to have fun and see where it goes.

More thoughts to come…

Director of Student Innovation and VeloCity at the University of Waterloo

It is now official, I can drop the “interim” part of my job and take on a new and exciting title of Director of Student Innovation at the University of Waterloo. I am really excited about all the positive change that is happening at the University of Waterloo and especially the Student Success Office lead by Sean Van Koughnett. Sean started VeloCity with just a crazy idea and a mandate to do something good for students. In only a year it had it first residents and less than three years later a 23-year-old donated $1 Million back to the program. That is success.

Now under the Student Success office with the mandate of “Student Innovation” I feel like the bar just got raised some more. There is a lot to do in regards to first identifying current innovation (which includes VeloCity) and doing the right (or best guess) things to help interesting things happen more often. We will start this fall, it will be a lot of fun.

I am really excited by the team Sean has put together and double excited to work again with Virginia Young who was once an Associate Director with me at VeloCity. She is taking over the Communications and Research role under Student Success. Pam Charbonneau is going to lead Student Experience and Heather Westmorland is leading Learning Services. It won’t be a quiet summer. More in the Daily Bulletin.

What is next for VeloCity?

After the most awesome two months and a bit I have experienced in my professional career I have yet to sit down and take stock. There simply isn’t time to take a breath but I am going to take a moment and explain what is going on with my part of the universe. By now everyone knows we (at VeloCity) got some funding from, to many, was a very unlikely source. That funding was the missing piece — now we have the funds to give people a chance to try that may not have been able to as we can now clear the financial limitation.

The VeloCity program is going to be a full service incubator for students like none other.

What I mean by full service is that;

• we will (and do) recruit best talent in the world,
• inspire students that can do awesome stuff and have the passion but might have financial reasons blocking them to take a risk that can do awesome stuff,
• provide an environment (build community) where ideas and entrepreneurs find their legs,
• follow that up with a location to start to build a startup in an environment with just a bit more and way more experienced entrepreneurs and support one another,
• then encourage (read: kick them out when they are ready) into the wild startup world (ideal) or into a job working for another startup (not bad for the community) or recommend one of the countless tech jobs in town (not everyone handles risk well).

At the end of it all, the student or alumni has the opportunity to try in an environment that gives them a big long term advantage over those not involved with VeloCity.

The plan for the next 4 months is to lay low and focus on: what we have learned so far, what we can do that is better (or figure out what not to do anymore), try out a couple things, hopefully staff up a little, and recharge. This means, I think, no conferences, very little travel, and fewer meetings. At least until some big outstanding tasks get tackled. I want to blog more as well. Writing helps focus thoughts and share the journey. Twitter is just too short.

It is going to be an exciting Spring term in Waterloo

An insane young startup guy handed me a cheque for $1 million USD and…

…life in Waterloo just got a lot more interesting. StartupNorth calls Ted insane in the best sort of way and I agree. He managed to build a great little startup, attracting some top tier VCs and then orchestrates a brilliant deal to not alienate some great investors. Then he does something nuts to pretty much everyone, he empties a big part of his bank account and asks me (and VeloCity) to do something awesome with it. I am blown away.

Talking with people today was really interesting. Students had a hard time getting their heads around the fact that Ted has no influence over that money once that cheque is cashed. He doesn’t get equity, we aren’t naming a room after him or a building, he doesn’t gain in any way that people seemed to think he would. He does, however, hope that what we can do at VeloCity is help fill a big gap in Waterloo (and Canada) for support, education, and risk taking funding to support young people as they really go for it.

Besides the cash part I think the most important thing here is that students get an entrepreneur to look up to that is:

• just ahead of them in age
• thinking really big, $1 million isn’t cool enough
• a really nice guy willing to open up his newly established networks to his fellow Waterloo students

Over the next few weeks some big plans for VeloCity will start to take shape. So very exciting. Thanks Ted.