Category: Seed Accelerators

If you check out seed accelerators for long enough, you’ll come across one relatively consistent criticism. (Particularly for the lower quality programs, I have to say.) That criticism is that accelerators focus way too much on Demo Day. I believe that founders that say this don’t understand the real “why” behind the preparation.

I joined Techstars at the beginning of June this year, and in that time have seen the preparations for the Demo Days of the Techstars London 2014 batch of companies, as well as the first Barclays Accelerator batch of companies. So I’ve already seen, up-close-and-personal, two cycles of companies spending time and getting ready to pitch at Demo Day. And Demo Day is important: there are hundreds of angels and institutional investors there and it’s a once-in-a-lifetime opportunity for most companies. They need to work hard to make the most of the opportunity.

But the subtle secret about preparing for Demo Day is that it’s not just about one 5-minute pitch, it’s a month of deep critical-thinking about how to communicate a product, a company, a market, a team, and an opportunity. Sure, the direct output is that 5-minute pitch, but founders learn how to give a one-line description of what they do, an elevator pitch about their company, and how to talk about the company in ways that really resonate with a particular audience. This process, and particularly the feedback from experienced entrepreneurs and mentors, is critical to founders. (And while it involves the whole team, it should only be the day-to-day job of the CEO, leaving everyone else to continue working on the company.)

Let me give two examples from the Barclays program:

ClauseMatch — Evgeny from ClauseMatch was not a natural speaker, and his company (a platform for contract negotiation) is in the legal world, which tends to make peoples’ eyes glaze over. And at times, he struggled to communicate how revolutionary their product is. But he cracked it with a simple (and amusing) anecdote to start his Demo Day pitch. He took the audience back to 1995, when Microsoft Word introduced “Track changes” and e-mail started to become widely introduced. For the first time, instead of faxing manually annotated contracts back-and-forth, lawyers could e-mail Word files back and forth… it was a revolution. Then he made a simple statement: after twenty years of internet and cloud technology development, lawyers are still working the exact same way. It was a massive “a-ha” moment for the audience that grabbed their attention for the rest of his pitch.

GustPay — Werner from GustPay actually spent a bit of time at the start of his pitch talking about Disney… specifically about the NFC wristbands that Disney has developed for their theme parks. He talked about the “magic” of the experience, in that the wristband becomes their ticket and their wallet and their room key, and everything they need for their stay. Then he told the audience that Disney spent >$1billion in developing this technology, but GustPay provides the same experience for venues and events for just $1/wristband. Again, it was an “a-ha” moment that got people to recognise what they did, and why it was important.

Being able to communicate your startup to a wide variety of audiences (investors, early adopters, sales prospects, press) takes a lot of hard work. And while it may seem all that hard work is just in service of a 5-minute pitch, the real benefit is far, far beyond that.

Seed-DB has been a member of the Accelerator Assembly since the organization began last year. The Accelerator Assembly is a “Startup Europe” initiative funded by the European Commission, but importantly is an industry-led network. It was founded by seed accelerators in Europe (Seedcamp, TechStars/Springboard, Bethnal Green Ventures), as well as Startup Weekend, Seed-DB, and several others, with strong support from Nesta.

One of the tasks that this group of organizations agreed to was to do two pieces of research. The first was on the overview of the seed accelerator ecosystem, particularly as it applied to Europe. The second was on the results and impressions from the startups that graduated from accelerators. Seed-DB (and specifically me) was tasked with combining quantitative analysis, largely based on Seed-DB data, with qualitative research based on surveys of accelerators and startups. THANK YOU to all of the accelerators and startups that answered the surveys… there is clearly survey fatigue amongst accelerators and startups world-wide, so I appreciate your time.

Both reports can now be found and downloaded from the Accelerator Assembly research page.

These reports are somewhat limited in scope, because the European Commission has very specific items that they required us to study. Despite this, I think there are some insights that may be useful for accelerators and startups alike:

Seed Accelerator Ecosystem paper

• Size of accelerator ecosystem: The European accelerator ecosystem makes up a smaller proportion of the number of total companies funded (20.3%) than the number of programs world-wide (27%). This is because all of the programs that accept significantly larger class sizes (like Y Combinator, 500startups) are located in the Americas.
• Size of job impact: Based on some reasonable assumptions, the number of jobs shown on Seed-DB is likely only 50% of the total number of jobs created by seed accelerator graduates.

Startups paper

• The top two reasons that startups cite as important benefits are: 1) Mentorship / Coaching / Feedback, 2) Network / Alumni / Prestige. But one of the top drawbacks of accelerators cited by startups was also mentoring! It’s clear that mentoring is a highly valued aspect of a seed accelerator program, but when done poorly can be damaging to startups.
• Another top drawback is the focus on Demo Day. As seed accelerators proliferate, the number of interested/qualified investors at each event will quickly diminish except for the top programs. Spending significant time on Demo Day when there’s no clear benefit to the startup detracts from the startups’ experience.
• When asked how much equity a startup would be willing to give their accelerator even without any funding, nearly 80% gave non-zero answers, with 55% stating between 1–6% equity.

Please do have a look at both papers when you have some time. And as always, get in touch with me directly if you have any questions or comments.

Happy New Year! In light of the Economist article this week that featured Seed-DB data, I’ve got a whole bunch of new features to share that just launched, some benchmarks on Seed-DB data, and plans for 2014.

Economist article

This week’s issue of the Economist features a special report on “Tech Startups”, and I’m happy to say that it used Seed-DB data in a chart to show a sample of result data from accelerators. It also cited Seed-DB data (and even mentioned my name) on the financial summary of the accelerator ecosystem in the section titled “Getting up to speed.”

2013 Achievements

Over 3100 companies and over 180 seed accelerators are now tracked on Seed-DB. They’ve raised funding of over $3.2billion and have created well over 11,000 jobs. About 25% of accelerators have administrative access to add companies and modify their pages themselves. (I’m hoping to increase this significantly in 2014.)

New Features on Seed-DB:

• Top Investors League Table: Identify the top investors in companies that come from seed accelerators by the number of companies they’ve funded, the number of individual funding rounds they’ve participated in, or the number of different accelerators from which they’ve funded graduates. Top 12 of each list are shown on the investor graph page.
• Administered entries: Accelerators that manage their own page on Seed-DB now show up with a yellow dot on the list of all accelerators. The name of their page administrator(s) are shown on the accelerator’s page.
• Tables of funding, exits: I’ve long had a feature to list startups that have raised a particular amount of money (or more), and a feature to list all companies that have exited. These are now more clearly presented in the new “Tables” menu. If you want to see companies that have raised more than a particular amount of money, just start from the list of companies that have raised >$1million, and replace the number in the URL with the value you want.
• Clarified how individual funding rounds are displayed on each company’s page
• Seed-DB should be running faster! I’ve improved data caching on the site, and made some performance tweaks
• Improved the menu structure on the site to make it easier to understand/navigate
• Investor data is improved, and should stay fresher over time.
• You can help pay for Seed-DB running costs by donating bitcoin. (None of this will go to Jed; it will go solely to paying server bills and other incidental costs of running the site.)
• The development roadmap has been updated
• Progress charts. I’m now collecting daily summaries of the data on Seed-DB. Once I’ve built up a little more history I’ll be displaying how Seed-DB is constantly increasing the number of companies, the number of accelerators, and the amount of funding tracked

Benchmarking data

A lot of people ask me question along the lines of “how accurate is this data”? The answer is two-fold, since there are two primary sources of data.

The first data source is what companies have graduated from what accelerators. This data is very complete for the larger accelerators, less so for newer accelerators. I continue to work to make this as complete as possible, but some accelerators go out of their way to make it difficult to find out what companies they’ve funded. (And some accelerators make it difficult for me to determine if they qualify as an accelerator.) In general, this information may be incomplete in places, but it is rarely incorrect.

The second primary data source is on funding. This comes exclusively from Crunchbase. Some companies have not listed their funding on Crunchbase, and this is the primary reason why Seed-DB funding data is lower than what some programs advertise. Reasons for not listing data range from strategically staying quiet about resources, to not caring much about what’s shown on Crunchbase. Per Paul Graham’s tweet this week, we can calculate that Seed-DB captures ($1.748bn / $2.09bn) = 84% of the total YC company funding. I’ve been informally told that TechStars has a similar factor. Again, the data is as complete and accurate as the individual companies make it.

2014 goals
I have a few key goals for Seed-DB in 2014, and would welcome your feedback and suggestions on more ways I can develop the site. Here are my plans/goals:

• Increase ability and frequency of accelerators to manage their own pages on Seed-DB
• Completely refresh the look-and-feel of the site
• Integrate more statistics for analysis, such as the markets for each startup from their Angellist entries
• Make upkeep of Seed-DB less manual and more sustainable

Final note

On a personal note, I’m looking forward to focusing a bit more time on Seed-DB in 2014. For those of you that don’t know, it’s just a side project of mine… my day job is at Google in London. Last year was tough for me to spend much as much time on Seed-DB as I wanted; my daughter started walking and going to day care, my family moved to a different home, and my day job was absolutely crazy. (I’m currently hiring three people for my team!)

Someday I still plan to write the story about how I taught myself Python/App Engine, built Seed-DB, became a father, and launched a bunch of interesting new features all in a ~nine month period. That’s a good one…

• Seed-DB Investor Graph: EXCLUSIVE first look
• “Zombie VC” s**tstorm & Crunchbase data
• TechStars expands by merging with existing programs

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Seed-DB Investor Graph — EXCLUSIVE first look

I’m pleased to announce the launch of the Seed-DB Investor Graph! The Investor Graph shows the web of VC and angel funding, by detailing who has funded which accelerators/companies as well as which round (seed, a, b, etc.) and when the funding occurred.

Diving into the data of individual investors, you can see that Google Ventures has funded companies from a number of different accelerators. In contrast, Andreessen Horowitz generally only funds companies from Y Combinator, though with some exceptions.

From a different viewpoint, entrepreneurs might be interested in which investors actually fund companies from different accelerators. (Not just who shows up to the Demo Days, for instance.) In the Investor Graph you can see that Angelpad has a fairly diverse group of investors that have funded their companies. Though I’m not going to name names, this tends to be a very different story for newer/smaller accelerators.

Finally, the individual company pages have now been upgraded to show information on funding rounds. For example, Songkick shows their progression from a Y Combinator investment in 2007 through to further investment by Index Ventures in 2008 and a large investment by Sequoia Capital in 2012. Alexa traffic rank charts and Compete unique visitor charts have been included.

The Investor Graph is still in its earliest stages. There are still some intermittent bugs I’m trying to quash, and there is a lot of functionality and visualization that I could potentially build. But in the spirit of a minimum viable product, please let me know what would be useful to you. (Or if you experience any bugs! Though typically re-loading the page resolves the error.)

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“Zombie VC” s**tstorm & Crunchbase data

Danielle Morrill of Referly has recently been on a blogging tear, and in the meantime been kicking up a bit of a s**tstorm in some VC/Angel circles. It all started with her excellent post about zombie startups. (A future project for Seed-DB is to better identify potential dead/zombie startups._

But last week Danielle posted about zombie VC’s which seem to have touched a nerve for two reasons. One — she programatically went through Crunchbase to identify active vs. inactive VC’s. This didn’t work because of Crunchbase’s data, which I’ll discuss further below. Two — she called out the zombie VC’s instead of focusing on the active VC’s. Focusing on the negative just opened her up to further sensationalism, though I’m guessing it certainly drove pageviews!

Through Seed-DB I’ve been deeply enmeshed in Crunchbase data for the past year, so I think I have some unique insights. The fundamental thing about Crunchbase is that:

Crunchbase data is largely accurate, but often incomplete.

Where people have taken the time to contribute information/data, the entries are pretty good. But so, so many companies (even companies with good funding) simply don’t have data in Crunchbase. The biggest sin I’ve seen in Crunchbase data is duplication, of funding rounds, of investors, even companies. For example, Danielle’s company Refer.ly has two entries in Crunchbase, and the active/maintained entry has duplicated funding information which makes it appear that Refer.ly has raised two $1million rounds instead of just one $1million round. For Danielle, when it came time to determine algorithmically which VC’s were “zombie” VCs, the incompleteness of Crunchbase meant that active VC’s were mistakenly identified as “zombies”. But in a brilliant marketing strategy, the sensationalism of the headline and initial results meant that a lot of these VCs were very… motivated… to get in touch with her to correct the results!

Like Danielle, I think Crunchbase is an absolute treasure for the startup community, but data from it needs to be understood in context of “largely accurate, but often incomplete”.

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TechStars Expansion

TechStars has been growing since it established itself in Boulder in 2007. However, creating a new program from scratch in a new city certainly requires significant investment, both in cash, facilities and most importantly people. Over the last 3 months, TechStars has expanded in a big way by merging with existing successful seed accelerators; Excelerate Labs is now TechStars Chicago while Springboard is now TechStars London. Expanding this way has interesting benefits for both parties.

Excelerate Labs and Springboard were both running very well-regarded accelerators in Chicago and London/Cambridge, respectively. But with over 150 different accelerators around the world, it’s difficult to rise above the fray. Merging with TechStars linked Excelerate & Springboard to a large and growing brand that can help drive even higher quality dealflow to and through their programs. Additionally, TechStars has developed expertise and an organization that’s engineered to support startups regardless of location or program.

By merging with existing programs, TechStars has removed the risk and limited the investment necessary to expand. Since TechStars runs/fosters the Global Accelerator Network, popular amongst accelerator program administrators, they naturally have developed relationships that will allow them to do this more easily in the future. It is quickly making TechStars a well-known institution around the world, and I’m sure having positive benefits for TechStars dealflow.

I suspect what TechStars is doing now would benefit other accelerator brands as well and we could see a new trend of brand consolidation emerging in the next 1–3 years.