SEED Accelerator:The 90-Day Incubator

By

Ray Smilor, PhDSchumacher Fellow in Innovation and Technology

Professor of Professional PracticeNeeley School of BusinessTexas Christian University

Agenda

I. Critical elementsII. Benefits to entrepreneurs/investorsIII. Selected modelsIV. Lessons learned

I. Critical Elements

• Purpose – speed up product/company development

• Results – better entrepreneurs, higher-value ventures

I. Critical Elements

• Unconventional application process– Targets selected groups of startups– Requires team (not 1 person)

• Focused program to facilitate product development– 3 months usually

• Equity investment in startups– Under $150k/often under $20k

• Mentor-driven

I. Critical Elements

NO –• Business plan• Rent or fees for services• Physical space

Entrepreneurs work out of living quarters near accelerator.

I. Critical Elements

1. Founders/Mentors

Experience

Networks

Expertise

I. Critical Elements

1. Focus

Distinctive

Targeted

Compelling

I. Critical Elements

Ownership path:• 5-10% equity stake in 1st round of financing• Successful companies → more rounds of

financing• Stake reduced with each round• Absolute value of stake increases

II. Benefits

For entrepreneurs:– Mentors– Connections– Business support– Product support– Seed funding– Access to future capital

II. Benefits

For investors:– Faster product development– Better quality deal flow– Lower risks– Quicker time to market– Higher returns

2011 Rankings USA Startup AcceleratorsRank Program Location

1 TechStars Bolder Boulder, CO

2 Y Combinator Mountain View, CA

3 Excelerate Labs Chicago, IL

4 LaunchBox Digital Durham, NC

5 TechStars Boston Boston, MA

6 Kicklabs San Francisco, CA

7 TechStars Seattle Seattle, WA

8 Tech Wildcatter Dallas, TX

9 Dreamit Ventures Philadelphia, PA

10 The Brandery Cincinnati, OH

11 Capital Factory Austin, TX

12 NYC SeedStart New York, NY

13 Betaspring Providence, RI

14 BoomStartup Salt Lake City, UT

15 AlphaLab Pittsburgh, PA

Source: Frank Gruber, “Top 15 U.S. Startup Accelerators and Incubators Ranked,” http://techcocktail.com

II. Benefits

Criteria for Top 15:• 25% - Qualified financing events• Companies get financed after completing program

• 50% - Success of companies that graduated• 25% - Accelerator program characteristics• Money startups receive, equity, support

III. Models

Y Combinator:– Founded 2005 – Silicon Valley• 1st SEED Accelerator

– Worked with over 380 startups– 1 major venture capital fund– “Y Combinator”• From computer science

– “a program that runs programs”

• Metaphor: a company that starts companies

III. Models

Y Combinator:– Invests on average $18k in large number of

startups– Two 3-month funding cycles• January/March and June/August

– Program: fast and intensive• Mentors• Prototype Day• Demo (Pitch) Day• Social events/dinners

III. Models

TechStars:– Founded 2006 – Boulder, Colorado• 5 locations in U.S.

– Works with 10 companies per location– Funding from 75 venture capital firms and angel

investors

III. Models

TechStars:– Invests $18k in startups– “Perks”• $100k convertible debt note• In-kind support from range of companies• Valued at $250k

– 3-month program• Mentors• Demo (Pitch) Day• Social events

III. Models

TechStars:Application form:– Describe business in 140 characters– Provide demo/prototype– Explain:

• How you will make money• Who your competitors are• What keeps you awake at night

– Provide 3-minute video of team

III. Models

Tech Wildcatters– Founded 2010 – Dallas, Texas– Works with 8-10 companies at a time– Mentorship-driven, micro-seed fund

III. Models

Tech Wildcatters:– Invests up to $25,000• $10,000 per company• $5,000 per founder (up to 3)

– Two 3-month programs• Spring/Fall

– Program – “Bootcamp”• Mentors• Pitch Day

III. Models

Tech Wildcatters:– Selection Criteria

• Technology: web/mobile/software/game• Majority of revenue from businesses• 2 or more founders• Live in Dallas for 12-week program

– Application Form – 3 key questions• What problem do you have?• How do you solve it?• How will you make money?

IV. Lessons

Proactive strategy:

IV. Lessons

• Align needs of startups with investors’ expectations

• Provide platform for growth via ongoing mentoring

• Tie into entrepreneurs’ eco system• Target training to accelerate product

development• Provide seed funding while entrepreneurs

bootstrap