SEED Accelerator: The 90-Day Incubator

1. SEED Accelerator:The 90-Day Incubator By Ray Smilor, PhD Schumacher Fellow in Innovation and Technology Professor of Professional Practice Neeley School of Business Texas Christian University

2. Agenda • Critical elements • Benefits to entrepreneurs/investors • Selected models • Lessons learned

3. I. Critical Elements • Purpose – speed up product/company development • Results – better entrepreneurs, higher-value ventures

4. 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

5. I. Critical Elements NO – • Business plan • Rent or fees for services • Physical space Entrepreneurs work out of living quarters near accelerator.

6. I. Critical Elements 1. Founders/Mentors Experience Networks Expertise

7. I. Critical Elements 1. Focus Distinctive Targeted Compelling

8. 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

9. II. Benefits For entrepreneurs: • Mentors • Connections • Business support • Product support • Seed funding • Access to future capital

10. II. Benefits For investors: • Faster product development • Better quality deal flow • Lower risks • Quicker time to market • Higher returns

11. 2011 Rankings USA Startup Accelerators Source: Frank Gruber, “Top 15 U.S. Startup Accelerators and Incubators Ranked,” http://techcocktail.com

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

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

19. 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

20. 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?

21. IV. Lessons Proactive strategy:

22. 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