Accelerators getting more choosy and more targeted

Aside

Accelerators attract quantities of applicants, a number of whom have ideas for new businesses that are very evidently non-starters, some even barmy; many have ideas of limited scope, some of whom present poorly. A few have an immediate appeal as really disruptive, or as having an innovative approach to a big issue, though not necessarily demonstrating outstanding entrepreneurial qualities. How are selection processes trying to deal with these issues?

 

  Accelerator Academy originally opted for a computer-based test for applicants (about entrepreneurial potential) together with application form and interview; but it now relies more on having two of its staff hold Skype-based interviews  with candidates that aim to explore how well the programme suits the candidate and vice versa.

Imperial Innovations’ student Accelerator has adopted a two-stage application process, the first of which is simply a single line pitch and 500 character description, designed to force applicants to think concisely about the problem being solved and who are the potential users. Workshops once or twice a week during the following two months on various topics including funding sources, legal, and perfecting the pitch, and next year also time to work on their products (technical or business aspect) help the students to focus on each area of their business (value, customer relationship, cost structure etc). And then students are invited to complete a more in depth application based around their learnings and using the business model canvas as a framework. Finally the top 20 are invited to semi-final pitches and 5 go through to pitch for funding and intensive mentorship.

Newcastle’s Science City incubator is currently planning to hold sessions at which experts in the field in question talk about topical problems that are ripe for solution – in an attempt to get candidates to tackle issues of significance.

      Bethnal Green Ventures has cast a wider net: regional meetings have been canvassed; and candidates are invited to meet and talk about themselves and their work. Some assessment can then be made of those who later make formal applications about their progress and their entrepreneurial capabilities as well of course as their project.

Biocity in Nottingham runs three-day Bootcamps for aspiring entrepreneurs to develop their ideas for new businesses – that might find a place in the Biocity Incubator, the Nottingham Cleantech Centre and Antenna – two other specialist incubators in Nottingham.

The Royal College of Art’s incubator consciously takes candidates who have identified issues that entail significant engineering or IT Development. Oxford’s Said Business School has provided an opportunity for people to identify commercialisable opportunities from among a portfolio of IP from the European Space Agency and from CERN, in the hope that some of those people will choose to work together, perhaps taking space in Harwell’s Science Park, to develop a business of the IP.

The latest Wayra Lab cohort of 16 were invited, along with as many other candidates, to Wayra Week, where they were helped to identify the special focus of their proposed business and to learn how best to pitch it; and where at the end of the week they made their submissions to the seven assessors.

The 16 who won places in the Accelerator started off with a week’s Bootcamp – of instruction in essential aspects of business, and surgeries with experts. The week included a pitching session with mentors, at which each new team hade 2 minutes to pitch to the hundred or so mentors present and each mentor had 45 seconds to pitch to the teams, after which they were left to make their own contacts. It is the quality of the contacts that seems to be the most valued aspects of Wayra Lab.

Like other Accelerators EntrepreneurFirst (which is sponsored by several leading corporates) whittles its c600 applicants down – to 35 – by a three-stage selection process. But EntrepreneurFirst has adopted a year-long programme of periodic development and support for its potential entrepreneurs prior to its 6-month progamme.

Over the course of the summer, they have participated in team building selection and development days, including a 2-day session in which three teams of 5 had to make a 3-minute film on a theme around the Year 2022, and then get as many people as possible to view it – all in two days. Two months later, when in early August their university exams were over, they had a fortnight’s residential bootcamp, where they received training and support from entrepreneur mentors on how to build a lean startup. This also required them to test their early startup ideas with customers – a task designed to help understand product communications and the difficulty of getting heard!

At the end of  the programme that starts in September, while some teams will pitch to potential funders for ongoing support, others will be helped to find different roles in some of the more successful teams.

 

So who will fund an extended process of this kind?  If the Knowledge Transfer Networks were to take up the challenge of encouraging Accelerators on behalf of their different sectors, they might find that the benefits were worth the cost of providing support of this kind. The TSB has already identified areas associated with social or economic need where emerging technologies are likely to be able to contribute; and has run competitions for significant grants. Perhaps in addition, it should fund Accelerators in each such area.

 

Copyright 2013

John Whatmore                                                                                             May 2013

The Centre for Leadership in Creativity

London

 

 

Three different Nottingham Incubators to run snappy Bootcamps

Aside

Three-day Bootcamps to kick off Accelerators – one in IT, another in Cleantech and the third in Life Sciences will aim to help participants to develop their ideas for a business into a fundable proposal that might enable them to take space in an Incubator for developing their business.

A natural sequence for a budding entrepreneur with the opportunity for a hi-growth new business might be to kick off in a 3-7 day Bootcamp, followed by participation in a 3-9 month Accelerator programme, leading on to a period in an Incubator – a pathway being explored in Nottingham.

The three different incubators in Nottingham plan each to run Bootcamps, starting this summer – with supporting funding for two years from Nottingham City Council.

Biocity, the city’s well-established incubator in Life Sciences and healthcare has run Bootcamps for entrepreneurs with new businesses for several years. The one-year-old CleanTech Centre incubator, which specialises in recycling and green technologies, is running its fourth in May. And Biocity, Cleantech and Antenna, Nottingham’s incubator for Digital and web-based businesses are aiming to come together to run an Accelerator Programme later in the year, with Bootcamps as a kick-off.

Each is likely to have a different emphasis from the others: while all will deal with finance, IP and marketing, each field operates under a different regulatory regime, with different technologies, different markets and different business models. While Accelerators have attracted IT startups because of their low start-up costs, easy proto-typing and testing on customers, startups in other fields, most notoriously in Life Sciences, have a much longer and more arduous life cycle.

These low-cost, three-day Bootcamps, also supported with finance by local services and by industry, and economically hosted in local incubators, are a crash course for people up to a year before or after they start new businesses. They aim to help to develop an idea into a full-blown and marketable business concept and one that might find an appropriate place in an incubator.

For up to fifteen people, they combine workshops, exercises, and interaction; starting with a pitch, they also culminate in a Dragon’s Den-type session. The participants meet mentors, advisers and experts who have ‘done it before’ or seen it before, and there is a lot of ‘pointing where to go for help’.

Once incubatees have a fundable proposition, at Biocity they can then pitch for a further period of structured support – on a one-to-one basis for a fixed period of  6-9 months (http://wp.me/p3beJt-i). Their mentor provides guidance and challenge, offering different perspectives, getting the participants to challenge the market, to look for revenue sources, to make a business plan, and to iterate that plan; teaching about investors and shareholdings, helping them to pull together a package for potential investors, and to handle possible due diligence; and then possibly taking a board seat.

 

Evaluating processes for developing young businesses is virtually impossible – because there are so many elements involved in success or failure; and because it cannot be done until several years later. So signs and signals from experiments like these are the stuff of evolution – to be watched with great interest.

Financing start-ups: some current hiccoughs

Aside

* How do you structure funding for projects with very uncertain prospects?

* Early-stage investors not taking a long enough perspective?

* How do you manage the processes of funding more effectively?

* Grants as an alternative; but they have their strings.

* Footnote: What is the logic of some recent very fancy prices for IT start-ups (Instagram, Summly)

 

Some of those who run Accelerators have turned to the ‘convertible note – structured as a loan’ – in addition to a slug of equity (5-15%), as the best way of maintaining their interest in long odds bets; but this is leaving less room for new investors.  A number of recent ‘graduates’ from Accelerators have been appearing at Angels’ Investor Days looking for follow-on funding. Some have brought with them surprisingly high outside equity investments (up to 15%) and other commitments to third parties. The value of a business will inevitably be affected by its balance sheet; but aspiring entrepreneurs also need to be able to see their early financial commitments in terms of longer-term funding needs.

A number of Accelerator managers are concerned about helping the participants in their programmes to find follow-on funding without any interruption in their progress. The concerns here are two-fold: how do you enable Angels to have access to likely investees early enough in the development process to enable them to make a thorough evaluation of the project and the entrepreneurs; and how do you enable this process and the processes of investment (due diligence etc) to be done and dusted (ideally) by the culmination of a specific programme (eg an Accelerator)?

Angels have also expressed concern at over-valuations. At the final of recent New Business competition at Oxford’s Said Business School, I watched Philip Green, one of the judges, offer the winner £250k for a 50% stake in his business. The latter responded by saying that for that sum he might be willing to sell 2 – 3% – a gap in understanding that might have been filled if the background and the context had been better understood – by both parties. (See also Footnote below.)

Others have looked to grants (eg from the Technology Strategy Board) for early-stage funding, but sometimes find the processes of application, the conditions and the constraints such that they do not have the freedom to get on with the job or to go wherever the project dictates.

 

Footnote

A recent article in the Herald Tribune (9.4.13) wrote of five ways of valuing a start-up. If it is pre-revenue [and in IT], then how many eyeballs has it attracted; or what is the price or value of its developers [and they are in short supply here as they are in Silicon valley]. If it is up and running, suggests a Professor at Harvard Business School, how much time and effort would it take to build the product from scratch and attract those new users; or what is the potential cash flow.  And fifthly, ‘what number do we need to put on the table to convince the management and investors to part with their dream?’ The writer adds that all these calculations fall apart when a start-up receives an exorbitant amount of media coverage and exposure on social networks; and suitors can become irrational – producing prices that might just have come out of a hat!

 

 

 

Business Learning to become more personalised

Aside

Business Learning in Accelerators and their ilk will become increasingly personalised

Business learning provisions are increasingly migrating to online, and for very good reasons; so business learning and business development programmes will need to include learning coaches/mentors.

With the rise of the net, learning is being transformed: the President of MIT said when he spoke recently at Davos that his institution had started putting courses online a decade ago, and that MIT open coursework has accumulated 100 million individual learners, and this is increasing by one million a month. Stanford has been following suit.

A number of Accelerators give over a regular fixed time to learning – about business, usually consisting of lectures, presentations and discussions with experts, and about key topics such as IP, marketing and finance (among them Bethnal Green Ventures, Accelerator Academy, Entrepreneurfirst and the Young Foundation). Accelerator programmes, as short periods of intensive development for up to a dozen small groups of people who have ideas for innovations  (commercial, technical or social), have such an intensity that the participants focus strongly on the present needs of their developing venture. A standard syllabus (delivered in sessions of this kind) is increasingly seen as wasteful of valuable time – by those who already know or can do what they need to, and by those for whom it is not immediately relevant.

Learning from each other is another characteristic feature of co-working environments like Accelerators; and learning from each other’s learning experiences is part of that, and at least as important a source of learning as any other in this field. Every Friday, Watershed, Bristol invites its participants to meet and talk about their recent learnings; and an edited version is then put up on the intranet (http://wp.me/p3bejt-3Y).

We can expect general business learning sessions to be replaced by the Learning Coach/Mentor ( – among other specialist mentors,) who will keep in close contact with the evolving learning needs of programme participants, and perhaps on hand by Skype, helping individuals to make effective use of material that is readily available on the internet and relevant to their issues of the moment; and helping them to learn from each other’s learning. The special value of such a person is that in an Accelerator, the help that participants need is in meeting their immediate learning needs – as those change from day to day.

 

 

 

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The RCA’s incubator wrestles with its own development

Aside

 

The Royal College of Art’s Incubator wrestles with its own development

InnovationRCA, the RCA’s incubator, has ploughed a leading furrow among higher education establishments; and is contending with the issues that are raised by an incubator programme that runs in parallel to its academic programme, (which is a post-graduate programme), and that is also a part of the educational process.

The RCA’s incubator now takes in four or five new business teams each year – its sixth cohort (it started with just two per annum in 2008); and it is a two-year programme. While many start-ups involve little more than taking a recently created way of doing something and simply applying it to a new field, often with a tweak or two, the kinds of businesses that are brought to this incubator entail substantial design or engineering/IT development (the essence of the RCA) as well of course as market and business model testing. (There are other groups whose products seem to lend themselves more readily to licencing; and these are also housed alongside, but under a different regime.)

Evaluation of early-stage development processes is notoriously difficult, partly because they are all so different from one another, and partly because, as one expert observed, you cannot do so until years after (but how many?!) The statistics are that about 40% of the teams in the incubator have received ongoing funding; and just under half have developed products and are trading.

There is a bootcamp in the summer and networking events to help candidates to understand their own personal aims and objectives and to match up with appropriate team members; and the deal is that those selected for the incubator receive loans of £30-£70k, partly convertible into equity, plus compulsory support. The RCA has established a fund in order to support these businesses (it was originally supported by a substantial grant from Nesta), but needs to be able to recycle the proceeds of sales of or repayments from its businesses in order to sustain the incubator.

The incubator is housed in the recently completed Dyson Building in Battersea which can house around fifteen businesses, with flexible accommodation and meeting spaces, and excellent kitchen/eating space.

The learning programme seems to be very sophisticated, and comprehensive; and each team is assigned a pair of coaches, whom the participants meet every two weeks. Every six weeks they have a review with a larger group of mentors; and they are required to pitch their business every three months to another group of mentors. The RCA has a group of eight ‘coaches’ (mentors), plus half as many more ‘occasionals’; and would like to have a larger and more diverse range of mentors available

Teams sometimes find that one or more of their members are less wholeheartedly committed to their project than others, that other

career interests attract them more than entrepreneurialism, or that their interests in the future of the business do not co-incide with those of  potential investors. And any of these circumstances impede the progress of the business and necessitate the reforming of the team and their re-energising and redirection – often a difficult management task.

Demo Day takes place once a year with around half-a-dozen investors, mainly angels, and InnovationRCA would like to have more such potential investors; but the two-year term of the incubator and the potentially divergent interests of the participants make investing in their businesses more uncertain than some other start-ups. Moreover, the RCA needs to hold its investments under some kind of fund that would handle all the legal and contractual arrangements – which are not within its normal capabilities.

There is evidently a number of issues associated with incubators that run in parallel with academic programmes, not least when they are part of the educational process; and as a leading incubator in higher education, InnovationRCA is wrestling with these.

For descriptions of other aspects of DesignLondon’s work – especially the development of its pedagogical programme, see: http://goo.gl/Yr12c

 

Copyright 2013

John Whatmore                                                                   February, 2013

The Centre for Leadership in Creativity

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A cluster-based ‘Accesserator’

A cluster-based Accelerator…here helping to enable SMEs with innovative products to market to the big companies of this sector – all located close to one another; the process energised both by collaboration and competition

This novel application of the Accelerator in a cluster suggests how SMEs with innovative products can be promoted by a period of intensive support to help disseminate their innovations into organisations in the cluster, where the latter are working both collaboratively and competitively.

While most commonly Accelerators have been about helping aspiring entrepreneurs to develop their ideas into commercial ventures, some, like this one, have been about helping SMEs to grow. They have done so by focusing on the development of strategy (see Qi3 at http://goo.gl/Od6F1), business model (see The Young Foundation at http://goo.gl/ET1zQ), new concepts (see Watershed http://goo.gl/XCTxK), new products (see Plato, Belgium at http://goo.gl/hzBJ5), and new customer segments and marketing (Fintech below).

The FinTech Innovation Lab London is a three-month long collaborative Accelerator, in its third week as I write, in which seven young businesses in IT have been brought together, all of them carefully selected by the senior IT officers in the thirteen big companies in this project (twelve of them large banks) because their ‘products’ might be valuable to them.

The FinTech Innovation Lab, provides its seven companies with office space in the heart of Canary Wharf for these three months, and provides mentors to help them through the process. And a ‘chaperone’ was appointed by the senior IT officer in each company, whose job it is to help them talk to people in their bank (The cultures of the banking industry and the IT industry are quite different, and selling by the one into the other is recognised as a complicated and arduous process.)

A similar ‘Accelerator’ has been run for the last two years with a number of banks in New York – with evident success – enabling them to make use of products or services from other fields which have no necessary relationship to the banking industry.

The role of these ‘chaperones’ is to identify which of these young businesses might have something that would be of value to their company, and to help their staff to get in front of the right people in their company, people who could help them to make use of their products. One person who has experienced this process is said to have commented that his company was able to achieve in the three months what would otherwise have taken two years.

The process is energised by the fact that having committed to the project, each company’s senior IT officer and its ‘chaperone’ are simultaneously collaborating and competing with those of the other companies to get the most out of the process and out of the IT companies and what they have to offer. Every week, one of the big companies makes a presentation in the co-working space, for example about security problems, about their purchasing hoops, about their current challenges etc.

The programme finishes with ‘Demo Day’on 20th March; and hopes will focus on whether it has stimulated growth in the SMEs, whether it has brought innovative ideas into the banking industry, whether it has identified interesting investment opportunities to present to investors; and whether in the longer term it seems likely to inspire entrepreneurs to see potential in the financial services industry.

In addition to the thirteen big companies and the carefully selected companies in the IT industry (several of which are from other countries – reflecting the international nature of the banking industry), the parties to this exercise, all of whom can hope to gain from it and therefore have an interest in its success, are the major consultancy organisation that is managing the process (which has clients in the banking industry) and the predominant landlord in the area, which has provided space for new business nurseries in the hope that among them might be some future tenants. The TSB is making contributions to the programme. And it is formally supported by the Mayor of London.

 

If you are interested to learn more and meet the consultant who is running the process, email me john.whatmore@btinternet.com.

 

John WhatmoreThe Centre for Leadership in Creativity

Copyright 2013