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Kauffman Fellow presentation at Class 14. Field project by Aziz Gilani and Gianluca Dettori

Kauffman Fellow presentation at Class 14. Field project by Aziz Gilani and Gianluca Dettori

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Accellerators in US and Europe Accellerators in US and Europe Presentation Transcript

  • Incubators in US and Europe Speed and scale in capital formation @ Kauffman Fellow Program Aziz Gilani, DFJ Mercury Gianluca Dettori, dpixel
  • Goals of the accelerators & incubators study
    • 1) Provide the first systematic ranking of seed accellerators for use by entrepreneurs when picking a program.
    • 2) Understand if this model is profitable and how scalable , particularly in ‘unsual’ venture capital geographies such as Italy or Texas
  • What is a Seed Accelerator?
    • Key Criteria
    • Notable Seed Accelerator Graduates
    • • Airbnb (Y Combinator 2007)
    • • DailyBurn (TechStars 2008)
    • • Dropbox (Y Combinator 2007)
    • • Foodzie (TechStars 2008)
    • • Heroku (Y Combinator 2008)
    • • Ignighter (TechStars 2008)
    • • Next Big Sound (iVentures10 2008 /TechStars 2009)
    • • Posterous (Y Combinator 2008)
    • • Reddit (Y Combinator 2005)
    • • RunMyErrand (fbFund REV 2009)
    For Profit Closed Terms Less Than 1 Year Paid in Equity 200 entities in the initial map
  • Rewind 6 years back…
    • 2005: Paul Graham starts Y Combinator in Silicon Valley / Boston
    • 2006: David Cohen starts TechStars in Boulder
    • 2007 Reshma Sohoni and Sal Klein launch Seedcamp
    • 2011: around 200 Startup accelerators across the US and Europe, mostly in the course of launching now
    • 2011: Ycombinators assets value 4,7 BN US$
  • The average deal
    • 3 founders
    • 35k to 50k US$ investment
    • 6 -10% equity on average however with big variance (2 - 40%)
    • 3-6 months program
    • The incubator always provides mentorship, hands-on support
    • Often provides for co-working space
    • Demo days, visibility and access to the venture capital ecosystem
  • Some metrics
    • We narrowed down the map to 30 (US) + 8 (Europe) = 38 incubators active or relevant to the industry
    • 533 alumni (US) +85 (Europe) = 618 startups generated
    • 50% of startups have been generated by the top 3 incubators: Techstars (all locations), Ycombinator and Seedcamp
    • 1 out of 6 had qualified financing events. 72 (US) + 26 (Europe) = 98 rounds or exits
  • U.S. Results Rank Program 1 TechStars Boulder 2 Y Combinator 3 Excelerate Labs 4 LaunchBox Digital 5 TechStars Boston 6 KickLabs 7 TechStars Seattle 8 Tech Wildcatters 9 DreamIt Ventures 10 The Brandery 11 Capital Factory 12 NYC Seedstart 13 Betaspring 14 BoomStartup 15 AlphaLab
  • Two different models that work in the US
  • Observations, US
    • The vast majority of Accelerators have neither funding nor liquidity events, bringing their efficacy into question
    • TechStars and Y Combinator have created two viable but different models of operating
    • There are other viable ways of analyzing the data
      • Could have set a different threshold for QFE (lower amounts would have included more angel funding)
      • Could have looked at volume of investment/exits (would have favored accelerators that work with more companies)
      • Could have focused on returns to LPs (accelerators were very reluctant to share this information)
    • There are a lot of “claims” circulating around the industry around success. We focused on verifiable / public data that may have hurt some accelerators due to NDAs around funding events.
  • Main Takeaways US
    • In VC, you must be active in social media to stay relevant to your network
    • Accelerator programs are valued by VCs more for the connection to the venture community than for deal flow
        • Recognized for their educational value to entrepreneurs
    • Y Combinator and TechStars are the “gold standard” of accelerator programs, but have different models
        • TechStars and its followers utilize a mentorship-driven, open and replicable model
        • Y Combinator has a “guru” model, with a closed/exclusive approach
  • EU Results *Currently Not Active Rank Program 1 SeedCamp (UK/Europe) 2 Startupbootcamp / Tetuan Valley (Spain) 3 Startupbootcamp (Denmark) 4 Springboard (Cambridge, UK)* 5 Openfund (Greece) 6 NDCR LaunchPad (Ireland) 7 Propeller Venture (Ireland) 8 Startupbootcamp (Ireland)*
  • Main Takeaways EU
    • Europe is much more complex and diversified with loosely connected ecosystems, that have developed their own darwinian recipes and variations
    • Several relevant players in the European ecosystems where not in the map due to strict criteria application (such as LeCamping, Working Capital, Hfarm, The Accellerator Group, Kima, Garage48, Aalto)
    • SeedCamp is the European “gold standard” of accelerator programs with a Ycombinator model, while StartupBootcamp is following the Techstars model
  • Buzz and some controvercy
    • Techcocktail and Techcrunch covered the story and published the charts.
    • The European Map was presented at NESTA’s Startup Factories event in London
    • 50% of seed accelerators/ incubators started in 2010, we’ll need a couple of years to really figure out what works and what does not work in Europe
    • A more detailed study would be necessary to really get the picture of what’s happening, particularly outside the US
  • Key considerations
    • We did assess a methodology and provided startups with a fairly significant map in terms of where to apply, when they are searching out of 200 incubators
    • Ycombinator, Techstars and Seedcamp are proving they have a viable economic and scalable financial model
    • “ Startup factories” like this can easily generate 50 up to 200 startups per year
    • The good news is that venture capital is flourishing not only in Mountain View, Palo Alto and Boston but also in Boulder Colorado, Austin, Washington DC, Philadelphia, Pittsburg, Seattle, London, Dublin, Copenhagen, Madrid and Athens
  • Zoom forward 5 years… where is this going?
  • The “what if” scenario and some open questions
    • There are probably 200 relevant incubator around the globe active right now, generating at least a rate 500 startups per year
    • How far/fast can it go? How much can it scale?
    • Can it be extended to other innovation sectors besides Internet and software?
    • How many stars per year? How much external capital raised? How many entreprenerus created?How many jobs will be generated?
    • How capital efficient is this?
  • The future, next objectives
    • Use data as background research for accelerator case studies and better investigate successful models
    • Put together a Working Committee for the 2011 Edition of the Study
    • Extend the map to Asia, Latin America and Africa
    • Adapt criteria and ranking algorithm to account for the different ecosystem peculiarities and models adaptation
    • Launch the Incubator International Awards (October 2012, Italy)
    • Proposed new extended map criteria
    For Profit/No Profit entities Closed Terms Less Than 1 Year Stipend value /Charge fees /Seed investor
  • Annexes
  • Project Approach
  • Methodology Qualitative Analysis   Evaluation Factor Weight Mentorship Quality 12.5% Participant Quality 12.5% Demo Day Quality 25% VC Awareness 50%     Overall Ranking   Evaluation Factor Weight Stipend Value 5% Equity Stake Taken By Program 10% Size of Alumni Network 10% Qualified Financing Events ($350,000 within 1 year of program completion) 25% Exits 25% Qualitative Evaluation 25%
  • Measurement criteria
    • Qualified Financing Events – 25%
      • Virtually all Accelerators end their programs with a “Demo Day” for VC funds
      • “ Investor and Demo Day is the culmination of three months of hard work by our companies” David Cohen
      • Criteria: What % of companies raise $350K within 12 months?
    • Founder Liquidity Events – 25%
      • Did the founders ever cash out?
      • “ Our definition of success is that the founders get rich” Paul Graham
      • Criteria: What % of companies exit for at least $1M?
    • Many Accelerators had neither QFEs nor Exits
  • Measurement Criteria
    • VC Pereption – 25%
      • How do VCs perceive startups from an accelerator?
      • Panel: 10 VCs who have invested in accelerator companies
      • 4 Criteria
        • VC Awareness
        • Mentor Quality:
        • Past Company Quality
        • Demo Day Quality
      • “ Our goal is to get founders from zero to VC fundable” Bootup Labs
    • TechStars has high brand value with VCs, possibly due to LP structure focused on VC inclusion
    Rank Accelerator 1 TechStars Boulder 2 TechStars NYC 3 TechStars Boston 4 TechStars Seattle 5 Y Combinator 6 Excelerate Labs
  • Measurement Criteria (US)
    • Accelerator Characteristics – 25%
      • Stipend Value: $0 - $50K
      • Equity Taken: Surprising Variance, 5-40%
      • Alumni Network Size: 0-209
    • Some Accelerators deviated very far from the norm in terms of Stipend, Equity, and Alums
  • Accelerator Rankings (US, Spring 2011) Rank Overall Program 1 TechStars Boulder 2 Y Combinator 3 Excelerate Labs 4 LaunchBox Digital 5 TechStars Boston 6 KickLabs 7 TechStars Seattle 8 Tech Wildcatters 9 DreamIt Ventures 10 The Brandery 11 Capital Factory 12 NYC SeedStart 13 Betaspring 14 BoomStartup 15 AlphaLab Rank QFE   1 Excelerate Labs 70% 2 KickLabs 50% 3 Tech Wildcatters 40% 4 TechStars Boulder 37% 5 LaunchBox Digital 23% 6 The Brandery 17% 7 Y Combinator 15% 8 TechStars Boston 15% 9 DreamIt Ventures 11% 10 Capital Factory 10% Rank Exits   1 TechStars Boulder 15% 2 LaunchBox Digital 14% 3 Y Combinator 13% Rank VC Perception 1 TechStars Boulder 2 TechStars NYC 3 TechStars Boston 4 TechStars Seattle 5 Y Combinator 6 Excelerate Labs 7 NYC SeedStart 8 LaunchBox Digital 9 DreamIt Ventures 10 Capital Factory Rank Alumni Companies 1 Y Combinator 209 2 TechStars Boulder 41 3 DreamIt Ventures 35 5 LaunchBox Digital 22 6 AlphaLab 21 7 TechStars Boston 20 8 Betaspring 15 9 KickLabs 12 10 LaunchHouse 12
  • Acknowledgements
    • Prof Yael Hochberg and Kelly Quann KSM ‘11 from the Kellogg School of Management helped with data collection and provided guidance on the analysis.
    Frank Gruber published the first summary of our analysis which was subsequently published by various other media outlets. Marco Ciccolini, for having worked out the data collection and number crunching of the European dataset. NESTA for having pulled together the European seed ecosystem at ‘Startup Factories’ in London and Mike Butcher of Techcrunch for covering the story @TechCrunch