SXSWi – ‘Seed Combinators’: Startup Incubators 2.0

About Seed accelerators and those that help start-ups succeed through mentoring and small amounts of money. Presentors: @techstars, @capitalfactory, @venturehacks, @ycombinator

Define Seed Accelerator:

Find a whole bunch of startups at once, with a small amount of money, make them move to you, have events, give advice, and at the end, you have a “demo-day” where they can pitch to investors to make money. The goal is to help early stage startups - mentorship and community. The money isn’t the most important part, it’s helping. Creating jobs.

How to pick the right seed combinator

Location can be very important. Metrics: it depends on what you do and who you want to work with - working with similar businesses and customers. Paul Graham says that it’s two parts: if you’re geographically constrained, pick the closest, otherwise, pick the “best”. It’s like picking a girlfriend (the one who’s right for you) or a surgeon (the best - he thinks this is the best). Look at the mentors and see how they can fill gaps in your company.

What they aren’t - misconceptions

Don’t look at just the money - look at the network, and the network of investors around the program, not just valuation. It’s also a myth that it’s for really young people - the median age is about 27. Also, people need to value the alumni network more - their start-up can fail and they could hop to another successful start-up.

What is the subjective reason to pick the companies?

They’re looking at the relationship between the co-founders, the commitment to the program - an intellectual captcha has been added to their forms. It’s not about the idea - it’s about the founders. “A pretense to having a conversation”. Which makes it complicated because people change. It’s also about “awesome”. Not the idea, it’s the people. People they really want to help out. Your problem also should be valuable, and you should be the right person to solve it. Smart people, energetic, but also with integrity. As they go through the interviews, they want to be more and more excited about the company you want to build. Be open to change - not to say, you can’t be stubborn, but be willing to accept advice.

The brand of the seed accelerator

YCombinator initially had no brand, but now it does. Others are newer and are working on it. Any smart investor will care more about your startup rather and the brand of accelerator that you joined. VCs are now doing a lot of 100-200k “little” investments. $5,000 is the new $5,000,000.

What are the hard costs for the companies applying?

“The only costs are opportunity costs”. “It might make your life cheaper because you’re not spending on leisure activities”. They’re paying you, so the cost is negative.

How do the accelerators find PR? Is it a hard sell?

YCombinator has press calling them up all the time. How important is local press? “Is there such a thing?” - press can be a negative ROI for start-ups - starts competitors. “Being in TechCrunch isn’t going to get you users, but investors are going to read it.”

How important is location? Silicon Valley vs. Boston vs. etc?

It can be done anywhere but you need every advantage you can get - so Silicon Valley can be a great place to be. You get a real, tangible benefit to being in SV. But there are advantages to not being in SV (and applause from the crowd) - it’s very expensive, it’s easier to stick out, and it depends on your skill-sets. Every community has it’s own advantages and disadvantages. Boston investors were more slow moving than Silicon Valley investors.

What are the commonalities

They all want to make it easy for entrepreneurs.

Questions

Are they looking for quick-sells?: No - they love it if you’re the next Larry and Sergei. They don’t want service-based businesses, but businesses that scale are valuable. They won’t force you to sell.

Have you ever funded anyone over 40?: Yes.

What do they think of entrepreneur residence programs?: Investors are doing more deals - they’re looking to spend money without sitting on boards.

These aren’t all of the questions… some of them ramble. Hmm. Check out the conversation on Twitter!