All posts by “jed

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$10 Billion

Ten years after the seed accelerator model was pioneered, Seed-DB has now identified over $10 billion that has been invested in accelerator graduates.  Over 200 seed accelerator programs around the world have funded nearly 5000 companies, and over 300 companies have already exited for a total of over $3.5billion.  The total valuation of companies that have come through accelerators reaches in the tens of billions of dollars.  If you don’t believe that accelerators are a relevant way for early-stage technology companies to get funding and started… you’re sadly mistaken.

How has this happened?

To quote Ernest Hemingway (via Chris Dixon’s great post): “Two ways. Gradually, then suddenly.”

The first accelerator, Y Combinator, only started ten years ago.  Techstars’ first class was in 2007, DreamIT Ventures in 2008, AngelPad in 2010, and 500startups in 2011.  Most of these only funded handfuls of companies to start.  Those early starts have compounded to create a juggernaut of high-quality startups getting funding.  And as mature growing companies are able to find plentiful later-stage capital in the current environment, large funding rounds are becoming commonplace.  Here’s what’s happened over time:

10yearsacceleratordata

Top accelerators are now brands themselves, and their stamp of acceptance and access to their networks is self-reinforcing.  While $10billion in total funding is an impressive milestone, companies that have gone through accelerators comprise only a small portion of the total venture funded startup scene.  There is a lot of space for their influence to grow.

Top tier programs

76% of all venture capital funding of seed accelerators go to graduates of just five accelerator programs: Y Combinator, Techstars, 500startups, Angelpad, and DreamIT Ventures.  But there are three parts to this: quality, quantity, and longevity.

An accelerator needs to be of a sufficient quality in order to help their companies become investable.  That accelerator needs to fund a relatively high number of startups in order to have a meaningful impact in aggregate.  (Either by funding more per year, or steadily accumulating a portfolio over time.)  The longer a program has been in operation the bigger their companies can grow.

This is not to say that new programs won’t break into this top tier… just that they need more time.

Funding – a Power Law in action

If you search for [venture capital] and [power law], you’ll see that venture capital is an industry known to follow a power law… and power laws encompass the phenomenons of the “long tail” and the Pareto principle (aka 80-20 rule).  This holds true for the world of seed accelerators, too.  The following is a chart of the funding that the 939 companies that have raised the most venture capital after going through an accelerator (so ~20% of all accelerated companies).

Acceleratorfunding normal

This is a pretty extreme power law; Dropbox has raised over $1billion in funding alone, but hundreds of companies have raised between $1million and $10million in funding.  (And thousands have raised seed rounds of <$1million).  Let’s see what happens when we check for a real power-law relationship by plotting both axes on log scales.

Log log acceleratorfunding

The result is a straight(-ish) line, which means venture funding of accelerator companies is a power law relationship.  (The math to prove it is fairly complicated and outside the scope of this post.)

But… do accelerators accelerate?

This is a very difficult question to answer.  Luckily there are some very smart researchers trying to quantify this.  Ben Hallen, Chris Bingham, and Susan Cohen have done some great work in trying to answer this question.  Essentially they’re trying to determine if companies that have gone through accelerators reach key milestones faster than companies that haven’t gone through accelerators.

They haven’t yet published their paper, so I’m not going to steal their thunder.  But their work should put the analytical horsepower to confirm (and disprove) various theories on accelerators.

I want to note that Yael Hochberg is another researcher in this field to watch; she and Susan Cohen lead the Seed Accelerator Rankings project.

Data Disclaimer

All data on company funding comes from Crunchbase.  Some companies don’t enter funding information in Crunchbase, and others don’t even have Crunchbase pages; in those cases the total funding would be even larger.  Additionally, I know a number of accelerators have funded companies that aren’t yet listed on Seed-DB; I continually work with programs to help make sure data is accurate but inevitably the data for many companies will be missing.

Also, I pulled the data above earlier this week in order to write this post; it’s already out of date with the funding rounds raised this week.  (Three Techstars companies announced over >$100million in funding within 48 hours this week, for example.)

Personal Disclaimer

I did my first research into accelerators in the summer of 2009, and created Seed-DB in the summer of 2012.  One year ago I started working for Techstars as a Product Manager.  This post represents my personal views, and not those of Techstars.  All data comes from Seed-DB alone.

[Check out the discussion on Hacker News]

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Going to California…

Golden Gate Bridge

My wife and I have recently made a big decision.  After over eleven years living in London, we’re moving back to the US… to the San Francisco/Bay Area of California!

Wait… what?!?

If we haven’t caught up with you in a while, my wife started working for Google about a year ago in London.  A few months later, I left Google to join Techstars (but still based in London).  We’ve both been really, really happy in our respective jobs, and the changes have opened up new opportunities for both of us.  At Techstars my role has shifted, and I’m leading a product team building applications and tools to help our founders leverage the Techstars network and “do more faster.”  And at Google, Annie has been kicking ass and been offered an opportunity to transfer within her team for an important role… but one based in California.

But why??

Frankly, it’s great for both of us professionally to make this move.  But it’s not just that, it’s also to be closer to family.  For any of our immediate (or even distant) family to visit us, it takes them 6-10 hours of flying and a substantial amount of cash for the transatlantic flight.  As our daughter grows, we want her family not to be some abstract concept that she sees on the other side of a FaceTime, but people she knows and loves as she grows up.  (We’ve also gotten to be rather jealous of our British friends whose families can help with babysitting far, far easier than ours can!)

There’s a myriad of reasons why we’re doing this, and it’s a bit different for Annie and me.  (They range from more sensible school options to being better able to buy a home for ourselves to seeing our UK friends move to the countryside…)  But we’ve considered them all, and a move to California is what’s best for us right now.

How are you feeling about this?

I’m very excited for the move, but I’m very sad and frankly a little anxious.  

I’m excited for new opportunities (professionally and personally), excited to spend time with old friends that we haven’t spent much time with in years, and excited for new experiences in general.

I’m incredibly sad to be leaving our friends here in London and the UK.  Annie and I have spent the majority of our adult lives in London, and we’re gutted that we’re going to have to say goodbye (at least for now) to our friends.  That said, we’ve committed to ourselves to visit as frequently as we can.  (Probably for Henley every year at least!)  And we’ll certainly be back at some point to live in the UK again.

Finally, I’m anxious because there are a lot of things I’ve never had to deal with in the US… like health insurance!  (Between the Navy and the NHS here in England I’ve been spoiled when it comes to healthcare.)  Frankly, I think I’ll feel like an ex-pat in my own country for quite a while.

When is this happening?

We’re wheels up from the UK at some point in the last couple weeks of March… so less than six weeks away.  (Yikes!)

Whoa… I think I need a drink

And I’d say I agree.  In the selfish interests of seeing as many people before we go, we’re going to have a party on the afternoon of Saturday, March 7th.  Get in touch if you’d like to know more details; we’d love to see you there!  :)  (A Facebook invite will be going out shortly.)

Finally, I’ll just leave you with this brilliant (and relevant) song from a legendary band…

 

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The weird reporting of YouTube stats

Here’s a paragraph from a recent New York Times article on Susan Wojcicki and YouTube:

Smosh, a pair of 20-something lip-syncing comedians, have roughly 30 million subscribers to their various YouTube channels. PewDiePie, a 24-year-old Swede who provides humorous commentary while he plays video games, has a following of similar size. The list goes on and on. For the sake of perspective, successful network television shows like “NCIS: New Orleans” or “The Big Bang Theory” average a little more than half that in weekly viewership.

My problem? – Why does any reporter try to compare YouTube subscriber numbers with actual television viewer numbers??

To be fair, the author does mention this several paragraphs later:

But advertising on YouTube isn’t like advertising on television. Subscribers don’t translate neatly into viewers.

But that is a woeful understatement.  YouTube subscribers have simply pressed a button once.  TV weekly viewership actually has watched the content.

I just logged into my own YouTube account and saw that I’ve subscribed to 115 different channels, everything from TED Talks to the America’s Cup to CGP Grey (who’s awesome!) to Matthias Wandel’s woodworking channel.  I rarely watch the vast majority of the videos from any of these channels.  The exception would probably be CGP Grey, who’s videos are so awesome that I set e-mail reminders to make sure I don’t miss them.  So me being counted as a “subscriber” for any of them is essentially meaningless… a vanity metric.

So what’s my point?  Beware YouTube subscription numbers, especially when they’re being compared to TV viewers.  What’s the best comparison?  Actual views of video content…  It’s definitely not easy to make that comparison, but whoever said life (and journalism) was supposed to be easy?

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Startups want *operators* – what about Special Forces?

First thread:  I try to go out of my way to help current and recent military members to transition to civilian jobs and careers.  I remember how tough it can be to translate the very rich experiences I had in the Navy to something that most employers could understand.  And it’s usually tougher the longer you stay in the military.

Second thread:  What I see pretty much each day at Techstars is the value that startups place in execution.  The people who can consistently get things done and fight their way through difficult situations are hugely valued.  They can get far more done per dollar and thus have a greater chance to both survive and thrive given each incremental investment dollar.

These two threads collided for me today.

Special Forces?

I’ve gotten to know a few different special forces operators in my time during and after the military.  My boss for about a year was a Navy SEAL that went on to command a Navy SEAL team.  They’re both tremendous individuals, but also strangely normal people, too.

Today I met a Special Forces operator, with over ten years in the SAS.  (Equivalent to Delta Force, SEAL Team Six, etc.)  He’s a really smart and accomplished individual, who for years has done nothing but operate.  He’s gone on virtually no notice to countries where he and a team would be required to evaluate current situations, make plans, and execute those plans, often under tight time pressure and imperfect information.  And in places where if you screw up, you (and others) could die.

This person is also interested in branching out from the traditional security/policy/government roles that recent military retirees often fall into.  (This is a bit unusual, but I think very highly for him in proactively thinking and researching how to make the switch.)

I think this particular person is a specific example of a broader idea.  Special forces operators regularly “retire” from the military in their 20s, 30s, and 40s with incredible expertise, but often little commercial experience.  So while the guy I talked to today could probably easily step into a COO role and has the operational expertise to warrant the role, his lack of direct business experience means that he wouldn’t ever be reviewed.  It feels like the world of startups is missing out on a category of potential key employees, that could radically improve their chances for survival, because they can’t translate individuals’ military experience into something startups understand.

(Side notes: Techstars operates Patriot Boot Camp for US military and military veterans, and I think highly of the program.  We’ve also invested in at least one company that was founded by a Navy SEAL: FitDeck, founded by Phil Black, which went through the Nike+ Accelerator, powered by Techstars.)

My questions

Broadly – How can/should startups think about hiring people with non-traditional operations expertise?  Would startups be willing to hire special forces operators?  Would they be willing to take someone on for a 3-6 month trial to evaluate their operations ability?  What would it take for startups to seriously consider special forces operators on a regular basis?

Specifically – What roles should a person like this consider?  What are the job titles he should be on the lookout for?  Should he go get an MBA and use that to help transition?

 

I would love to hear your thoughts.