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$20 Billion – and a relaunch of Seed-DB

Just 11 years after Y Combinator funded the first handful of companies in the first seed accelerator, over $20 billion has been raised by accelerator graduates.  For those keeping track at home, this is just 16 months after accelerator graduates passed the $10 billion raised milestone.

Over $5 billion in exits have already been achieved by accelerator graduates.  Companies that have yet to exit are collectively valued at over $80 billion.

Early stage startups continue to be a power-law phenomenon.  Despite funding over 6,000 companies in nearly 200 programs around the world, 75% of the investment dollars have gone into accelerator graduates of just four programs: Y Combinator, Techstars, 500 startups, and Angelpad.

That said, this stat isn’t as dramatic as it might appear.  Those four programs have collectively funded over 40% of the 6,000+ graduates.  Essentially, they’re prominent because they figured out ways to scale effectively, either through bigger class sizes or more frequent programs.  Between these programs’ alumni and mentor networks, and reputational effects, they’re able to consistently find, fund, and mentor a higher-achieving tier of startups.

And while you obviously don’t have to go through an accelerator to succeed; it helps.  Pitchbook found that one-third of startups that raised a Series A round in 2015 went through an accelerator.  But only about 1,200 companies per year went through an accelerator in 2013, 2014, and 2015, and there were far more than 3,600 companies started each of those years.  So while companies that go through an accelerator are a small portion of early-stage startups (likely 10% or less), they are a much larger percentage of successful startups (33%).

Why Seed-DB?

One of the big reasons I created Seed-DB is because the world of accelerators is plagued by anecdata.  It’s easy to remember the accelerators that helped the B2C companies that you may use today; it’s harder to know about accelerators behind the B2B hard-tech companies that don’t get a lot of press but are growing like crazy.  I also believe there are some great accelerators (or at least accelerators that have found great companies) that don’t get the attention they deserve.

For example, did you know the Flashpoint program at Georgia Tech funded two companies that have both gone on to raise over $100million each?  Did you know the third biggest exit of an accelerator company (for $350million) came from AngelPad?

Seed-DB exists to give entrepreneurs the data on which companies have been through which programs, in order to make more informed choices.  To answer the questions:  is an accelerator right for me? Which accelerator is right for me? And why?

Seed-DB – relaunch

Today also marks a re-launch of Seed-DB!  While the user interface hasn’t changed substantially (I’m not a strong front-end developer), the data structures behind the scenes have changed substantially.

Charts & Tables

Tabular data is valuable, but charts bring data to life.  Seed-DB now has a dedicated “Charts & Tables” page to showcase this information.  There are four key charts:

  • Total number of accelerator companies over time, updated monthly
  • Total funding (in $) of accelerator companies over time, updated daily – now > $20 billion
  • Number of funding rounds over time, updated daily
  • Number of accelerator cohorts/batches over time, updated monthly
  • Log/Log chart of company total funding (for companies that have raised >$500k)

You can see from these charts that there was a significant change in trajectory with more companies going through accelerators starting in 2011, which increased further in 2012.  The chart of total funding has a significant trajectory change in 2014, which increased again in 2015.

The same page also has some of the most popular tables:

Focus on Cohorts

The biggest data structure change has been a pivot on accelerator cohorts or batches.  Previously each accelerator was a flat list of companies they had funded, though Seed-DB did store the month they started with at the program.  Now each accelerator shows the highlights of each individual cohort, and then you can drill down further to see individual companies in that cohort.  (You can toggle back to the old view if you want, though.)

This is significantly faster for most users, but also shows a new layer of detail.  It’s clear to see that one of the most successful YC companies to date (AirBnB) was in one of the smallest YC classes ever, in the middle of the financial crisis in Jan – Mar 2009.

Additionally, this cleans up the user experience for accelerators that run multiple programs in different cities or verticals.  (Specifically, programs like Techstars, DreamIT Ventures, Startupbootcamp, Wayra, etc)  Instead of each of these programs getting listed as separate accelerators, the various cohorts are all grouped together in one overall accelerator.

Sign Up for Updates

Interested in how accelerators progress over time?  It’s been just 16 months for accelerator companies to raise $10 billion; would you like to know how quickly the next $5 or $10 billion is raised?  You can now click Login, OAuth with Google or Facebook, and click one button to sign up for updates on when high-level milestones are reached.  (Your email address won’t be shared, and updates will be infrequent.)

You can also sign up for the Seed-DB newsletter, which will have more analysis and long-form updates, and is sent even more infrequently.

Better on Mobile

While I won’t say Seed-DB is truly mobile optimized, the tables of data in Seed-DB can be used far more easily on mobile than they ever have before, and the new charts work great on mobile, too.  (Thanks, d3.js!)

Patreon Campaign

Finally, I’ve kicked off a Patreon campaign to help support Seed-DB.  If you find Seed-DB valuable for yourself or the startup community, please consider supporting the campaign!  No funds will go to Jed; they will all be used to either pay monthly infrastructure costs, or go to contractors to help with data collection.  In other words, any contributions only go to keeping Seed-DB running and improving data quality.

Personal Disclaimer: I did my first research into seed accelerators in the summer of 2009, and created Seed-DB in the summer of 2012. Two and a half years 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.

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Frustration with a taxonomy for startups

tax·on·o·my – noun – the branch of science concerned with classification, especially of organisms; systematics

I’m frustrated with the current lack of any standard taxonomy for early stage startups.  Chalk it up to a little bit of obsessive/compulsive behaviour, the desire to better compare like-for-like amongst startups, my years of experience in industries where these taxonomies existed, and also trying to make better connections between the corporate partners and friends of Techstars to the Techstars portfolio companies.  Startups are messy and change ridiculously fast, so a taxonomy will never be as rigorous as what exists in the world of biology.  But it doesn’t mean we shouldn’t try!

Angellist probably has the best structure of markets that I’ve seen so far, but the way Angellist structures these markets behind the scenes is actually a fairly deep web of interconnected markets.  While that makes sense in that a graph represents how markets are related to each other, the way they’ve built the graph can make it difficult to analyse startups and markets more broadly.

Not only that, but I think startups are complex enough that there should really be multiple dimensions in building a taxonomy for them.  These are the dimensions I’ve been pondering recently:

  • Market (ie, FinTech, HealthTech, Advertising, Infrastructure, etc.)
    • This is where there needs to be multiple layers of “markets”
  • Revenue model (Advertising, commerce, subscription, etc.)
  • Platforms (desktop, mobile/iOS, mobile/Android, hardware)
  • Orientation (consumer, enterprise, marketplace)

Why am I posting this?  Frankly, I’d love any and all feedback.  I’d like to get to a point where there’s a taxonomy that helps people like me understand and directly compare and contrast startups that are doing similar things (in different markets), or different things (in similar markets), or any combination thereof.

If you’re interested in this project, or would like to help, please comment below or get in touch with me directly.

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Highlights from the HedgePo conference

In late October, I had the opportunity to speak at (and attend) a CIO Summit in Gleneagles, Scotland, which was put on by HedgePo.  (HedgePo itself is a startup that connects investors and family offices with a vast field of investment opportunities.)  All of the talks were 20-minute “TED”-style talks, and many of them were quite interesting!  In my talk, I spoke a bit on how Techstars evaluates the very early stage companies that apply to our programs.  But I wanted to provide a little re-cap of some of the more thought-provoking talks I saw.

Phil Carson – former SVP of Atlantic Records

Simply put, Phil Carson is a legend in the music business.  He personally signed AC/DC to Atlantic Records, toured the world with Led Zeppelin (coordinating promotion of their albums), and has managed artists like Robert Plant, Jimmy Page, Foreigner, and Ronnie Wood.  He was close colleagues with the Atlantic Records founder (Ahmet Ertegun) and promoted the Ahmet Ertegun tribute concert at the O2 in London… you know, the one where Led Zeppelin played a full set for the first time since John Bonham died?

I had the chance to speak with Phil at a dinner before the main conference began, and he’s just a wealth of data and stories about the music industry.  We talked about Led Zeppelin recording their first album at Olympic Studios in London, and how Taylor Swift will have been the only artist to sell over a million records in all of 2014.  And if she didn’t, it would have been the first time in decades that no one would have sold a million records in a year.

In his talk, he gave a little more background on signing AC/DC.  They were an Australian band, but Australian artists at the time had very little (if any) success outside of Australia.  One of the female assistants who worked for Phil at Atlantic Records had a brother who managed them in Australia, and convinced him to consider signing the band.  After checking out a primitive video of AC/DC performing, he signed the band to a 15 album deal for just $25,000.  (Phil claimed it was the most profitable record deal ever!)  As he said, “There is money in the record business… you just need a pretty girl to give it to you.”

Phil also gave some great perspective about how the user experience in the music business has changed.  In the 1950’s a single cost 99 cents, which equates to about $8-9 in today’s money.  But they still only cost about 99 cents, so artists are making much less money from album sales.  At the same time, the tour revenue for top artists is going up massively.  But overall Phil is actually fairly negative about the record industry.  As he titled the talk, “The Music Business is Alive & Well, and Living in 1947”.

Professor Tim Jenkinson – Professor of Finance, University of Oxford

Professor Jenkinson talked quite a bit about the performance of private equity and venture capital funds.  He’s co-author of the paper “Private Equity Performance: What do we know?” which is the data from which he based his talk.

But out of all the data he shared and conclusions he made, one stuck out to me massively: if an investor were to invest in every first time venture capital fund, that portfolio’s performance would be top quartile among venture funds.  The illustrates the fascinating dynamics in venture investing.  First time funds have a hard time raising money from LPs because they have no track record.  But those that do appear to do particularly well in their first fund, perhaps because their first fund sets a massive benchmark for their ability to survive in the future.  So while any individual first-time fund looks even riskier than average, collectively they perform very well.

Professor Mark Most – Maastricht University

Professor Post’s talk blew my mind a little bit.  If you search for his name, you’ll see quite a few results with his research.  He and his team have developed a way to “grow” meat in-vitro.  The impact of this is transformational… in today’s world, a huge amount of resources around the world go toward meat production.  Vast acreage of farmland go just to growing food that will be fed to cattle, and the cattle themselves take up large tracts of land in addition to consuming that food.

The technology Professor Post has created takes a small biopsy of muscle from a cow, and then replicates that to “grow” meat.  The meat is literally the exact same genetically as the cow it was taken from.  Right now, they are only able to replicate the meat, which means that the traditional fat in the meat doesn’t exist.  That’s the next step in their development of the technology.

Professor Post estimates that this method of creating meat will be production-ready in 10 years.  Even if you’re pessimistic on timelines or cost, it is very feasible that in a generation the entire meat industry will be transformed.  This could mean that hundreds of thousands to millions of acres of farmland would open up for other crops.  It could mean the loss of thousands (or tens of thousands) of jobs across the supply chain from farm to table.  But all of that said, it still strikes me as a hugely positive step for society, particularly as rapidly growing societies (China, for one) consume more and more resources.  This technology could radically reduce the resources required to maintain our existing standard of living, and I think that’s a very good thing.

Scott Jacobs – Generate Capital

Scott was a co-founder of McKinsey & Company’s global CleanTech practice, and is now a cleantech investor.  He was clearly a very smart guy, and talked about how many cleantech investment opportunities are isolated and treated in silos, such as solar energy or wind energy, etc.  But really, all of these environmental risks are correlated, and that thematic investment across sectors makes much more sense in the world of sustainability.

Gregory Perdon – Co-CIO of Arbuthnot Latham

Gregory’s talk piqued my interest because he spoke about something I knew nothing about: the housing market in Denmark.  He provided some persuasive data as to why Denmark’s housing market is f**ked, calling it a “fake haven” instead of a “safe haven”.  Apparently this particular market has been stable for many, many years but recent regulation and market movements have actually caused severe problems in its foundation.  The Q&A after this talk was also memorable when one of the academics in the audience asked him, “If you’re so smart, why aren’t you rich?”.  He replied first “How do you know I’m not rich?”, quickly followed up by stating that he and his firm believed strongly in the thesis he presented, and that they had made trades such that if they were correct they stood to make quite a lot of money.

Dr. Ayo Salami – CIO of the Duet Africa Opportunities Fund

Dr. Salami gave the most passionate talk of the entire conference, and I was massively impressed by him.  He packed in a lot of content and data, but the fundamental message was that Africa is on the rise.  He also beat the message into people that Africa is not one market or country, and in addition to that, African countries are not correlated!  Unlike Europe, where economies are highly linked, that isn’t the case in Africa.  You can have one country with a chaotic economy right next door to a country with a very modern economy, and they fundamentally don’t affect each other.

Instead of summarising his talk, I’d just suggest that you watch it in the embedded video here:

Finally, I’d like to say thank you to the three other “startup” speakers at the event:

All three of these guys has lots of good things to say; I just took fewer notes since their messages were familiar to me.

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New Seed-DB research published

Seed-DB has been a member of the Accelerator Assembly since the organization began last year.  The Accelerator Assembly is a “Startup Europe” initiative funded by the European Commission, but importantly is an industry-led network.  It was founded by seed accelerators in Europe (Seedcamp, TechStars/Springboard, Bethnal Green Ventures), as well as Startup Weekend, Seed-DB, and several others, with strong support from Nesta.

One of the tasks that this group of organizations agreed to was to do two pieces of research.  The first was on the overview of the seed accelerator ecosystem, particularly as it applied to Europe.  The second was on the results and impressions from the startups that graduated from accelerators.  Seed-DB (and specifically me) was tasked with combining quantitative analysis, largely based on Seed-DB data, with qualitative research based on surveys of accelerators and startups.  THANK YOU to all of the accelerators and startups that answered the surveys… there is clearly survey fatigue amongst accelerators and startups world-wide, so I appreciate your time.

Both reports can now be found and downloaded from the Accelerator Assembly research page.

These reports are somewhat limited in scope, because the European Commission has very specific items that they required us to study.  Despite this, I think there are some insights that may be useful for accelerators and startups alike:

Seed Accelerator Ecosystem paper

  • Size of accelerator ecosystem: The European accelerator ecosystem makes up a smaller proportion of the number of total companies funded (20.3%) than the number of programs world-wide (27%).  This is because all of the programs that accept significantly larger class sizes (like Y Combinator, 500startups) are located in the Americas.
  • Size of job impact: Based on some reasonable assumptions, the number of jobs shown on Seed-DB is likely only 50% of the total number of jobs created by seed accelerator graduates.

Startups paper

  • The top two reasons that startups cite as important benefits are: 1) Mentorship / Coaching / Feedback, 2) Network / Alumni / Prestige.  But one of the top drawbacks of accelerators cited by startups was also mentoring!  It’s clear that mentoring is a highly valued aspect of a seed accelerator program, but when done poorly can be damaging to startups.
  • Another top drawback is the focus on Demo Day.  As seed accelerators proliferate, the number of interested/qualified investors at each event will quickly diminish except for the top programs.  Spending significant time on Demo Day when there’s no clear benefit to the startup detracts from the startups’ experience.
  • When asked how much equity a startup would be willing to give their accelerator even without any funding, nearly 80% gave non-zero answers, with 55% stating between 1-6% equity.

Please do have a look at both papers when you have some time.  And as always, get in touch with me directly if you have any questions or comments.