All posts filed under “Highly Recommended

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

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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$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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What I struggle with every day…

Seth Godin truly nailed it on the head today with a short blog post titled “In and out“.

That’s one of the most important decisions you’ll make today.

How much time and effort should be spent on intake, on inbound messages, on absorbing data…

and how much time and effort should be invested in output, in creating something new.

There used to be a significant limit on available intake. Once you read all the books in the college library on your topic, it was time to start writing.

Now that the availability of opinions, expertise and email is infinite, I think the last part of that sentence is the most important:

Time to start writing.

Or whatever it is you’re not doing, merely planning on doing.

I grew up loving reading, loving learning and this has transformed me into someone that constantly juggles half a dozen books, a couple magazines, a never-ending Twitter feed and a truly never-ending Google Reader.  But as much as I enjoy it, when I step back I realize that I really love doing something about what I’ve learned.

The problem is saying “enough is enough”, stepping back, and taking action.

It feels like I’ll never get the balance right, but I try to get better every day.

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The Checklist Manifesto – A hugely important book

Back in 2007 I read a fascinating article called “The Checklist” written by Dr. Atul Gawande in the New Yorker. Atul Gawande is a practicing surgeon, MacArthur Fellow, Rhodes Scholar and professor at Harvard Medical School and Harvard School of Public Health. The article described how a doctor convinced a group of hospitals in Michigan to do a wide-spread trial of a simple experiment: a checklist. The checklist aimed simply at making sure staff completed five key steps to limit central line infections, an unfortunately common source of infections in hospitals.

The result?

In one hospital:

  • 10-day infection rate went from 11% to ZERO
  • Prevented 8 deaths
  • Saved $2million in costs

Across ICU’s in Michigan:

  • In three months cut infections by 66%!
  • Typical ICU cut infection rate to ZERO
  • In 18 months, prevented 1500+ deaths
  • In 18 months, saved $175,000,000

These are amazing results, and his book on checklists, “The Checklist Manifesto,” was recently published. Click below to order it from Amazon.

This book is inspiring, educational, engaging, riveting and fascinating. It’s extremely well-written, and is a fairly easy read. I’ve never written a blog post immediately after finishing a book, but I am now because not only is it GOOD, but this book is IMPORTANT.

Dr. Gawande led a huge study of a “safe surgery” checklist, a simple set of steps to be checked in each surgery. It was used and studied in eight hospitals: four in the developed world (US, UK, etc.) and four in the developing world (Tanzania, New Delhi, Jordan, Manila). Thousands of patients were studied for months before and after checklists were implemented. The results?

  • Rate of complications fell by 36%
  • Deaths fell by 47%
  • Infections fell by nearly half
  • Even in advanced hospitals in developed world, complications were decreased by one-third

I mean…. WOW! Cutting infection rates and death rates in surgery by half (with marginal differences between developed and developing countries) is simply incredible.

But here’s a choice quote from the book:

Take the safe surgery checklist. If someone discovered a new drug that could cut down surgical complications with anything remotely like the effectiveness of the checklist, we would have television ads with minor celebrities extolling its virtues. Detail men would offer free lunches to doctors to make it part of their practice. Government programs would research it. Competitors would jump in to make newer and better versions. If the checklist were a medical device, we would have surgeons clamoring for it, lining up at display booths at surgical conferences to give it a try, hounding their hospital administrators to get one for them – because, damn it, doesn’t providing good care matter to those pencil pushers?

Checklists are powerful, and not just for surgery. Gawande writes about data from investment managers and venture capitalists that shows that those that use checklists are much more successful than those that don’t. They’ve been used in aviation for 70+ years, ever since airplanes became so complicated as to be dangerous without checklists. The modern construction industry uses checklists to ensure their projects are safe and properly constructed.

I’m very familiar with checklists; operating a nuclear reactor in a US Navy submarine means you live with checklists in everything you do. But I accepted it without too much thought since we had no idea there was any other way of running such a complicated machine. It’s amazing to me that other complex professions don’t also use the same procedures.

Checklists are threatening to many people and professions. Using them implies that professionals don’t know what they’re doing, that they don’t have the ability to do their jobs. Even with the results described in surgery above, many surgeons still don’t use them. (Despite the fact that they continually prove to save patients’ lives, everywhere.) As Dr. Gawande describes above, if the same results were achieved through a pill or machine, doctors and hospitals would be racing to adopt them!

Dr. Gawande goes into real detail not only in what makes a good checklist and how to develop them, but also why they work. They work by simply making sure that key simple steps are accomplished, and by freeing your brain from concerning itself about the easy stuff (since the checklist will catch anything you miss). This frees the brain to think about the hard stuff, and able to deal with complications more directly. Good checklists also make communications easier, so that when things do go wrong, the experts involved can address them more directly.

Fundamentally, time after time, in study after study… checklists WORK.

Summary

This is a hugely important book, and I honestly can’t recommend it more highly, It doesn’t matter what industry you’re in, if you deal with or manage complexity, you NEED to read it.

If you want to efficiently improve your performance or your teams’ performance quickly and substantially, a checklist is your way to do it.