All posts filed under “OpenCoffee Cambridge

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A tale of two (entrepreneurial) cities

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I got my bachelor’s degree (Aerospace Engineering) from the University of Michigan, which is located in the lovely town of Ann Arbor, Michigan (about a 45 minute drive from Detroit). As one of the top research universities in the US, the greater Ann Arbor area is home to major R&D facilities and company headquarters from the pharmaceutical, automotive, and engineering industries. There are interesting, fun things to do all the time in Ann Arbor.

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I got/am getting my MBA degree from Cambridge University, in the ancient town of Cambridge, UK (about a 45 minute train from London). As one of the top research universities in the world, Cambridge is home to major R&D facilities and company headquarters from the semiconductor, software, and general technology industries. There are interesting, amazing things to do all the time in Cambridge.


Theory on resources

I believe strongly in the notion that prosperity leads directly from two things: natural resources and population size. (It’s a big reason why the US economy has been so dominant: amazingly large & diverse land mass with a large enough population to exploit it.) As an example, there is an extraordinary correlation between the Olympic medal table and just five factors:

  • GDP
  • Population size
  • political structure
  • climate
  • home nation bias

The same elements apply to cities and their business cultures. As most of the western world generally has the same political structure, and home nation bias is irrelevant in this argument, the only things that matter are GDP, Population size and climate. It’s here that Ann Arbor and Cambridge are strangely similar.

According to Wikipedia, Ann Arbor boasts a population of 114,000 with students making up 32% of that. Greater Cambridge boasts a population of 130,000 with students making up 17% of that. As I mentioned above, both are home to major tech employers. (Strangely, both have engineering centers that are both well away from the main University centers… in Cambridge: the West Cambridge site, and in Ann Arbor: North Campus.) Even the climates are fairly comparable, though Cambridge doesn’t get quite as warm, or quite as cold, as Ann Arbor.

But what I want to address are the differences. As I am now tied more strongly to Cambridge, I’d like to show how those differences can provide lessons to the Cambridge community.


Advantages of each

Cambridge’s advantages over Ann Arbor

A huge advantage that Cambridge has over Ann Arbor is its next largest neighbor. Ann Arbor is closest to Detroit, which is slowly coming to grips with the fact that it will never come close to being the legendary Motown again. Detroit (and the entire state) is suffering from severe economic hardship, and unfortunately it’s not going to end anytime soon.

Cambridge is lucky in that the closest city is London. London has weathered the recent economic hardships well, and is still a leading center for the financial and media industries throughout Europe. Being an easy 45 minute commute away truly puts the world at Cambridge’s doorstep. (Key airports also put most of Europe less than half a day of travel away.)

Another advantage Cambridge has over Ann Arbor is Cambridge University. Where the University of Michigan is one of the best US universities, Cambridge is world-class. Literally, Cambridge University been ranked as one of the top 3 universities in the world. The number of incredibly smart people around the city is vast.

Finally, Cambridge has a huge funding advantage. Because of Cambridge’s history in the last 50 years in the tech world, there are a lot of accomplished investors between the angels and VC’s in the city. The city is still seen as a strong source of leading-edge technology; for example, Xen Source (since acquired by Citrix) was one of the few international investments from Kleiner Perkins.

Ann Arbor’s advantages over Cambridge

Ann Arbor has its own advantages over Cambridge. For one, the standard of living is cheaper. (Partly because of the general malaise in Michigan, partly because it’s a student town, and partly because exchange rates favor the dollar.) This makes it generally easier to start a business since your cash lasts longer.

Ann Arbor has some great facilities. I highly encourage people in Cambridge to check out this site: Tech Brewery.

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The Tech Brewery is an old brewery that’s been converted to offices for entrepreneurs & startups for just $50-$250 a month. It’s pretty close to both central Ann Arbor and the College of Engineering campus. Looking at the site, twelve companies are located there, including Hab.la/Olark, a Y Combinator company. That’s a space that will attract interesting, vibrant startups.

(On this note, there is a bit of a shining beacon in Cambridge. Red Gate Software, through its co-CEO Neil Davidson, has built something a bit similar at their headquarters in Cambridge. In addition to hosting the new Springboard program, they’re also home to a group of startups that work from the Red Gate offices and get to share in the free food there.)

But Ann Arbor also has the Workantile Exchange, located in the center of town. It’s essentially a cool (and again, attractive) co-working space attached to a coffee shop.

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Additionally, Ann Arbor has the Center for Entrepreneurship. It has a pretty focused goal: it’s a “Michigan Engineering venture that empowers students, faculty and staff to pursue entrepreneurial achievements that improve people’s lives, drives the economy and helps innovators bridge the gap between inventors and venture capitalists.”

(Compare that to the Cambridge Centre for Entrepreneurial Learning. It’s goal is more educational: “to ‘Spread the Spirit of Enterprise’ by providing educational activities to inspire and build skills in the practice of entrepreneurship.” In other words, while Cambridge focuses on learning, Ann Arbor focuses on doing.)

Finally, there is simply a bit of a culture gap. I’ve simply been told too many times, “Of course; it takes an American to start Cambridge Tech Meetup / Cambridge OpenCoffee.” It’s honestly a little depressing that that was the case.


What can Cambridge take from this comparison?

Entrepreneurs will naturally cluster… help them

I would LOVE it if Cambridge had a space similar to Ann Arbor’s Tech Brewery. A cool, convenient, cheap place to work with fellow geeks. While there are hopeful signs between Red Gate and the Hauser Forum, I think there simply needs to be a space near the center of Cambridge that can accommodate 10-20 startups, or around 60 people.

I don’t think this can or should happen at St. John’s Innovation Center or at the Cambridge Science Park… they’re too far out from the city center. (Red Gate’s office works because they’ve got amenities like proper food on site.) Young startups need to be in a vibrant atmosphere, which generally doesn’t exist right now.

There is the CityLife Social Enterprise Centre, which has very cheap office space and is home to a number of small companies. (Some who were there last year have since moved to Red Gate’s offices, though new ones have also moved in.) This is absolutely the right idea. Unfortunately, I understand that the owner of the building is looking to tear it down & redevelop it; CityLife is in there for the next year or two until that happens.

Unfortunately, finding/creating an attractive space takes effort, resources (both time and money), and a decent business plan. I know the economics can work, though it might require a bit of “barn-raising” to make it happen. Just take a look at the space that Ann Arbor’s Tech Brewery has to offer above… surely Cambridge can do something similar!

A focus on Doing, not Learning

The Cambridge Centre for Entrepreneurial Learning is a good institution. My criticism is its focus on Learning… not Doing. Business plan competitions are fine, Enterprise Tuesday is interesting the first year or two (until you’re tired of hearing the same sessions/advice every year), and teaching students the elements of building a business is great. But it never extends to actively supporting the startups that are trying to get off the ground. A simple example… where is the list of student startups from Cambridge? Here’s the one from Ann Arbor.

Cambridge Enterprise should be in a position to help, but its focus is on commercializing university IP… not helping generic startups get off the ground. (Where a startup is leveraging university IP is clearly a different story, and they do offer free 40-minute business “surgeries” to anyone.)

This is one of the main reasons why I started the Cambridge Tech Meetupto celebrate Doers. To help promote the entrepreneurs and businesses that aren’t just learning about taking a new technology to market, but those that are actually doing it. (There were many others, but this was a big one.)

Now, this isn’t to say that people in Cambridge just talk about new technologies and products, and don’t develop them. There are plenty of companies around that are “doing”. But the University and the organizations in orbit around the University, those that have the biggest effect on potential student entrepreneurs, need to switch their focus from learning to doing.

There are amazing lectures in Cambridge all the time; it’s all part of the 800-year-old Cambridge tradition of learning. To help breed more and better startups, the culture needs to believe in building and making things just as strongly. Which leads me to the next point below…

More smaller, dynamic groups

Here is a sampling of Ann Arbor groups: Ann Arbor New Tech Meetup, a2geeks, a2buildbunker, CoffeehouseCoders, Ignite Ann Arbor, A2 Mini Maker Faire.

Whereas in Cambridge, I know about Cambridge Tech Meetup, Cambridge OpenCoffee (which has been a bit anemic lately), SuperHappyDevClub, Refresh Cambridge, Cambridge Geek Nights and Cambridge Geek Day. (There are also paid events, like FOWA Tour Cambridge and StackOverflow Dev Day).

Oh, but wait… there are over 50 more groups for Ann Arbor listed here.

Cambridge needs to have people just plant a flag in the ground and start a group that focuses on cool stuff. This seems to be far more of a cultural issue than a capability issue. Individuals with some talent just need to get a small group together, do cool stuff, and make sure people talk about it. Of course some aggregation will be necessary to help people find the right groups… I’d be happy to advertise any and all of these at Cambridge Tech Meetups to help spread the word.


Summary

This started as a tale of two cities, but ended in lessons for the city of Cambridge. I’m just one person, these are just my opinions, and I’m sure there will be plenty of people that will disagree with me. But being in the midst of the startup scene in Cambridge has left me with an overarching feeling: poorly-tapped potential.

Cambridge is a fantastic city. There’s amazing talent, reaching from university labs to local startups to the R&D centers that are scattered around the city. There’s money ready to invest in cool new technologies and products. There’s mentors all over that have lived their startup experience and can help others’ with theirs.

What Cambridge needs is a cultural tune-up. (aka, a collective swift kick in the ass to go out there and MAKE something.) Some of the important things I think should happen:

  • A place for startups to cluster
  • A new focus on doing
  • A whole mess of small, dynamic groups that do different cool things

Going to see speakers and hear talks is fine. (There are millions in Cambridge.) But lets start taking that knowledge and turn it into action, products, and companies.


What are your thoughts?

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Copying Y Combinator – WHY and HOW

[UPDATE]– I’ve written an update 1.5 years later on the original post: “Looking back – 1.5 years since ‘Copying Y Combinator'”

Have you thought about starting a program like Y Combinator in your city? That doing so would not only build a startup ecosystem but would also bring a good financial return? I studied Y Combinator, TechStars, Seedcamp, and many more programs to develop a framework for “Copying Y Combinator”.

(With apologies to Chuck Palahniuk…)

  • The first rule of copying Y Combinator is: Do Not copy Y Combinator.
  • The second rule of copying Y Combinator is: DO NOT COPY Y COMBINATOR.

The key to copying Y Combinator is to figure out how you can be just as good, but in a different way, than Y Combinator.


Background

This last year I’ve been an MBA student at Cambridge University. In order to complete the degree we had to do a substantial piece of research, and I chose to do it on the rise of Y Combinator and similar “seed accelerator” programs. My hypothesis was that a lot of people/organizations are starting seed accelerators without really examining the full scope of innovations they need to think about in order to achieve their goals.

I wanted to take the opportunity to look into why entrepreneurs choose to go into a seed accelerator, why individuals choose to start a seed accelerator, and then propose a framework for designing new programs.

Key results are described in this post, and the full paper is embedded via Scribd (a Y Combinator company) below.

Data

The very first step in examining these programs is to get data; it’s almost all posted somewhere, but isn’t consolidated. Between the data that each program publishes on their website, press on the various programme Demo Days, and Crunchbase, I built a list of virtually every startup funded by every seed accelerator.

Click this link to see the spreadsheet on Google Docs.

The only accelerator where this data isn’t as comprehensive is for Y Combinator; I’ve put in placeholders where known (ie, 8 companies in cohort X but only 5 have launched). That said, it should only be missing a handful of companies at most. And please note that nearly all exit values are purely speculation, though educated speculation based on exits of similar companies.

I also surveyed the founders of companies that have either been funded by accelerators or are looking to be funded by accelerators (Y Combinator and others). Specifically, I wanted to find out what they cared about when choosing a seed accelerator. The results are as follows:

  • Connections to future capital: 8.51
  • Brand/Alumni connections: 7.83
  • Business support: 7.42
  • Product support: 7.13
  • Pre-money valuation: 5.25
  • Level of funding: 4.14

These numbers did vary somewhat between different programs and non-funded companies. (For example, the average Y Combinator founder valued Brand/Alumni connections much higher than the average respondent.) But the trends show that entrepreneurs value the elements of programs that give them long-term chances for success: connections to investors, other connections, and product/business support.

Financial Results

Since seed accelerators are still in their early days, it’s too early to make a definitive verdict on their success. But the early data is promising.

Y Combinator and TechStars are two of the oldest seed accelerators, and are the only two to have had substantial exits. The TechStars exits have likely already generated a profit, and there are several companies that may still exit at some point in the future. The Y Combinator company exits have likely already brought Y Combinator to break-even, even after having funded over 100 companies. More impressive is that there are a good number of companies in the portfolio that could reach substantial exits at some point in the future. (And potentially a handful that could reach the vaunted $1billion+ exit.)

Recommendations – How to Copy Y Combinator

The bulk of my paper goes through the elements that are involved in a seed accelerator program. But the fundamental decisions that can define the potential success of a program are simple.

Success derives from the program’s founders and focus; together they must create a distinctive and compelling reason for entrepreneurs to join them.

There will always be entrepreneurs looking for funding; what a seed accelerator should provide is the right match of resources for those entrepreneurs. If the resources that entrepreneurs get by participating aren’t compelling, the program simply won’t get the highest quality applicants, and thus will not achieve maximum success.

This is why there has been little true competition for Y Combinator thus far: they simply have truly compelling resources to offer through PG and the other Y Combinator founders, the YC alumni network, and the combined program network. Until another program can be more compelling than Y Combinator, they will attract the best startups. (See rules 1 & 2 at top about copying Y Combinator.)

The key when constructing a seed accelerator is to look critically (and honestly) about the resources a founder has available; the founders’ experience and the expertise available to the entrepreneurs. Find the focus point that is different from Y Combinator that makes it distinctive and compelling. For example, FbFund REV accelerates companies building applications on Facebook. The new Springboard program in Cambridge (UK) is focused on B2B software applications.

Maybe your expertise is in mobile technology, maybe it’s in medical devices or maybe its in enterprise software. The key is that the founders and the mentors they assemble for a program in that focus area are a distinctive and compelling reason for entrepreneurs to apply and attend. Once the founders and focus are decided, many other decisions fall into place. For example, the program length and funding level will need to be adjusted so that companies can reach a significant development milestone during the program. Just because Y Combinator is three months long doesn’t mean that your program can’t be 9 months long, provided that’s right for the companies involved.

The full paper has far more detail, the point to take away is that the founders and focus must align, and must align to create a programme where an entrepreneur would travel from around the world in order to participate. (Even if there was an accelerator in their own backyard.) The potential to do this in the field of web applications is diminishing quickly.

Final Thanks

I want to say a specific thank you to the program founders that agreed to be interviewed: Paul Graham, David Cohen and Reshma Sohoni. And a huge thank you to the people that commented on my blog posts and Hacker News posts over the summer and took the survey I described above; your feedback was invaluable!


The Documents

Copying Y Combinator

 

Appendix A – List of Seed Accelerators

Click here to view the list of seed accelerators. Only seed accelerator programs are listed; see main paper for details.

 

Appendix B – Example Seed Accelerator financial model

 

Appendix C – List of all companies founded by Seed Accelerators

 

OR

Click here to view the list via Google Docs.

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Cambridge Tech Demo Night – 10 September – CALL FOR DEMOS

After the success of the last Cambridge Tech Demo Night, we’re going to do it again! The next Demo Night will be on Thursday, September 10th, and will be held at Judge Business School at the University of Cambridge.

But we need demos!

Requirements include:

  • Technology-based product
  • Connection to Cambridge; ideally founded or located in Cambridge
  • Able to demo in 7 minutes or less
  • You MUST show the product working
  • Hardware-based products/services highly encouraged. Simply demo as much functionality as you have.

I’d like to have 5-6 demos for the night, each lasting 7 minutes. All in all, one hour celebrating brilliant Cambridge tech.

Info for the night:

DATE: Thursday, September 10th
TIME: 6:30pm meet & greet, 7pm Demo’s start
PLACE: Judge Business School, Trumpington Street, Cambridge
RSVP: Will be posted once demo’ers confirmed

For the companies looking to demo, you’ll have seven minutes in which to show off your product (hardware, software… doesn’t matter) in front of a group of people that want to help you succeed. Find early adopters, investors, promoters, collaborators and potential hires.

For everyone else, get a fantastic look into the technology that’s being designed and built in Cambridge, and the people behind it. Find out the new, interesting tech before anyone else.

Last time we saw demos from Broadersheet, Timetric and True Knowledge. Who’s next?

(Please feel free to comment here, e-mail me at jed.christiansen@gmail.com, or get in touch via twitter at http://twitter.com/jedc)

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Y combinator – dissertation and request for help!

As I wrote in my last post, I am writing my master’s dissertation on Y combinator and the similar programs it has spawned. Y combinator is a really interesting program, but I think simply copying it and starting it in a different city isn’t the best way to do it.

This post will detail how I’ve structured the dissertation thus far, and ask for your help!

Request for help

Are you interested in startups, or have you been involved in a startup? Then I would love it if you could take my survey. I’m looking to get some data around what people really want out of a program like Y combinator.

*** Please click here to take the (very short) survey! ***

Secondly, in my draft papers I’ve been using the words “startup incubator” but really don’t like that term. Incubator implies a central office space, which isn’t part of some of these programs. I’ve also thought of “startup accelerator”, “startup boot camp”, but they don’t seem quite right.

If you have any suggestions for a better general name for these programs, please let me know in the comments section below!

My dissertation

The first step in the project was to get a handle on what programmes exist, how they’re structured, what companies they’ve funded and what kind (if any) exits they’ve had. It’s taken a lot of research, but I’ve developed the following files:

List of programmes – https://docs.google.com/Doc?docid=0AUkhSN3vaY4jZG1xenptZ18xMmZjcDdnN2M4&hl=en
List of funded companies – https://spreadsheets.google.com/ccc?key=0AkkhSN3vaY4jdF90b1l1Vnl5NmZjaTBNQWlJYVozMEE&hl=en

The biggest “holes” in the data are some missing company names from Y combinator, and a general lack of awareness of follow-on funding from all programmes (except TechStars and Seedcamp).

My goal is to establish a framework for thinking about startup incubator programmes. To do that, I’ve evaluated the needs of both types of participants: the programme founders and the entrepreneurs. What I’ve developed is this:

Entrepreneurs want:

  • Seed funding / Financial support
  • Product support (making product better)
  • Business support (how to run a business)
  • Connections to future sources of capital
  • Brand connections (and alumni connections)

Programme Founders want:

  • Financial return
  • To enjoy startups without the same risk/working hours
  • Local/regional influence
  • High-quality deal flow

(I’m currently working to verify and quantify these assumptions, and would appreciate any feedback in the comments below.)

There are a number of complications in setting up these programs, however. Mainly:

  • Non-financial goals (on part of programme founders) –
    • Particularly when a significant part of the funding comes from the government which has clear non-financial goals.
  • Location: where people want to live/work (and where they’re legally able to live/work) –
    • This is a question of desires in personal life versus efficiency and opportunities in business life.
  • Follow-on funding, where programme founders fund some of their companies but not all for further development –
    • This is a serious consideration depending on the angels/VCs involved and the structure of the program.

That said, there are a lot of areas for innovation when setting up future startup incubator programmes. Namely:

  • Focus on industry vertical or particular scope of technology
  • Length of programme
  • Funding level
  • Scope of education programme

Where this is all going to lead is a framework and recommendations for people or groups that want to start a startup incubator.

My biggest recommendation thus far is straightforward. What will make a new programme so compelling that founders would want to choose it over any other? That likely will not be because of the location, despite the fact that most Y combinator clones seem to be just that: Y combinator in a different city. But if a new programme can do something unique, like build an incubator around database technology, or sensing technology, or enterprise customers, or something else it could be a very compelling opportunity for entrepreneurs.

Decisions around industry verticals or technologies then lead into decisions on levels of funding and length of programme. While most programmes have copied Y combinator’s $15-25k for 5-10% equity, there is a lot of scope to change this when the programme isn’t just funding web applications.

Summary

This is what I’ve written thus far, and look forward to your comments and suggestions! If you’d like to get in touch with me privately, please contact me by clicking here.