All posts by Jesse Rodgers

About Jesse Rodgers

Jesse is the Director of the Creative Destruction Lab at Rotman, a cofounder of TribeHR, and built VeloCity at the University of Waterloo. He has been a key member of the Waterloo startup community hosting StartupCampWaterloo and other events to bring together and engage local entrepreneurs. Follow him on Twitter @jrodgers or WhoYouCallingAJesse.com.

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What is the problem accelerators are solving?

There is currently a preoccupation with accelerators in the entrepreneur world resulting in a large increase in programs.  Arguably, the result of this frenzied growth is that ‘entrepreneurship’ is as commoditized as college. Unlike college, it is extremely hard to know which programs are adding value and which ones are wasting everyone’s time. This doesn’t mean investors aren’t in the know and they are favouring the programs they like – example, YC or TechStars.

It could become (or has already become) virtually meaningless to be an accelerator born internet entrepreneur so why would you give up 6-12% of your company to do it? For investors it is really hard to cut through the noise. I think this is because few people actually know why accelerators exist at all. In some cases I fear that the people that are creating new ones aren’t likely clear on why they are creating these programs either.

How does anyone know which ones work? What problem are they solving? What metrics should they be tracking in order to get better at what they are doing?

Defining the problem(s) accelerators solve.

There are three problems I think accelerators are trying to solve:

  1. Investors need to identify talent.
  2. Talent needs to find the right investors and coaches.
  3. Education system failure.

The first is a relatively easy problem to solve. It is hard for investors to identify talent at an early stage, accelerator programs offer a filtering tool for investors as they can take the top talent that applies and narrow it down to those that have the highest potential based the criteria of the particular program. If an investor trusts the filtering job done by the accelerator than that accelerator is providing value.

A suggested metric for this: measure how many alumni of a program receive funding, from what type of investor, and in what time span?

The second problem that talented people and teams have is finding the *right* investors and coaches. By the right investor I mean someone that will give you enough money and coaching that you can slowly de-risk your startup a little more and build momentum as you grow towards being a sustainable business. Founders need coaches to apprentice under while they build their company. The right investor is someone who will put in enough of their own money and time and they can help you get your business through the major milestones it faces. This likely means that party rounds are bad. What I think should be the goal are 4-6 investors and/or an individual (not a VC) has a 1/2 to 1/3 of the total round.

This should result in the person(s) who put in significant capital also have a board seat and have their sleeves rolled up ready/able to help.

A suggested metric: track who put in the most personal money in the round and are they on the board of directors or some other significant role in the company? How much time a week/month do they spend with the founders?

The failure in education is a much harder problem to solve. Is it the traditional silos that are limiting education or is it the expectation that you go to school to be trained for a job or a bit of both or something else? Is the failure the education system (K-12) or is it the students or both? In higher education you have environments that are designed to encourage independent thought that is backed by facts and thinking. You should be exploring and developing your networks.

At no other point in your life will you be surrounding with that much leading edge research and thinking. Just because a school doesn’t hand you your first startup with funding and office space does not mean the education system is failing entrepreneurs!

There is also already a process for very smart people to apprentice under others that have already developed their ability to take massive amounts of information and focus it on an outcome. It also happens to come with a filtering mechanism built right in that improves the likelihood that the person that finishes is relatively in the top few percent. It’s graduate school. The process is not perfect but it is a process that works.

Educating people is hard. Coaching people is harder still. If an accelerator is going to solve the failure of the education system in educating entrepreneurs it should take that part very seriously and not dismiss the education system as having nothing to offer.

A suggested metric: Does the accelerator have qualified educators and coaches that put in a significant amount of time (more than 1 hr a week) with each entrepreneur? Are there measurable outcomes expected on the entrepreneur? Are there consequences for not meeting expectations?

Accelerators should be more than marketing to the entrepreneur and placing them in a zoo for the public to see them in action. Education is serious business and it is about people’s future. Entrepreneurs need to have realistic expectations and enter with a clear idea of what they want out of the opportunity.

Everyone around accelerators is still learning about how to make them work and figure out for whom do they exist. It is an exciting time in education — just be sure to track stuff that matters while you run the experiments!

A Perspective on Investor/Mentor Whiplash

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The other day Fred Wilson posted an opinion and some tips on Investor/Mentor Whiplash. He took the position that that is a big problem for accelerators as well as early stage and seed environments. Brad Feld took this as a bit of a misunderstanding on accelerators, he insists that TechStars creates an environment where early stage companies can learn to manage the whiplash. Brad Feld states:

I disagree with Fred. It’s not a big problem. It’s the essence of one of things an accelerator program is trying to teach the entrepreneurs going through it. Specifically, building muscle around processing data and feedback, and making your own decisions.

On the surface this seems correct. A problem (one of many) new founders face is the overwhelming barrage of mentorship (good and bad) and information mixed with the inability to filter. An accelerator should be able to provide the environment where a strong group of peers with some guidance can help to build the “muscle around processing data and feedback.” In the last 6 years I have noticed that is a common problem founders face and their ability to manage it is important to their success. It wasn’t until I experienced the whiplash myself a 2nd and 3rd time that I fully appreciated the damage it can do even if you are prepared for it.

Generally what I tell early stage founders:

  • Only talk to customers once you have something to show them — but that shouldn’t take you a long time, don’t go heads down for months. Asking people what they want and not focusing on something specific they can touch/feel is a path to busy work and infinite sadness.
  • Avoid the mentor parties/socialization. Find two (or three) good people with opposing views and bounce specific data off them but only when you have done something that requires fresh eyes to advise you how to interpret the results.
  • Focus on what isn’t working when getting feedback from mentors. Founders need to be positive but you need to focus on the bad things when talking to your close mentors that have been through it already. If they can’t help you with the tough stuff why are you spending a lot of time with them?
  • Don’t expect a direct answer. Experienced mentors know you are the best person to run your company, not them, and they have developed a way of not telling you what or how to do things but instead challenge you to figure it out in a positive way.

Whiplash from mentors doesn’t just happen in startups, it happens everywhere people are giving you advice or have something to gain by influencing the decisions you are about to make or the opinion you develop on something.

Being prepared and learning to manage the whiplash isn’t just the essence of accelerator programs, it is the essence of education that culminates in the top level you can achieve to filter information – a phd program. At the phd level the filter muscle is almost too strong but that is a topic of a whole other blog post.

The scary thing for entrepreneurs is that accelerator programs are too often run by people that don’t know how to effectively educate people and/or they have something to gain financially by the decisions founders make.

I think this *is* a big problem in accelerators. I wonder if the ability to teach that skill to founders (or select founders that already have that skill) is the difference between a successful accelerator (which is really only TechStars and YC) and one that isn’t (pretty much everyone else)?

[Editor's note: This post was originally posted on Jesse Rodgers' Who You Calling a Jesse blog on July 31, 2013.]

Startup “ecosystems” in Canada are doing well but…

Editor’s note: This is a guest post by Jesse Rodgers. Follow Jesse on Twitter . This post was originally published on November 21, 2012 on WhoYouCallingAJesse.com.

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The Startup Genome released another report mapping top startup cities but this time a bit more specific than it’s heat map from April of this year. Canada did well depending on how you interpret it with Toronto at #8, Vancouver at #9, and Waterloo at #16. In its previous report, Startup Genome ranked Toronto at #4, Vancouver at #16, and Montreal made the list at #25. Oddly Waterloo wasn’t listed in the previous ranking but made it into the top 20 in the new report while Montreal remained outside of it.

Focusing on my Ontario centric nitpick – the separation of the Toronto and Waterloo “ecosystems” when they are anything but separate is not going to give an accurate picture of Canada’s awesome startup communities. They are unique communities but their strength comes from how they work together in the same ecosystem. The emotional energy (and money) burned in defining how they are different is holding Canada back from an even better and sustainable growth curve. That energy is in the report.

In the report:

“Toronto competes for startups with regional competitors such as NYC, Boston and nearby Waterloo.”

Then in the Waterloo profile:

“In the near future, it will be interesting to see whether Waterloo is able to hold on to its talent base or whether it will be sucked into Toronto.”

Would you say that about Palto Alto sucking talent to San Francisco and vice versa? No. It’s the valley. A huge area that is far more developed but very similar to the Toronto – Hamilton – Waterloo. The problem, I think, is that at some point in the past when local economic development groups were competing on a similar scale for tax dollars (and manufacturing plants) they narrowly defined regions (Golden Triangle, Golden Horseshoe, etc) where everything above the escarpment is barbarians and the urban modern folk live below next to the cold blue lake.

There can be (and there are) distinct communities inside the larger Toronto – Hamilton – Waterloo ecosystem. Each community has its strength. Each success in the larger ecosystem helps the entire ecosystem.

The big problem the ecosystem faces (in Toronto):

Startups in Toronto receive 71% less funding than SV startups. The capital deficiency exists both before and after product market fit. Toronto startups receive 70% less capital in Stage 2 (Validation) and 65% in Stage 4 (Scale).

The ecosystem most likely lacks a sufficient quantity of all kinds of startup capital sources: angels, super angels, accelerators, micro VCs, VCs etc. As a result Toronto startups rely more on self-funding, or rounds from family/friends.

The other big problem (in Waterloo):

Waterloo has a funding gap (96% less in the second stage) for early stage startups before product market fit, probably due to a lack of super angels and micro VCs. There are high numbers of accelerators and much lower numbers of super angels and VCs than SV.

Solving the funding problem in Toronto also solves the problem in Waterloo, more companies that able to find the money and the talent to scale in either or both communities helps both or am I missing something?

Building a strong economy, community, and ecosystem isn’t a zero sum game.