Some rights reserved by archer10 (Dennis)
Most people love to just give advice as if it’s set in stone. These thoughts cannot be applied to every startup, use your own judgement and do you own due diligence.
Rewind to 2009, we had a stellar year. We had created Tether.com from a simple idea to millions of dollars in revenue. I evaluated various aspects of this success and realized we were paid huge dividends because we made a significant difference in the way people were able to work. At the young age of 21, I faced two options:
- Continue creating disruptive products and change the world
Luckily (or unfortunately) I took the second option, creating products that would hopefully disrupt markets. I decided the market I wanted to disrupt was computer programming.
Some rights reserved by archer10 (Dennis)
Being from Nova Scotia, a small province not really known for its stellar technology, I was faced with two options:
- Fund my own startup out of pocket, or
- try to raise money.
We’re known for lobsters, which is a far stretch from computer programming. Raising cash locally was a stretch, particularly given the very early stage of the business. And while it feels like a feeding frenzy in the Bay area, most US-based investors wouldn’t know where Nova Scotia is on the map (while Jevon [LinkedIn, @jevon] is trying to change that, outside of Boston many might still have a hard time finding us) and putting capital into an early company in a location they don’t know felt very unlikely.
The best option was to self-fund Compilr with the expection to go from initial idea through to revenue much like we had previously done with Tether.com. We had an idea, we had a team that was capable of building, we had users signing up to use the service (our user base had grown 13x in a 3 month period), but we had no revenue. And we were running out of cash. Getting people to pay turned out to be very challenging. More challenging than it was with Tether.com.
At some point, I realized that I needed help. The help probably wasn’t cash. Raising millions of dollars in funding, wouldn’t solve our problem. The money could extend our runway, give us more time to increase our output on features, bug fixes, but if no one would pay for the product – it didn’t matter.
If money alone wasn’t the answer, maybe it was accelerators that could help (I hear there might be an incubator/accelerator bubble or something). I applied to Y-Combinator with a video from my beautiful rented apartment in Dominican Republic, but ultimately was turned down. I applied to a local entrepreneur competition, Compilr placed 3rd but sadly there was no financial benefit. At this stage the product went to the back-burner, the development team focused on other projects, the question was: what to do next?
“You miss 100% of the shots you don’t take” – Wayne Gretzky
An angel investor introduced me to Seedcamp. And while Seedcamp was Europe focused, they had a strong portfolio of very early stage software companies. Long story short: I applied, invited to pitch in New York, and was accepted to the program. Going to an incubator was a big decision. I was getting mixed advice from my mentors, with some mentors telling me “you are an idiot for valuing your company so low” and others saying “Seedcamp had over-valued the company given the traction”.
It’s a hard decision, but ultimately I decided that the small percentage I was giving up Seedcamp was a good fit for Compilr and me. Seedcamp was providing value to help Compilr, and if I was successful we could return the favor so they can invest in other entrepreneurs. It felt good, like a fair trade.
I’ve determined that startup accelerators can provide returns even beyond the bottom line (or the post-money valuations). Here is what entrepreneurs should expect from an incubator:
- When an accelerator says, we like your idea and your team and want to give you a small bit of cash, this is significant validation. I think this is the death row for most startups. If your team doesn’t get any validation, will it just become a “back-burner” project. Accelerators can help provide entrepreneurs early, meaningful validation.
- Always insure that your accelerator is able to provide you with adequate exposure. Every time we were involved in a Seeedcamp event we saw about a 30% increase in traffic, which was easily identifiable from those particular events. Accelerators are press whores, they want just as much exposure as you. Weasel your way into anything that could be related to you.
- Being a single-founder with a crazy idea, accountability sometimes goes on the back-burner. As a founder/CEO sometimes you have ideas that are completely inaccurate and have no foundation. Having a team that can slap you around a bit, when you decide you want to pivot from an online IDE to an online garden center is a great asset.
- They don’t solve your problems.
- My reason for joining an accelerator was simply, if I get enough smart people looking at my business, I’d get to revenue faster. The fact is you could have the most brilliant advisers or mentors helping you, but they still can’t solve your problems. They just aren’t connected into the industry like you. In the end you need to make strategic decisions on where you want to go.
- Joining an accelerator, is always competitive. Being apart of an accelerator provides a degree of competitiveness. When your teammate just raised $910k from top US investors and you haven’t done shit, you instantly feel like you want to go out and raise $2m.
- Prepare to insult everyone
- The worse part of having really great mentors, is when you are in a rut, they’ll tell you “they told you so”. If you didn’t follow a mentor’s advice they may shun you, they may refuse to give you advice on the “basis that you don’t follow it”. The biggest problem if you take one mentors advice, you will insult another.
Can I help? If you think I can help, shoot me an email: [email protected]