Since I arrived at MCED in October 2010, I’ve been calling Top Gun Maine an entrepreneurship accelerator, modeled after TechStars and other similar accelerators but adapted to Maine. And while I’m sticking to my story, last week I was reminded, twice, that we’re qualitatively different from the internationally known accelerators.
My first reminder was doing research for an article I was writing. In spring 2010, prior to joining MCED, I attended the weeklong Babson Symposium on Entrepreneurship Education (SEE) with another 60 (would-be) entrepreneurship educators. Babson has now started an e-newsletter for SEE graduates; I had volunteered to write an article, and last week was my deadline. I wrote about the evolution of Top Gun since I’ve been here – pretty dramatic – but I checked out Wikipedia (of course!) for background on “seed accelerators” and found this:
“Seed accelerators are a modern, for-profit type of startup incubator, with an open application process, taking in classes of startups consisting of small teams, supporting them with funding, mentoring, training and events for a definite period (usually three months), in exchange for equity. While traditional business incubators are often government-funded, generally take no equity, and focus on biotech, medical technology, clean tech or product-centric companies, accelerators are privately-funded and focused on mobile/Internet startups.”
The lack of funding for Top Gun Maine companies is one big difference versus Techstars and Y Combinator. At this juncture, in Maine, I think that funding in return for equity would not be appropriate for all Top Gun companies. Why? It propels companies down the high-risk equity investment path, which is not the right path for many promising companies. Of the 40 or so Top Gun graduates to date, probably less than 25% would find that high-risk equity is a good fit for their long term plans.
Take one of our prominent successes: Liquid Wireless. At MCED’s mentor-only networking event last week, veteran mentor (and venture capitalist) Kip Moore told the story of how, at his first meeting with Liquid Wireless founder Jason Cianchette at the beginning of Top Gun Maine 2009, Jason said that funding was his top priority. Kip gently suggested that maybe talking to customers ought to come first, to make sure there was demand. A few weeks later when they met again, Jason said something like “I don’t need funding – I talked to some customers, they want to buy the product now!” That was a better path for Jason – he owned the whole company when he sold it in January of 2012 - even though his “lead generation from cell phone users” business could probably have raised angel investment.
My other reminder was during a visit the following day to the New England Angel Capital Association quarterly syndication meeting. I was there to act as the lead investor supporting Newfield Design, which was one of four companies chosen to pitch to the meeting of about 60 angels from more than a dozen different angel investor groups. Newfield is a “spotlight company” for the Blackstone Accelerates Growth initiative, and a team of us had worked with Jim Colony on his pitch the day before. It was the winner of the 2011 Juice Pitch Competition, which is how I became an investor.
Before the pitches there was a panel discussion on the topic of how angels should interact with accelerators, and the accelerators represented included TechStars Boston and MassChallenge. One of the panelists described the type of entrepreneurs they accept as follows: there must be a coalesced team, they must have executed “something” already (such as a prototype) but they do not yet have substantial market proof of demand for the concept.
The Top Gun class is far more diverse. Sometimes we take solo entrepreneurs looking for key team members (although that’s a very big risk for startups). To date we haven’t required execution of “something” (although the hurdle for getting into Top Gun gets higher every year). And we do include some companies that have already achieved some level of market traction – some Top Gun companies have annual revenue up to $1 million.
So we’re not a seed accelerator – Top Gun Maine is an entrepreneurship accelerator. A lot of other elements are similar to seed accelerators, but adapted to Maine. Isn’t this the way it should be?
The Top Gun Maine class of 2013 will be announced December 14.