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Archive for February, 2014

Goodbye v0.2

StartUp42 v0.2

This post was originally published on StartUp42 blog on February 6 2014.

Last Monday the second season of StartUp42 ended with our Prototype Fiesta. As our startups are now moving towards their future on their own, I wanted to take some time to reflect on how we helped them during the last 4 months.

What we did great

  •  Having a Program Manager on-site (initially Kevin, then Aline), every day, to coordinate interactions between the startups and mentors, partners and myself. Moreover, as both Kevin and Aline were business school graduates, they were able to help (with different skills) some of our startups on the marketing side of things. Remember, 70% of our founders have a technical background.
  • We managed to really boost some startups on the marketing and communication side. For example Worldcraze was virtually unknown before StartUp42. With the substantial press coverage they got during the past weeks, they have transformed into a known brand with copycats even popping up.
  • More than 60 mentors came during the 4 months to share their knowledge and experience with the startups, 50% of them being entrepreneurs.
  • We joined the Global Accelerator Network which gives us a stronger bridge with the Techstars network as well as relationship with other accelerators globally.
  • We attracted more than 100 investors, media and corporate partners for our Prototype Fiesta, which really demonstrates the seriousness of our program.

On the lessons learned side, while our Program Manager was able to help the startups from time to time, their action was unfocused and not optimum towards all our startups, due to their other program management activities. While I was very wary about Entrepreneurs In Residence, this situation made me change my mind. We will announce very soon a new EIR for our v0.3.

I am very proud of how our startups performed during the Prototype Fiesta. Most of them were really transformed by the accelerator experience and I wish them great success in their entrepreneurial life.

If you also want to be part of such adventure, applications for our v0.3 session are now open until March 3rd.

Should you give away equity without financial investment?

While investing money in a startup is the traditional way of getting some if its equity, it can happen that individuals or organizations get startups’equity against education, networking or media.

Even though I can’t say I’m against these practices, I always remember entrepreneurs that equity represents the future value of your company. When you start, your company is worth nothing and 5% of nothing is a pretty good deal. But what will your company’s valuation be in 5 years? In 10 years? Millions? Well, 5% of millions is a pretty good sum of money.

Moreover, after giving away equity, you might be stuck with an unwilling fellow that has no power in your company but whom you have to continually chase to sign board meetings or investment papers (remember, he’s now an investor).

The rule of thumb I recommend in those situations is to really consider how much the non-financial investment you’re receiving is impacting the future of your company. Maybe this person or this incubator that helped you in your early days, put you in touch with THE customer that made your business happen. Fair. Or maybe he’s still, many years later, a trusted advisor that really helped you go through the roller coaster of entrepreneurship along the way.

But maybe, he only helped you for some time and is no longer involved in the company. If, 10 years after its creation, your startup is now worth 100M€ and you gave away 5% equity to a 6 or 12 months accelerator that you are no longer in contact with, you literally gave them 5M€.

As of media for equity, the same rule applies. If your business is highly media dependent (say you sell ringtones or on-line dating), then go for it full force! But if you think media can help you acquire customers, remember it’s only a channel (unless Google starts offering AdWords for equity).

In conclusion, always remember that equity is future value of your company and sometimes, it’s better to pay someone or an organization for the help they give you (e.g. giving away commissions on business they help you get).