How to stop the student exodus

Five years after the Boston Globe sounded the alarm, the question that is still top of mind in Massachusetts is: How can we do a better job of connecting students to the startups that are driving the growth of our region’s innovation economy and persuade them to stick around after graduation?

UMass Boston’s experience with internships shows that universities have an important role to play. They must help educate startups how to create compelling roles for students so they are contributors out-of-the-gate, and then make it easy for startups to effectively find the right kind of students.

At UMass Boston, this is accomplished by the Venture Development Center working with the College of Science and Mathematics and the Career Services and Internships office. That’s how UMass Boston students Valentina Dunn, Bersabel Wondimagegnhu, Amy Worth, Jacob Borr and Hembly Rivas (pictured, above at the Venture Development Center) were recently hired by GnuBIO, enEvolv, Parabase Genomics and Pressure BioSciences.

Students light up when given a chance to experience the excitement of goal-oriented, product-focused research first-hand. And startups learn how to expose students to why their team, company, and vision are fantastic, and get them committed to joining full-time upon graduation.

The state has done its part to make internships attractive. The Mass Life Science Center Internship Challenge will pay a company up to $7,200 per intern to bring them on board.

Now, it is up to universities to facilitate the match-making. Think of it this way: What university doesn’t want to enroll the kind of entrepreneurial student interested in a chance to intern at a world-changing startup?

Who Raised $174,979,832 in 30 Months

Boston is quietly producing one of the most successful classes of startups in the nation, at least in terms of fundraising.

The 44 companies – including OnChip Power, Valerion, Ginger.io, Sample6, Peer Transfer, GrabCAD, Boundless, Localytics, Kinvey, and Anthurium Solutions – that in 2011 joined Dogpatch, TechStars and the Venture Development Center, have raised a total of $174,979,832.

Here’s how fast they’ve raised it:

  • 12 months after joining, their total raised was $77,504,000. TechStars share was 19%; Dogpatch was 39%; and the Venture Development Center was 42%.
  • 18 months after joining, the number stood at $125,181,790. TechStars share was 33%; Dogpatch 38%; and the Venture Development Center 29%.
  • Now, 30 months after joining, the total raised has climbed to $174,979,832. TechStars share is 30%; Dogpatch 35%; and the Venture Development Center 35%.

Last time we checked, at the 18 month mark, this class was doing better than any other in the nation. The 67 companies that started in 2011 at Y Combinator, 500 Startups and Launchpad LA in California had raised $88,674,690, and averaged $1,323,503. Their collective fundraising success rate was 67%.

The 44 companies in Dogpatch, TechStars and the Venture Development Center were more successful. They had raised $125,181,790; the average was $2,845,041; and the fundraising success rate was 80%.

The individual fundraising success rates 18 months in were: Dogpatch 70%; Venture Development Center 83%; 500 Startups 75%; LaunchpadLA 70%; Y Combinator 64%; and TechStars 92%.

There are many ways incubator programs add value – validating a business model, providing a physical location, creating a network, etc. But follow-on funding is the one thing almost all startups want in their early stages. And Boston’s incubators clearly are delivering, at least for the Class of 2011.

Sample6: $11M richer but you’d never know it

On Wednesday food safety diagnostic test firm Sample6 announced it has secured $11 million in a Series B financing round. But don’t expect them to spend the money on anything but what’s absolutely essential.

The discipline of Sample6, embodied by co-founder Mike Koeris (pictured), impressed us from the beginning. And it was manifest in many memorable ways.

The first question Mike asked when the company joined the VDC was how to find an intern or two from UMass Boston. He wanted to leverage his senior team. We’d arrive in the morning only to find the results of a night’s worth of dumpster diving at area universities. Why buy new equipment if used works just as well?

Once, he asked us to print paychecks after the company’s $5.4 million Series A because they didn’t yet have a $99 printer. Another time, when all of our meeting rooms were booked, Mike wheeled a table into the storage room for a board meeting. The next day there’d be a box of chocolate from Mike.

The company’s sole focus was finding the right application for their engineered phages. Once they did, they spent on hiring experienced talent, including Will Cleveland, a UMass Boston biology graduate.

Our introduction to Sample6 was a call from Boston University, where the technology was born, asking us if we would consider accepting the company. They weren’t just looking for lab benches, but wanted a place where they could develop their company, team and culture.

We are proud to have given Sample6 its start, and have no doubt they will continue to be successful.

The Chasm of Skepticism: The Greatest Barrier to Raising Capital

Guest Post By Dennis Ford, CEO, Life Science Nation

Recently, I have been interacting with a lot of startup incubators and accelerators, revolving around fund raising boot camps that LSN teaches for scientists.  Basically, LSN’s “Discovery to Distribution Boot Camp” stays away from the strategic and concentrates on the tactical aspects of commercializing and raising capital. The marketing task is all about doing the research and finding a list of investors that are a fit for your products or services. It’s really a marketing 101 exercise: the first step is LSN helps them identify all the companies on the planet that look like their firm. In marketing parlance, this is identifying and sizing the competitive landscape.

Why is this important? This exercise – when done properly – will not only include most of the look-alike companies, but also the look-alike-companies and their lead and co-investors that have invested in the past and present. This über list of investors is quite valuable, as we know that these investors will understand the company, the market and the product, service or technology. I refer to this list as the global target list, and the reason is that these investors are a fit.

The next aspect is finding even more investors that are a fit based on present mandates to invest in the future. These investors have dry powder (investable capital), and are looking to allocate. When done properly, LSN can help them aggregate a list of relevant investor targets in their orbit that have shown a distinct past, present or future investment interest. Sounds simple enough, but here is where the world of the scientist collides with the world of the generic sales and marketing.

Time and time again when we put on these boot camps, the inevitable questions arise. The list is great, but am I allowed to call these investors? I hear that if someone doesn’t refer you, investors won’t talk to you. Can you prove to me or give me a reference of someone that has actually called an investor cold? I want proof that getting a list of investors that are a fit is how entrepreneurs actually raise money. On and on, the skeptical scientists create a thousand reasons why getting a list of investors that are a fit for their particular market segment or indication won’t work, and how in the past it worked like this (the old, outdated map). Enter the sequel to the Valley of Death version 2.0: The Chasm of Skepticism.

I make no bones about who I am and where I come from; I am genetically a sales person. I have been selling for decades, I am a selling CEO, I am an entrepreneur with 8 startups under my belt. Of the 8 startups I have been involved with, I have been part of the executive management team, the CEO or the founder. I have been part of 2 IPO’s and 4 acquisitions, with 2 more in the wings (I hope). So please imagine my reaction having spent my life in sales, marketing and business development when I have to debate whether a person who is a startup entrepreneur is allowed to make an outbound phone call to a complete stranger to move his/her company along.

What is even more chilling is this ethos is passed around in the life science marketplace as some sort of rule. Entrepreneurs shun rules. Entrepreneurs break rules. Entrepreneurs don’t listen to the status quo out-of-date dictums, and they don’t use old antiquated maps! They create new ones they do whatever they have to do. They jettison their comfort zone. They embark on hideously uncomfortable journeys. They do whatever it takes and making a blind cold call to a complete strangers who are a known fits for their product or service isn’t even the ante into the game. So here is how to get across the chasm of skepticism: get a list of investors that are a fit for your firm, do an email introduction, and then call and set up an intro meeting, then rinse and repeat.

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On June 4, 2013, the Venture Development Center hosted LSN’s “Discovery to Distribution Boot Camp.” We witnessed first-hand the world of the scientist colliding with the world of marketing and sales. But what was interesting is that the founders who already had been around the block a few times embraced the new approach to fundraising, more readily than others who wanted proof that it works before they will try it.

Do Startups Raise More in an East or West Coast Incubator?

You’ve decided to launch your startup at an incubator, hoping to get a jump on fundraising. There are many other ways incubator programs add value – validating a business model, providing a physical location, creating a network, etc. But follow-on funding is the one thing almost startups want in their early stages.

If you follow the wisdom of the crowd, you’d probably try to get your startup accepted into a Silicon Valley accelerator, like Y Combinator. Let’s look at actual results to see if you were wise to heed that advice.

We used funding data from Seed-DB which has been collecting information on 145 seed accelerators and their companies. Startup databases like this are notoriously incomplete. So we had to search individual companies and plug gaps in funding reported. We believe we captured the major financings.

Looking at the total investment raised, success rate and average and median raised by companies that joined the programs in 2011, we identified eleven top performing accelerators based upon the fundraising results of 178 participating companies.

To see if incubators (which unlike accelerators do not require startups to give up equity in return for joining the program) have comparable success to accelerators, and at the risk of comparing apples and oranges, we also included the 32 startups at Cambridge’s Dogpatch Labs and Boston’s Venture Development Center.

The charts show the results based upon data as of January 2013, about 18 months after the startups joined the incubators.

To determine the best performing classes, look beyond success rate to the average and median amounts raised, and you see that the best performing classes launched at incubators in Cambridge, New York City and Boston, not Silicon Valley.

The results of course are only a snapshot of one class, during an 18 month period, and not indicative of overall incubator performance.

It will take many years for the startups graduating from the incubators to demonstrate quantitative results of any significance. But money raised is an early signal because most need funding during their early stages.

Stay tuned!