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In 2011, 255 tech startups were accepted into incubator programs around the world, including 45 that joined three local incubators – Dogpatch Labs, TechStars and the Venture Development Center.
There are many ways these startups hoped the programs would add value – validating a business model, finding more investors, providing a physical location, creating a network, etc. But which incubators are most effective in helping their startups accomplish the one thing almost all want – follow-on funding?
We use 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.
Note that the Venture Development Center is not a seed accelerator, focusing instead on launching high tech businesses. These types of startups raise larger rounds of financing, but are harder to get financed, than the consumer web and e-commerce companies which comprise many of the accelerators.
We looked at total raised, success rate and average and median raised. Here are the results:
Considering all of these measures, which incubator had the top performing Class of 2011? We’ll give you a hint: It is in either New York, Massachusetts or California. Stay tuned for Part 4 to find out which one.
As Dan Phillips steps back to launch CloudPercept (team pictured above at the Venture Development Center), venture capitalists Jim Counihan and Michael Gaiss step up as the Venture Development Center’s entrepreneurs-in-residence, dedicated to advising our high tech companies. We’re thrilled they have joined us!
Jim is a General Partner at Prism VentureWorks which he joined in 2000 to run the firm’s software and services practice. Jim holds a B.A. magna cum laude from the UMass Amherst, and a J.D. cum laude from Suffolk University Law School. Jim was instrumental in driving the success of Softricity, acquired by Microsoft, GeoTrust, acquired by Verisign, Silverback Technologies, acquired by Dell.
Michael is the Founder at ThinkB1G which works with an elite group of startups and top universities outside the main entrepreneurial hubs to help make it easier for students to connect with exciting career opportunities at these companies. While at Highland Capital, as Senior Vice President, he advised portfolio companies on marketing strategy, launches, communications and programs. He graduated from the University of Michigan Business School, with a B.S. in Computer Engineering, and has an M.B.A. from the University of St. Thomas.
There is a lot of value to startups in having a network of advisers with different skills. But founders still need objective advice and feedback from a very shrewd business strategist with decades of successful experience behind them. Like Dan’s, Jim’s and Michael’s presence will help founders gain the trust of investors, because they know that they are taking advice from a voice of experience.
Dan has been entrepreneur-in-residence since 2010 at the Venture Development Center. CloudPercept is a rapidly growing cloud performance and business management software-as-a-service company which took shape during the last three months at the Venture Development Center. Dan also founded the Student Entrepreneurship Program, which continues to train and place software development, marketing and sales students into paid interns at an elite group of venture-backed startups in Massachusetts.
Is Dan taking advice from our new EIR’s? Yes.
You’ve decided to launch your startup at an incubator, hoping to get a jump on fundraising. If you followed the wisdom of the crowd, you’d probably try to get your startup accepted into a Silicon Valley accelerator, like Y Combinator. There’s gold in them thar hills.
In 2011, 198 tech startups around the nation were faced with this decision. We’ve been following this Class of 2011 to find out how they fared in accomplishing the one thing almost all want – follow-on funding.
The startups in Boston/Cambridge Class had an amazing 2012, nabbing $86,954,881. (See Part 1.) But would they have been more successful if they had launched at an incubator in another city?
We use 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 to plug gaps in financings reported.
To identify the top performing programs, we sorted the data by success rate, average and median raised. Then we sorted the programs by the region in which they are located. Finally, we totaled the city’s rank for each metric: success rate, average and median raised.
Here are the results:
#1 Boston/Cambridge (44 co.)
#1 New York City (23 co.)
#2 Los Angeles (10 co.)
#3 Seattle/Portland (20 co.)
#4 Chicago (10 co.)
#5 Silicon Valley (57 co.)
#6 London (20 co.)
#7 Philadelphia (14 co.)
Looks like the founders who chose the East Coast had greater success than the West Coast.
Next, in Part 3, we’ll compare the Classes of 2011 by incubator, not location.
In 2011, 44 tech startups joined three local incubators – Dogpatch Labs, TechStars and the Venture Development Center – hoping to accelerate progress.
We’ve been following this Class of 2011, tallying grant, debt and equity funding, the one thing most startups need in their early stages. How are they faring?
The Boston/Cambridge Class had an amazing 2012, nabbing $86,954,881. That is on top of the $38,226,909 raised in 2011.
The fundraising surge in the first half of 2012 was due to financings at the Venture Development Center and Dogpatch. The surge in the second half was mostly due to financings at Tech Stars. By the end of 2012, 78% of the Class of 2011 had raised $125,181,790, an average of $2,781,818.
On popular fundraising site AngelList, Massachusetts startups average $751,000, according to Startup Data Trends. In other words, a startup raised more than triple the amount of funds if they were accepted into one of the Boston incubators.
But there is just no getting around the reality that a startup takes hard and sustained work to get financed. As the data shows, it takes at least a year to raise significant investment. Ironically, the startups at Venture Development Center and Dogpatch, which are not accelerators, raised most of their financing earlier than Tech Stars, an accelerator.
How does the Boston/Cambridge Class of 2011 compare to the startups that launched in other cities around the nation and world? Stay tuned for Part 2.
Paul English (pictured) and Biz Stone have several things in common. These Massachusetts entrepreneurs are co-founders of prominent Internet technology companies – Kayak and Twitter, respectively. Each company has raised hundreds of millions in venture capital. Each is one of the most popular sites on the web in its class. Each is dancing with behemoths – Facebook and Google. And each founder was a student at the University of Massachusetts Boston. But that is where the similarities end. Both took very different paths to where they are today.
English achieved a masters degree in computer science from the University of Massachusetts Boston. He worked during college, doing programming for a bunch of companies, and even some video game software and sound-effect development.
Prior to Kayak, he co-founded several startups, including Boston Light Software, a small business e-commerce platform that was sold to Intuit. At Intuit, Paul became Vice President of technology and led small business Internet and product strategy, company-wide innovation process, and tech recruiting.
Stone lasted only a year at the University of Massachusetts Boston, on a theater arts scholarship. While working during college as a stock boy at a publishing company, he secretly designed a book cover and stuck it into a pile of outgoing designs when everyone was at lunch. When the client chose his design, Stone was made a designer and dropped out of college.
A friend pitched Stone on an idea for a new company called Xanga, a blogging site which they launched together. After moving to Los Angeles and returning to Boston, he was invited back to Mountain View to work at Google on Blogger, then left to set up Odeo, Twitter’s precursor.
Neither English nor Stone was initially motivated to go to college, but English stuck with it. Kayak’s market value is $1,800,000,000, after yesterday’s acquisition by Priceline. Unlike Kayak, Twitter is not traded publicly, but shares are constantly being traded on the secondary market, and its value is about $8,700,000,000. Both companies have a similar amount of annual revenue, about $225,000,000.
Last year, Stone stepped back at the microblogging site and moved on to work on new projects at the Obvious Corporation to help people work together to improve the world. Some projects they are working are Lift, a social network for human potential, dialogue platform Branch, and Neighborland, a site that seeks to create meaningful connections between neighbors.
Unlike English, Stone never had an operational role at Twitter, instead serving as the company’s creative director. Stone was part evangelist, part storyteller and part futurist. His net worth is estimated at $200 million. He is now working with director Ron Howard on a short film for Project Imaginat10n, which will solicit photos from the crowd and use them as inspiration for a series of short films.
In contrast, English remains at the helm of Kayak, navigating it to an IPO and $1.8 billion acquisition by Priceline. But he too has a side project that expresses his passion, one that he might be devoting more time to in the future. Its called JoinAfrica, which intends to blanket all of Africa with free and low-cost Wi-Fi. At the core of JoinAfrica is the belief that providing basic Internet is as essential to society as clean water and clean power.
While the story of these UMass Boston entrepreneurs is far from over, which appears to have made the right decision?
Seth Priebatsch, a Princeton drop-out and founder of SCVNGR, says:
“The term “drop-out” has very negative connotations and, I suppose, with good reason. Most people probably shouldn’t drop out of school, but for that small percentage of us out there who have a great idea burning up inside, dropping out is not just a good idea, it’s the right choice.”
Statistically speaking, though, entrepreneurs are more likely to be successful if they graduate from college than if they don’t. A survey of chief executive officers and product development heads at more than 500 high-tech companies showed that “education provides an advantage in tech entrepreneurship.” Specifically, the companies founded by college graduates had twice the sales and employment of the companies founded by people who didn’t go to college. Moreover, better-educated entrepreneurs are more likely to receive external financing.
Jason Baptiste, the CEO/Co-Founder of Onswipe, cautions budding entrepreneurs to ignore the sensationalist stories like Biz’s and the success that seems like it came overnight.
“It’s all difficult whether you are in college or not. It takes a lot of hard work and there’s a chance you will fail.”
If for some reason, something takes off, then consider going full time with it, Baptiste says. You could “stop out,” the equivalent of taking a sabbatical to focus on the company to see it through to an exit or failure. After that point, you can go back to school and finish what you started.
“This is what I did with my first real startup and I still think it was the right move. Sadly, things ended up failing, and I returned to school to finish what I started.”
(Update of story published on Wednesday, March 16, 2011 by Mass High Tech.)
The Venture Development Center is Boston’s leading startup incubator for technology and life science companies.