This is mainly because a) most accelerators are new so the companies haven't developed enough to exit and b) it takes time to build a program that reliably finds/develops companies that can exit.
I think the bit from the letter about "billed as campus, community, accelerator, and more" will probably narrow it down. That seems like a pretty distinctive way to brand your accelerator.
Presumably what you're talking about is the fact that the summed "exits" are less than the input investments. But it's not a steady state environment. Obviously exits are going to lag the investments by several years, and the rate of investment hasn't been constant -- it's been increasing steadily for several years itself. So you wouldn't expect to see a net profit.
The real question, of course, is whether we should expect to see a net profit across the incubator/accelerator world at some point in the future, or if we're indeed in the bubble some of us think we are...
Hi, creator of Seed-DB here. I'd stress that "exit" values are just that... for known exits only. Even if companies have raised money at billion+ valuations, that number is going to be zero for them. Assuming a 2-10 year horizon for most companies between accelerator and exit, most companies still have a long way to go before they'll have a meaningful number hit the 'exit' column.
Just want to clear the air on this comment (apparently this led to some unintended backlash) -
I participated as a consultant dev helping out a company there, I own no stake in the company and my view on the experience does not reflect the viewpoint of the company I was there for. I left on my own accord which had nothing to do with participation in the accelerator itself, the rest of the company remained thru the duration.
With that out of the way, the "Yikes" was to the effect of "wow, that ended up in the worst way possible". The "too familiar" was noting some of particulars of the story, some of which 1) female led MP 2) extra month+ before demo day 3) some other particulars I won't care to name, but nothing to the degree as told in the story. Let's just say to point 3 I was expecting it to be more hands on, and from what I've learned since writing this comment it was.
I have no issues/beef with the people involved, other teams, etc. I found everyone pleasant to deal with, and the nature of my involvement was as such that many issues going on behind the scenes weren't in my periphery anyway.
Too bad. The website seems very "High school project" caliber but I like the mission very much. It would be a shame if it's a scam.
1. an edtech accelerator embracing lean startup practices.
2. a collaborative coworking community in NYC dedicated to education entrepreneurship.
3. a campus focused on learning technology.
4. the birthplace of the future of learning.
One thing I do notice is there's a fine line between "We have 60% of the stuff figured out, and will make up the rest of the 40% as we go" and going 40/60 instead. One is an ambitious startup, the other is a scam.
Once upon a time, I had sent an email to an org with criticism of their web site and how it's hurting their image, only to find out that they gave the web dev opportunity to a high school kid in the area who really wanted the experience. The org was completely legit, and IMO they did a good thing by giving some kid a chance. If the org's product is not the web site, then I don't see why they should waste money/time on an amazing designer/developer when that money could ease operational needs elsewhere.
Why anyone thinks we need the details, is strange. You partner up, found things weren't right and continued on. It doesn't become a horror story at the end. The team chose to live in a bad situation and let it develop. Every single sentence of this should have been ended with, "I know I should have bailed out, but I didn't."
"The weird thing is that the MD keeps making intros, speaking highly of us and sending people our way. We think she does it because she doesn’t want us talking about our experiences."
Well that doesn't seem too bad, it even feels like the story had a happy ending as it sounds like they've been able to get investors and the startup is working.
It more feels like the MD wanted to keep schmoozing and acting important ignoring the reality of the situation.
There have been a few stories over the passed couple of years where someone name drops and schmoozes to elevate their own profile. In the end, they are found out to be frauds or worse.
Any area that gets a lot of hype will have those that want to cling on.
With that many red flags, why would anyone accept an investment and enter a relationship with such an organization? The things people will do for funding... I'd rather have a day job or a consulting gig in a heartbeat compared to a situation like that.
In college I flailed around for funding for an idea for a bit. I accepted the first offer I found. Said "investor" jacked half of his money back out of the account (he needed a card because he was supposed to do some work on the financial end) and spent it on parties and shit. Very similar tendencies to what was described in the article and lots of the same red flags. He then threatened to sue me if I talked about the whole thing. Thinking about posting the whole story somewhere.
But the broader point is: if you need investment and can't find anyone else, it's very easy to convince yourself that it won't be as bad as it will.
This story is really frustrating and sad to hear, but I have to say, in the three years I've been working on my startup, never once has anything good happened from paying for access to any type of person (investors or customers), using any currency (equity or cash).
We did YCombinator, which could be described as an "access" play, but apart from that, every time someone has offered us access to something in return for something else, we've always politely declined and then just gone and won the business or relationship on our own merits.
Gatekeepers suck, and doing business with gatekeepers leads startups to doing sucky things and pulls them down as well.
The minute I read him deciding to do a second accelerator so he could get access to "his vertical" I started getting a sinking feeling in my stomach.
PG's essays. Years of participating on HN. People I knew who had done YC. The litany of neat companies with products I liked that had come out of YC. The way they had been amazingly accomodating and flexible in smart ways during our application process. Lots more.
I agree, very often we have these average gatekeepers who imagine themselves as top level power brokers at an elite world, and those should be avoided.
But the best "gatekeepers" are not the ones that guard the gate, they are the ones who can show you where the gates even are, it's just very difficult to be able to distinguish the real valuable guys from the "hustlers" without having a lot of experiences yourself.
One of the great things about the SF/valley startup scene is how the whole gatekeeper dynamic doesn't work so much. The best VCs are all just a tweet or HN post away if you're really working on something great that they'll get excited about.
I find this viewpoint very confusing, assuming you see YC as a good experience... unless you are trying to tactfully say that YC was a bad experience and I'm just being dense.
"never once has anything good happened from paying for access" ... "We did YCombinator"
My point was to say that while we've done things to get access, like YC, which was wonderful and a massive exception to this rule, just about every other time we've explored an access opportunity, it's been a big miss.
Sorry to harp on the pedantic point, but your parent's point still stands: you said you never once paid for access, when in fact you seem to have exactly once paid for access, which is different. The point that paying for access makes sense only if it is through YCombinator may be a good one but it's a significantly weaker one than you were originally making. Instead of an unequivocal "no", you're saying "no, but...", which is more complicated.
Unfortunately life is complicated and does not fit into sound bites as well as we'd like.
I like my comment as it is because you get the second graph and realize even great sounding rules of thumb don't apply to everything perfectly.
You are right though, my point is made considerably murkier by the fact that "paying for access" for YC was a good experience. I could counter by saying we got a whole lot more from YC than that, but I think other folks get what I was trying to say.
to be a pedant to your point, OP never actually said he "never once paid for access"... he said "never once has anything good happened from paying for access". they're semantically different.
Gah, this is an awful pointless pedantry battle but I can't help it - OP said that, and also said that YC was something good, and YC is a program wherein you pay for (in part) access.
Paying someone for access never ends well. Do you think the people whose access is being sold are happy with the arrangement? By definition you're entering into a sleazy area. This is why apartment brokers selling access to apartments are sleazy.
I heard stories locally here in Miami of a "consultant" who apparently had charged people to introduce them to several local key figures (in this case I was one of these people he charged people to meet). The irony (aside from anyone ever paying to talk to me), was that they were always just cold emails as I had never met the guy charging for intros in person!
Probably not in the US, but keep in mind that very often in many other places, what the person selling access is also doing is screening for the person whose access is being sold.
This sort of arrangement works pretty well if the person selling the access is actually offering a decent service to both sides. However, it needs to be mutual, pre-arranged, and with plenty of duties all around (in most of the world "duties" end up meaning "kickbacks" but the system won't work if it is limited to that).
I get that screening is a service, but it's very gray. US (& UK) companies need to act with a higher standard globally. Barclays got in trouble with some corporate matchmakers.
I disagree that no good can come from "paying for access."
First, we must define what is "good". After participating in DreamIt Ventures in 2012, I can say that we extracted immense value by quickly invalidating a B2B software concept. It was taking me months to get one meeting with an enterprise client on my own. With the help of DreamIt's mentors, I secured dozens of meetings in less than six weeks. We learned that the software we were building was ill-fated through those meetings. This was undoubtedly "good" for us, and we paid a mere 6% for that kind of access. In retrospect, I'd do it again in a heartbeat.
But your mileage may vary. The value we obtained was highly correlated to the fact that we were pursuing a B2B venture, a sector where DreamIt's mentors could best leverage their networks. In contrast, I saw some consumer-facing companies extract less value from the accelerator program.
In sum, you have to carefully (and honestly) weigh the value that "paid access" can yield. Feelings of frustration in connection to "paid access" likely stem from a miscalculation of the cost/benefits that the access could provide.
I've walked away, shaking my head, from several YCombinator-alikes. They're too often about trying to put together deal-flow without understanding what's helpful. Now I'm all for new things if there were solid principals, strats and connections, but that's rarely the case.... anyone with half an aptitude is likely already in play. Basically, their "help" is a waste of my time and something I can do on my own, better, without giving up an iota of equity. My conclusion is you don't need most of them, most of the time, even the ones that try not to be instant wantrepreneur bootcamps. If you're focused, hungry and persistent... you already have what it takes. So where's the value?
It seems to me like a lot of accelerators would be better off throwing this one to the wolves ASAP before they all get tainted by a stench of unknown origin.
This doesn't seem to be about an accelerator as much as about a person with a behavior disorder that sounds very much like narcissistic personality disorder. NPDs cope with their incompetence by abusing and blaming those around them, creating chaos and misery yet still managing to escape responsibility 9 times out of 10.
The right thing to do here is anonymously expose the managing director.
My thoughts exactly. In my business experience, I dealt with two individuals diagnosed with borderline personality disorder. Of course, I did not see their medical records; it was hearsay. However, it explained much about their behavior. It's a sad story, but it is also the face of mental illness, which is all too real. Learning to recognize and deal with this is another thing to store in one's experience quiver.
Design tip: if a quote is a quote, have a quote style. If a quote is the entire content of your article and is many paragraphs long, rethink styling it as a quote and instead label it, or something.
Absolutely agree. It was very difficult to read, and I ended up having to remove the italic and color styles applied to that section, just to be able to read the article.
Nothing as bad, but heard of bad experience by teams at Microsoft + Techstars accelerator in Seattle where both sides lost interest in the class in the middle of the program. Not sure how good/bad the fundraising was across the board.
Classic narcissistic personality disorder. Run for the hills. With NPDs, it is always everybody else's fault. Add pathological lying, some bipolar, and maybe just for fun booze/drugs and they'll drive you insane too.
My experience was not nearly this bad, but still horrifying for me, my co-founder, and our families.
We had been talking off and on with an accelerator for about a month. We had pitched them, had a few calls, but lived on the other side of the country. They wanted to meet in person which was really not feasible for us. We worked at full-time jobs while hacking away on the side and scraping together whatever money we had to fund our company.
A little flashback, first: I had dropped out of grad school and taught myself programming to start my first company. After a year of living on my wife's student loans, I got "acquihired" by a startup that was run by one of the accelerator's mentors. They gave me 3% equity, a $10k moving bonus, $15k for the company, and a $75k/year salary. I said yes.
Three months later, I decided to quit. I was the only technical person in a company consisting of the two non-technical co-founder, co-CEOs, a project manager, and myself. They had burned through $700k already and hadn't built anything yet. It was becoming clear that my product was going to be their product. In the best case scenario I would spend the next four years working on my original startup, only now for pennies on the dollar.
The purchase of my assets still hadn't gone through and I hadn't yet been paid, aside from the moving bonus and salary. The co-founders claimed I had acted in bad faith and asked for the moving bonus back. I explained that I wouldn't have moved had the moving bonus not been offered (as I couldn't have afforded it). If they had wanted that money back in case I quit, our contract should have specified as much. They relented, and we went our separate ways.
Fast forward another year, back to our accelerator story. The accelerator decides they want to afford us the opportunity to meet in person. They agree to pay for flights so long as we pay for our own hotels and car rental. We also have to talk up the trip on social media, talking about how they paid for our trip, our meetings with investors, etc. Small price to pay, we think.
We make the trip and have some pretty productive meetings. They seem to like us. We fly back, and after some back and forth, they decide they want to invest. Of course, they still need to do their due diligence, so it's going to take some time. In the meantime, my co-founder and I get fired from our jobs. You see, our boss found out about our trip to the accelerator since it was broadcast over social media. It was cool when we were working on a startup after hours. It wasn't so cool when we were talking openly about actually starting a company.
It doesn't matter, though. We made it into the accelerator. They send over the paperwork. It's a convertible note with pretty standard terms, fully signed by all the partners. We sign and send it back. We can't believe it's happening. I sign a lease on an apartment in the new city and my wife and I pack up our apartment. My co-founder does the same.
Suddenly the music changes. They go dark for a couple days. I'm nervous because I have a U-Haul scheduled. I finally get a call with one of the partners; I'm supposed to start a 3,000 mile move the next day. He explains that they can't do the deal. A check isn't coming. He can't explain why.
My mind races and I think: it couldn't have been that mentor, could it? My resume was fully transparent. They should've seen the connection. And they did their due diligence before they made the deal. How could that have slipped by?
I ask for an explanation but to no avail. They can't explain it. Not even a little bit.
Now I have to try to reorder my life. My job is gone. My apartment is already rented out to someone else. Luckily the landlord at the new place lets me out of my lease. I reschedule the U-Haul to take us to my wife's parents' house instead.
My co-founder was devastated. He wasn't used to startups. In fact, to this day he's been bouncing ...
Thanks for sharing. Any insight as to why investors sometimes back out at the last minute, after the startup has already committed to the change? I've read of that same thing happen at least a few times now... I just don't really understand why it happens.
I wish I knew. I think in our case it was the mentor. My guess is that they sent news of the great new deal out to all their mentors after we signed the note. The mentor got it in his inbox and jumped at my name. I can only imagine the hurried phone calls.
In that case, they just needed better due diligence. They shouldn't have had us upend our lives because of that simple failure.
> They agree to pay for flights so long as we pay for our own hotels and car rental.
This seems crazy to me. In my head, if a few hundred bucks for flights & lodging is too much to ask, how much dough could they really have to invest? Is this standard?
> It's a convertible note with pretty standard terms, fully signed by all the partners. We sign and send it back. [...] He explains that they can't do the deal. A check isn't coming. He can't explain why.
Is there any legal recourse available in this situation?
> My mind races and I think: it couldn't have been that mentor, could it?
Which mentor are you talking about here?
> Now I have to try to reorder my life. My job is gone. My apartment is already rented out to someone else.
You know, I've seen deals fall apart so often that until cash is in the bank I don't change my life. Maybe it's from my time as a car salesman in college - until the bank funds the loan, I wasn't counting my commission. Deals fall apart in all sorts of crazy and ridiculous ways.
The convertible note was for $40,000, so they definitely had the money to spend if they were fully serious. I think they just played hardball.
There's no real legal recourse. I asked my lawyer the instant it happened. And even if there were, what's the best outcome you could get? Work at the accelerator with investors who hate you?
The mentor was the co-founder of the startup who "acquihired" me from my first startup.
And totally agreed on your last point. For me, it was definitely a lesson learned. The even better lesson was that I was spending a lot of time hustling for the wrong things. Why should I be working so hard just to get $40k? What would an accelerator do for me that I couldn't do for myself? Now I'm bootstrapping while consulting, a much more sensible choice for most businesses.
A bunch of talented developers who all want to run their own show. I'm not sure they'd make great employees for a small slice of equity even after their startup's failed.
> until cash is in the bank I don't change my life.
if you're in sales, this is EXTREMELY important, doubly so if you sell for a startup. the deal isn't real until the money shows up.
customers will take advantage of your kindness, lie to you, manipulate you, appeal to your vanity, and they can smell desperation from a mile away. "give an inch and they'll take a mile" - these folksy old timey sayings don't come from nowhere.
there are all sorts of shitty people out there that will play napoleon for a day just because they feel they have power over you. it's sickening.
do not start work until you get the money. do not ship product until you get the money. do not pay your suppliers until you get the money. do not pay your sales people commission until you get the money - money didn't show up? well that wasn't a sale, now was it?
if they don't want to pay at LEAST a deposit, they're not serious. END OF STORY.
very simple in concept - very difficult in practice because there are some people who are just plain naive out there. one of the most important skills you learn as a startup is how to say no.
This is an important lesson, but it's not an absolute rule.
You need to have a sense for your customers, how much power they have over the money, and how much they'll suffer if you're inflexible.
I've spent years working with teachers, who (as patio11 will tell you) are not a great target market for ready cash, but who are very honest. I used to have an informal policy where a teacher would just tell me they were working on getting a purchase order, and I'd credit their subscription. I changed that to only crediting them a month at a time (after one situation where I realized towards the end of the year that one PO had never arrived.. it was stressful for the teacher, but all resolved amicably), but still, there's trust involved.
If I didn't trust them, a lot of these teachers would just be stuck without access for weeks -- the site would be far less useful to them.
- Edit: "until the cash is in the bank, don't change your life" still applies in my situation; payment was slow and unreliable (though paid in the long run), and that does affect planning.
In your case you have an established business, and you have a class of customers you understand and therefore who you can extend tailored win-win credit policies to. As you note in your edit, that's a different thing than the stuff that changes your life, like all that went in to establishing your companies up front.
I understand urge for anonymity in these stories but I think it would be really helpful If the names of these accelerators where disclosed so people don’t fall into the same situations. I know "clues" are provided in both scenarios but there are literally dozens of accelerators out there (four alone in La area that I know of) some of which a couple of my friends have applied too. Avoiding these type landmines should be the paramount goal. I know there may be a negative stigma on publicly bad mouthing an accelerator you where part of(sour grapes from a bad team maybe) but this isn’t bad customer service where talking about which could be subjective this is totally unacceptable behavior that is being detailed here and in that case anonymity is a courtesy they don’t deserve
I agree, but I'm not sure I'm in a position to do much were I to disclose the name. A comment or a story on HN! We'll all guffaw and shake our heads; then we'll move on. Your buddies a year from now probably won't know any difference. And if I'm remembered, at best, I'll just be perceived as a disaffected applicant.
I don't know that there's a good solution to this. I wish pud's fuckedcompany still existed, and there were a place for investors, too.
Don't listen to advice from folks with nothing to lose if you adopt it. There's zero good that could come from naming names and being outed as an outer. It sucks but that's the way the world works. Always best to sever all ties and just move on to the next opportunity.
Maybe we should turn it the other way. List accelerators withh good feedback and the list of startups and people we can contact for performing the due dilligence.
I'm actually going to be talking to some Los Angeles accelerators in October/November. Your story is concerning. Can you reach out over email? My email is in my profile. I don't need any of your personal details, but the accelerator name would really help me out.
I hear that the VCs are flummoxed -- they have pots of money but they are not finding good prospects. The latest fad is to sprinkle little amounts of money around and hope they can pluck a promising seedling.
The important point is that there are VCs out there willing to write little 5 and 6 figure checks, for the hope of a real deal in the future. That has attracted professional deal makers, and this career looks especially attractive to people with weak technical chops for this industry but fancy they can make up for it with schmoozing.
Deal makers have a chicken and egg problem. They cannot get non-small checks without eggs in the basket. They cannot show any person with real money the eggs in the basket without promising future non-small checks to the future chicks. And sometimes people with money decide to not write the big checks until they see pretty chicks. Oops.
You were an egg. The deal maker here cajoled you to rolled into their basket with small amounts of money. And you were never given enough money to crack out of your shell.
I would point out that the deal maker is not screwing you over on purpose. But they may be telling you wildly overoptimistic things, while they are scrambling to see if any of a dozen different people will write a real check. When they refuse to explain, it is because they do not want to own up to making promises which they were not sure they could deliver.
As for Los Angeles, I may not have the best ear to the ground, but it does not sound like a top 5 location for recruiting tech talent. (I know you moved there, but the point still stands.) I would guess that those are third string deal makers who happen to believe they can rub elbows with unsophisticated money in the Hollywood area. (If they were really good, they would in SF Bay, Boston, Austin, NY, where the real VC connections can be found.)
My story about accelerator is all fluffy and red roses (I was with 500startups and the experience was AMAZING) and I moved from another country to the US in order to participate in it. I can only imagine what would have happened if they had cancelled on me at the last minute.
I think these kind of stories need to include name and not be anonymous, I hate when people get away with this kind of behavior because no one is interested in calling them out on this shitty behavior.
No offense taken. Just remember that I'm still the little guy here, as are many others who feel they have to share anonymously. I don't have a large fund. I don't have lots of great connections. And I still need to do business, maybe with companies who have existing relationships with these people.
Would you be willing to disclose this information in private? I'm not affiliated with any accelerator but do have my share of experience with them and this kind of information is very interesting to me.
If you do - then you know how to reach me (email is in my profile)
If you sold the company and then backed out, the company still should have remained sold even if you decided to quit. If you were still doing the same thing in the accelerator, it would probably be reasonable for the acquirer to raise the issue.
I have a horror story to share with regards to my experience within the LA ecosystem, but unfortunately now is not a good time and I don't have an anon account handy right now.;)
So accelanon your deal was in LA for $40K. There's only a handful of them. Hmm. My situation was pretty bad and I drove 3200 miles and rented a place for 4 expensive months. It was stressful, fun but not what I thought I was getting myself into. BUT the whole ordeal fired me up and I haven't lost a bit of focus. I am much better off now. If anyone wants info on what LA is all about hit me up.
A word of warning: these personality types are incredibly common in the startup world, for a number of reasons: Driven, strong personalities are valued. It's easier to hide in a small company. As a founder, it's relatively easy to build a team that will tolerate your excesses.
Don't be afraid. Moving on after one month is ok. It won't irrevocably stain your resume. The self-aware hiring managers know this dynamic exists, and won't hold it against you.
There are thousands of amazing, hard-working, kind, creative, interesting people and teams. Find one and cherish it.
I think a fair number of those personality types hide in larger companies, too. They don't have the clout/vision/cult-leader personna of a founder with that personality type. After a number of years of observing people like that who should be marched out the door - but aren't - I've concluded they must be blackmailing someone powerful within the company.
It doesn't have to be blackmail. It could be that the person has so entrenched himself or herself in his or her role that even their boss can't really fire them. This is especially true in companies that tend to hire top management from outside or do a lot of lateral transfers. It's entirely possible that the middle manager here knows more about that part of the business than his or her boss, and so the boss can't let this person go, because the boss doesn't know enough about the requirements of the position to hire a replacement.
maybe a noob question but usually, the agreement to do an accelerator program is usually overseen by an attorney? or is it just a handshake between accelerator and acceleratees?
The 'agreement' between them is meaningless (in a legal/financial sense) until they both sign the docs to officially transfer money for an equity stake.
I had an awful experience years ago that reminds me of some of these stories. I'd have to tone it down to make it believable.
Short short version: a guy with no money pretended to be a deep-pocketed investor, talked me into leaving my day job. At least that's how the story begins. Then it gets progressively more insane.
I met a one of these faux investor, charlatan, stone soup types a few years ago. When he talked about making investments, it took a while to figure out he'd invest time and no cash. When he talked about how was was affiliated with some impressive named and organizations, he really meant he'd done a shitty website for a semi well known author and he'd visited the Harvard campus once. At every turn when I asked him for a hard commitment of something I could use, actionable advice or hard cash, he never produced.
I recommend demanding excellence from your investors and expect them to demand excellence from you. Strong relationships improve when tested, others buckle and fade away. That's been my experience anyway.
Startups looking for accelerators remind me of authors looking for agents and publishers - we don't realize how much power we have in the relationship, and also how much we can do for ourselves without someone to "help" us for a chunk of our equity.
Of course the right accelerator/VC/agent/publisher, at the right time, can help. It works best if you see them as a piece of YOUR plan, rather than see yourself as a supplicant to their network/deep pockets.
I've been approached by a few startup-ish projects in the past few years, all wanting to 'partner' up and 'join an accelerator' or 'apply for startup program XYZ'.
I proceed to ask "what are you going to do with the $50k you'd get if you get in?"
There's typically a blank stare.
Now, I get that you get more than just money; hopefully you're getting connections and introductions and press you couldn't get on your own. But not always.
But I'm still shocked that typically there's no answer at the top of their minds. And they're asking me to invest the next 6 months or more of my life with them to 'do a startup'. As a tech/dev, I am an investor, investing my time, knowledge, energy and passion in to something. If they can't convince me to invest, they're not going to convince an accelerator.
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The real question, of course, is whether we should expect to see a net profit across the incubator/accelerator world at some point in the future, or if we're indeed in the bubble some of us think we are...
On a positive note, The Alley is a way cool co-working space, I miss it dearly. Routine nightly events/speaking engagements were pretty awesome.
I participated as a consultant dev helping out a company there, I own no stake in the company and my view on the experience does not reflect the viewpoint of the company I was there for. I left on my own accord which had nothing to do with participation in the accelerator itself, the rest of the company remained thru the duration.
With that out of the way, the "Yikes" was to the effect of "wow, that ended up in the worst way possible". The "too familiar" was noting some of particulars of the story, some of which 1) female led MP 2) extra month+ before demo day 3) some other particulars I won't care to name, but nothing to the degree as told in the story. Let's just say to point 3 I was expecting it to be more hands on, and from what I've learned since writing this comment it was.
I have no issues/beef with the people involved, other teams, etc. I found everyone pleasant to deal with, and the nature of my involvement was as such that many issues going on behind the scenes weren't in my periphery anyway.
NY, and SF.
"I've emailed @davidcohen and asked him whether he would be willing to share my response. Awaiting word."
1. an edtech accelerator embracing lean startup practices. 2. a collaborative coworking community in NYC dedicated to education entrepreneurship. 3. a campus focused on learning technology. 4. the birthplace of the future of learning.
One thing I do notice is there's a fine line between "We have 60% of the stuff figured out, and will make up the rest of the 40% as we go" and going 40/60 instead. One is an ambitious startup, the other is a scam.
Well that doesn't seem too bad, it even feels like the story had a happy ending as it sounds like they've been able to get investors and the startup is working.
There have been a few stories over the passed couple of years where someone name drops and schmoozes to elevate their own profile. In the end, they are found out to be frauds or worse.
Any area that gets a lot of hype will have those that want to cling on.
I wouldn't be surprised if "she" demanded something if she even knew of an investor OP's company ended up taking on.
But the broader point is: if you need investment and can't find anyone else, it's very easy to convince yourself that it won't be as bad as it will.
We did YCombinator, which could be described as an "access" play, but apart from that, every time someone has offered us access to something in return for something else, we've always politely declined and then just gone and won the business or relationship on our own merits.
Gatekeepers suck, and doing business with gatekeepers leads startups to doing sucky things and pulls them down as well.
The minute I read him deciding to do a second accelerator so he could get access to "his vertical" I started getting a sinking feeling in my stomach.
But the best "gatekeepers" are not the ones that guard the gate, they are the ones who can show you where the gates even are, it's just very difficult to be able to distinguish the real valuable guys from the "hustlers" without having a lot of experiences yourself.
"never once has anything good happened from paying for access" ... "We did YCombinator"
YC is the prototypical model for this.
I like my comment as it is because you get the second graph and realize even great sounding rules of thumb don't apply to everything perfectly.
You are right though, my point is made considerably murkier by the fact that "paying for access" for YC was a good experience. I could counter by saying we got a whole lot more from YC than that, but I think other folks get what I was trying to say.
This sort of arrangement works pretty well if the person selling the access is actually offering a decent service to both sides. However, it needs to be mutual, pre-arranged, and with plenty of duties all around (in most of the world "duties" end up meaning "kickbacks" but the system won't work if it is limited to that).
http://www.telegraph.co.uk/finance/newsbysector/banksandfina...
First, we must define what is "good". After participating in DreamIt Ventures in 2012, I can say that we extracted immense value by quickly invalidating a B2B software concept. It was taking me months to get one meeting with an enterprise client on my own. With the help of DreamIt's mentors, I secured dozens of meetings in less than six weeks. We learned that the software we were building was ill-fated through those meetings. This was undoubtedly "good" for us, and we paid a mere 6% for that kind of access. In retrospect, I'd do it again in a heartbeat.
But your mileage may vary. The value we obtained was highly correlated to the fact that we were pursuing a B2B venture, a sector where DreamIt's mentors could best leverage their networks. In contrast, I saw some consumer-facing companies extract less value from the accelerator program.
In sum, you have to carefully (and honestly) weigh the value that "paid access" can yield. Feelings of frustration in connection to "paid access" likely stem from a miscalculation of the cost/benefits that the access could provide.
For anyone else who thought the same, here's an article about a russian who got his face caught in a proton beam: https://en.wikipedia.org/wiki/Anatoli_Bugorski#Particle_acce...
Not only me - this is the top comment and there are three more comments about this. This is a good measure of how geek this site is.
"Putting your hand in the Large Hadron Collider..."
https://www.youtube.com/watch?v=_NMqPT6oKJ8&list=TLwUB7ALPnO...
I want to say that this fact should have been obvious long before, but I have the benefit of third-person hindsight.
The right thing to do here is anonymously expose the managing director.
"I may have also changed the gender of certain people (i.e. he/she), again, with approval of the author."
So lets not point fingers based on gender alone.
We had been talking off and on with an accelerator for about a month. We had pitched them, had a few calls, but lived on the other side of the country. They wanted to meet in person which was really not feasible for us. We worked at full-time jobs while hacking away on the side and scraping together whatever money we had to fund our company.
A little flashback, first: I had dropped out of grad school and taught myself programming to start my first company. After a year of living on my wife's student loans, I got "acquihired" by a startup that was run by one of the accelerator's mentors. They gave me 3% equity, a $10k moving bonus, $15k for the company, and a $75k/year salary. I said yes.
Three months later, I decided to quit. I was the only technical person in a company consisting of the two non-technical co-founder, co-CEOs, a project manager, and myself. They had burned through $700k already and hadn't built anything yet. It was becoming clear that my product was going to be their product. In the best case scenario I would spend the next four years working on my original startup, only now for pennies on the dollar.
The purchase of my assets still hadn't gone through and I hadn't yet been paid, aside from the moving bonus and salary. The co-founders claimed I had acted in bad faith and asked for the moving bonus back. I explained that I wouldn't have moved had the moving bonus not been offered (as I couldn't have afforded it). If they had wanted that money back in case I quit, our contract should have specified as much. They relented, and we went our separate ways.
Fast forward another year, back to our accelerator story. The accelerator decides they want to afford us the opportunity to meet in person. They agree to pay for flights so long as we pay for our own hotels and car rental. We also have to talk up the trip on social media, talking about how they paid for our trip, our meetings with investors, etc. Small price to pay, we think.
We make the trip and have some pretty productive meetings. They seem to like us. We fly back, and after some back and forth, they decide they want to invest. Of course, they still need to do their due diligence, so it's going to take some time. In the meantime, my co-founder and I get fired from our jobs. You see, our boss found out about our trip to the accelerator since it was broadcast over social media. It was cool when we were working on a startup after hours. It wasn't so cool when we were talking openly about actually starting a company.
It doesn't matter, though. We made it into the accelerator. They send over the paperwork. It's a convertible note with pretty standard terms, fully signed by all the partners. We sign and send it back. We can't believe it's happening. I sign a lease on an apartment in the new city and my wife and I pack up our apartment. My co-founder does the same.
Suddenly the music changes. They go dark for a couple days. I'm nervous because I have a U-Haul scheduled. I finally get a call with one of the partners; I'm supposed to start a 3,000 mile move the next day. He explains that they can't do the deal. A check isn't coming. He can't explain why.
My mind races and I think: it couldn't have been that mentor, could it? My resume was fully transparent. They should've seen the connection. And they did their due diligence before they made the deal. How could that have slipped by?
I ask for an explanation but to no avail. They can't explain it. Not even a little bit.
Now I have to try to reorder my life. My job is gone. My apartment is already rented out to someone else. Luckily the landlord at the new place lets me out of my lease. I reschedule the U-Haul to take us to my wife's parents' house instead.
My co-founder was devastated. He wasn't used to startups. In fact, to this day he's been bouncing ...
In that case, they just needed better due diligence. They shouldn't have had us upend our lives because of that simple failure.
> They agree to pay for flights so long as we pay for our own hotels and car rental.
This seems crazy to me. In my head, if a few hundred bucks for flights & lodging is too much to ask, how much dough could they really have to invest? Is this standard?
> It's a convertible note with pretty standard terms, fully signed by all the partners. We sign and send it back. [...] He explains that they can't do the deal. A check isn't coming. He can't explain why.
Is there any legal recourse available in this situation?
> My mind races and I think: it couldn't have been that mentor, could it?
Which mentor are you talking about here?
> Now I have to try to reorder my life. My job is gone. My apartment is already rented out to someone else.
You know, I've seen deals fall apart so often that until cash is in the bank I don't change my life. Maybe it's from my time as a car salesman in college - until the bank funds the loan, I wasn't counting my commission. Deals fall apart in all sorts of crazy and ridiculous ways.
There's no real legal recourse. I asked my lawyer the instant it happened. And even if there were, what's the best outcome you could get? Work at the accelerator with investors who hate you?
The mentor was the co-founder of the startup who "acquihired" me from my first startup.
And totally agreed on your last point. For me, it was definitely a lesson learned. The even better lesson was that I was spending a lot of time hustling for the wrong things. Why should I be working so hard just to get $40k? What would an accelerator do for me that I couldn't do for myself? Now I'm bootstrapping while consulting, a much more sensible choice for most businesses.
1) Fund a bunch of companies with the expectation that maybe 1 in 10 will succeed.
2) When the other 9 fail, you have a bunch of talented developers all in one place. And guess what? The really successful company is hiring.
It's pretty brilliant, if not Machiavellian.
if you're in sales, this is EXTREMELY important, doubly so if you sell for a startup. the deal isn't real until the money shows up.
customers will take advantage of your kindness, lie to you, manipulate you, appeal to your vanity, and they can smell desperation from a mile away. "give an inch and they'll take a mile" - these folksy old timey sayings don't come from nowhere.
there are all sorts of shitty people out there that will play napoleon for a day just because they feel they have power over you. it's sickening.
do not start work until you get the money. do not ship product until you get the money. do not pay your suppliers until you get the money. do not pay your sales people commission until you get the money - money didn't show up? well that wasn't a sale, now was it?
if they don't want to pay at LEAST a deposit, they're not serious. END OF STORY.
very simple in concept - very difficult in practice because there are some people who are just plain naive out there. one of the most important skills you learn as a startup is how to say no.
You need to have a sense for your customers, how much power they have over the money, and how much they'll suffer if you're inflexible.
I've spent years working with teachers, who (as patio11 will tell you) are not a great target market for ready cash, but who are very honest. I used to have an informal policy where a teacher would just tell me they were working on getting a purchase order, and I'd credit their subscription. I changed that to only crediting them a month at a time (after one situation where I realized towards the end of the year that one PO had never arrived.. it was stressful for the teacher, but all resolved amicably), but still, there's trust involved.
If I didn't trust them, a lot of these teachers would just be stuck without access for weeks -- the site would be far less useful to them.
- Edit: "until the cash is in the bank, don't change your life" still applies in my situation; payment was slow and unreliable (though paid in the long run), and that does affect planning.
Based on the OP and your story, I guess tech start ups have truly "arrived".
I don't know that there's a good solution to this. I wish pud's fuckedcompany still existed, and there were a place for investors, too.
anonymous rating & reviews are a good way to go, even if the reviews have to be vague to avoid a backlash
I hear that the VCs are flummoxed -- they have pots of money but they are not finding good prospects. The latest fad is to sprinkle little amounts of money around and hope they can pluck a promising seedling.
The important point is that there are VCs out there willing to write little 5 and 6 figure checks, for the hope of a real deal in the future. That has attracted professional deal makers, and this career looks especially attractive to people with weak technical chops for this industry but fancy they can make up for it with schmoozing.
Deal makers have a chicken and egg problem. They cannot get non-small checks without eggs in the basket. They cannot show any person with real money the eggs in the basket without promising future non-small checks to the future chicks. And sometimes people with money decide to not write the big checks until they see pretty chicks. Oops.
You were an egg. The deal maker here cajoled you to rolled into their basket with small amounts of money. And you were never given enough money to crack out of your shell.
I would point out that the deal maker is not screwing you over on purpose. But they may be telling you wildly overoptimistic things, while they are scrambling to see if any of a dozen different people will write a real check. When they refuse to explain, it is because they do not want to own up to making promises which they were not sure they could deliver.
As for Los Angeles, I may not have the best ear to the ground, but it does not sound like a top 5 location for recruiting tech talent. (I know you moved there, but the point still stands.) I would guess that those are third string deal makers who happen to believe they can rub elbows with unsophisticated money in the Hollywood area. (If they were really good, they would in SF Bay, Boston, Austin, NY, where the real VC connections can be found.)
I think these kind of stories need to include name and not be anonymous, I hate when people get away with this kind of behavior because no one is interested in calling them out on this shitty behavior.
No offense, I'm sure you have your reasons.
I wish it weren't so.
Would you be willing to disclose this information in private? I'm not affiliated with any accelerator but do have my share of experience with them and this kind of information is very interesting to me.
If you do - then you know how to reach me (email is in my profile)
So accelanon your deal was in LA for $40K. There's only a handful of them. Hmm. My situation was pretty bad and I drove 3200 miles and rented a place for 4 expensive months. It was stressful, fun but not what I thought I was getting myself into. BUT the whole ordeal fired me up and I haven't lost a bit of focus. I am much better off now. If anyone wants info on what LA is all about hit me up.
Don't be afraid. Moving on after one month is ok. It won't irrevocably stain your resume. The self-aware hiring managers know this dynamic exists, and won't hold it against you.
There are thousands of amazing, hard-working, kind, creative, interesting people and teams. Find one and cherish it.
You're right, of course. A difference when you're stuck near one is that it's generally easier to switch teams than companies.
Short short version: a guy with no money pretended to be a deep-pocketed investor, talked me into leaving my day job. At least that's how the story begins. Then it gets progressively more insane.
I recommend demanding excellence from your investors and expect them to demand excellence from you. Strong relationships improve when tested, others buckle and fade away. That's been my experience anyway.
Of course the right accelerator/VC/agent/publisher, at the right time, can help. It works best if you see them as a piece of YOUR plan, rather than see yourself as a supplicant to their network/deep pockets.
I've been approached by a few startup-ish projects in the past few years, all wanting to 'partner' up and 'join an accelerator' or 'apply for startup program XYZ'.
I proceed to ask "what are you going to do with the $50k you'd get if you get in?"
There's typically a blank stare.
Now, I get that you get more than just money; hopefully you're getting connections and introductions and press you couldn't get on your own. But not always.
But I'm still shocked that typically there's no answer at the top of their minds. And they're asking me to invest the next 6 months or more of my life with them to 'do a startup'. As a tech/dev, I am an investor, investing my time, knowledge, energy and passion in to something. If they can't convince me to invest, they're not going to convince an accelerator.