Venture Capital Dispatch

An inside look from VentureWire at high-tech start-ups and their investors.

July 23, 2012, 6:24 PM

Before Your Start-Up Goes to Boot Camp, Read This

By Lora Kolodny - WSJ

Start-up founders increasingly turn to incubators and acceleratorslike the pioneeringTechStars, Y Combinator, 500 Startups or the Founder Instituteto boost their visibility and productivity in their early days. An acceptance to one of these programs should give them cause for celebration. But after merriment and libations, they really need to get prepared, says David Cohen, founder of TechStars. If they dont, they risk losing out on the many benefits provided by such programs, like face time with heavy hitters in tech and venture capital. We asked graduates who are still running the companies they developed there what they did and wish they did to get in shape for business boot camp. Heres what they suggested. Krista Paul, founder of UsingMiles, a dashboard that helps travelers manage and earn rewards for travel. Graduated: TechStars, Boulder, Colo., 2008 Did Right: Upon admission to TechStars, Paul says she immediately quit her day job and got to work beefing up her team by hiring developers. She also started living on a lower budget, since she wouldnt be getting a steady paycheck any more. In Hindsight: We incorporated and had a website up when we applied, she recalls. If we sought more feedback from others early on, though, we would have wasted less time rebuilding our product [during TechStars.] At the suggestion of TechStars mentors and peers, UsingMiles shifted its focus. Points management was just a small piece of what it originally offered travelers. The company

is revenue-generating now, and raised $3 million in venture funding with a series A round led by iSherpa. Wade Eyerly, founder and chief executive of Surf Air, an all-you-can-fly subscription airline. Surf Air isnt fully operational yet, but raised $4 million in venture capital and has 16 full-time employees. Graduated: MuckerLab, Los Angeles, 2012 Did Right: The humble entrepreneur says he didnt do much rightbesides coming up with a business modelbefore moving across the country to Santa Monica, Calif., with five co-founding employees to participate in MuckerLabs inaugural class. In Hindsight: Eyerly wishes he had connected with CEOs who had been through accelerator programs to find out how it works, and help him come up with a plan to maximize the experience. He also wishes he would have connected with CEOs who were accepted into his class. Most of [our class] needed design help, Eyerly said. [Surf Air] didnt need the talents of a full time designerInstead of hiring a dozen one-off vendors to do different bits of work, we could have banded together to hire one person across companies, he says. Tikhon Barnstam, co-founder of Parse, a cloud platform for mobile application development. The 17-employee company wants to be Amazon Web Services for mobile, says Tikhon. To do this, it raised $7 million in venture funding, including $5.5 million from Ignition partners and $1.5 million from YCombinator. Graduated: Y Combinator, Mountain View, Calif., Summer 2011 Did Right: Barnstam had graduated Y Combinator once before, as the co-founder ofScribd [which is still going strong.] When he returned, he knew how it worked. You get a few months between being accepted and starting. Theres no reason not to work as hard as you would during an actual incubator then. We started writing code, testing landing pages, collecting emails so we could blast a list when we fully launched. In Hindsight: In 2006, I moved out from Boston to do Y Combinator the first time, and hadnt found housingYoure going to be working really hard, and may not see your

loved ones much. You definitely dont want to be worrying about where youre going to sleep. Jared Hansen, founder of Breezy, an enterprise software company that lets a companys employees print or fax documents from their iOS, Android and Blackberry devices. Graduated: Founder Institute, Mountain View, Calif., Summer 2010 Did Right: Hansens best move, besides developing an alpha version of his app, was doing extensive background research on [the programs] mentors, to see who had industry-specific experience. In Hindsight: Hansen says he didnt show his product to enough potential customers. Doing 30 interviews with the CIOs of law firms to find out what they needed, wanted and why, would have put Breezy in a better place by the time he was pitching to investors at demo day, he believes. Breezy has raised $1.1 million in seed funding, and employs seven full-time in Oakland. Chuck Gordon, founder and CEO of SpareFoot, a site that helps people find the best deals on self-storage. Graduated: Capital Factory, Austin 2009 Did Right: It was the inaugural year of Capital Factory when SpareFoots co-founders decided to move to Austin, Texas, from San Diego. We went with an open mind and a determination to make the company a success, says Gordon. That included trying things out manually when they didnt know how to write code to automate the process, he says. I juggled calls between a renter and a storage company, got the quotes, did the deal. It proved we had a business. In Hindsight: Gordon wishes hed ditched his perfectionism sooner. Fail fast is a mantra at most accelerators. Hed spent months perfecting the first version of SpareFoot.com. His team launched a completely new product and site in two weeks after Capital Factory began. Was it perfect? No, says Gordon. But it was live, helped the company lock in customers, get feedback and get going. Shelby Clark, founder and CEO of RelayRides, a car sharing marketplace that unlike its many competitorsis backed by a U.S. auto maker, General Motors.

Shelby Clark

Shelby Clark, CEO of RelayRides, a MassChallenge Graduate.

Graduated: MassChallenge, Boston, 2010 Did Right: Accelerators are built to make things go faster, Clark says. If your team has existing issues, that can cause drama between co-founders. We were clear on our roles and responsibilities from the start, thankfully. In Hindsight: Before MassChallenge, Clark says, We underestimated how valuable the resources [of an accelerator] could beMassChallenge offered free office space, but we had an office. We waited to move in and be around other smart entrepreneurs and mentors. We should have become more aware of the resources at our disposal, and gotten over there to take advantage of them right away. Based in San Francisco and Boston, RelayRides now has 35 full-time employees, and offers peer-to-peer car rentals throughout the U.S. It raised $13 million in venture funding from Google Ventures, Shasta Ventures, August Capital and GM Ventures, the auto makers venture arm.