How not to run your accelerator for startups

Posted: April 15th, 2010 | Author: | Filed under: posts | Tags: , , | 3 Comments »

Lots of rumblings in the startup accelerator world today about Bootup Labs in Vancouver. Unfortunately, it’s a cautionary tale for founders.

Statusly founder Jaime Martin blogged that his company had been removed from Bootup Labs:

“…Danny Robinson calls us into his office and tells us what we were so scared was going to happen, he tells us that they weren”t able to secure as much money as they originally anticipated. Basically that they”re really embarrassed, that they”re going to have to let us go…”

Jaime describes how his team moved to Vancouver on a handshake deal with Bootup, was then initially told their was a delay with closing the funding, but that the funding never arrived. A few short months after starting what was supposed to be an 8-month – $150,000 program, they were out with nowhere to turn…

 

The early stage startup world is a small one. Accelerators build their reputation slowly, one successful funding, sustainable business model, or exit at a time. The decision to give up equity is a tough calculation – for accelerators, though, the cost/benefit analysis has always been skewed heavily in their favor by the huge benefits and successful track record of the programs. And founders clearly take on a lot of risk by picking up shop and leaving home/jobs/life to participate in the accelerator programs.

Clearly, it’s reasonable to expect that out of the 70 some accelerators programs, a few here or there might not be able to live up to their grand visions. However, when that happens, being created for founders by founders, you’d expect that the response from the accelerators would be quite apologetic, at the very least. In this case, that’s not the way it was handled and it’s made a bad situation worse, for both founder and accelerator.

Jaime’s position could have been most any founder and the startup crowd clearly feels for him (rightly so), based on the comments over at Hacker News.

Unfortunately, this story demonstrates the value of an accelerator program’s strong track record (and that of any investor), beyond the exits and fundings.  Make sure you talk to founders who received investment from the accelerator or fund to find out what things are really like after you take money.  Once you do, there is no undo button.  (This being the first cohort of Bootup, unfortunately, it wasn’t possible for Jaime to talk to startups who had been through Bootup before.)  Like so many other things, too, this shows the importance of handling situations the right way – startup founders, probably moreso than many others, understand that life happens and it doesn’t always go according to plan. But if that does happen, a little help and a lot less bluster would have gone a long way in this situation (despite TechCrunch comments to the contrary). The Google Shrine will preserve these posts and comments for future founders looking into Bootup. Clearly, if money is offered, someone will probably take it, but at least now, they’ll be able to do so with their eyes a bit more open.

Good luck to Jaime – the early stage startup world feels for him – it could have easily been any one of us…

 

For balance and the other side of the story, so you can make up your own mind, here are the other relevant links: Bootup posted their press release, and a move favorable account (for Bootup) of the story is on TechVibes (plus ReadWriteWeb has a totally backwards view of the situation).  Also: comments from one of the Bootup founders.