musings about entrepreneurship & life…
Article originally published in The Next Woman .
It is a well-known fact that startup competitions are growing at a high rate globally. From incubators and accelerators to corporations fostering their own competitions, the hunt for disruptive technological ideas seems to be endless. In a world of startup noise, how are interested parties finding prototypes of what really matters?
To satisfy my never-ending quest for statistics, I began navigating the accelerator/incubator space. Entering the Global Accelerator Network lead me to a field with 50 accelerators. Walking through Seed-DB I discovered 220. Landing at f6s I got lost navigating a grand total of 2,856 accelerators. Bear in mind that tomorrow, you will find different numbers. When trying to find an exact number of successful acquisitions/exits, metrics around accelerator success rate, metrics around what makes an accelerator what it claims to be, I gave up. I couldn’t find reliable numbers.
I am bewildered by the amount of entrepreneurs who apply to accelerators. As of yesterday, the number on f6s alone was 464, 819. Prior to purchasing the well known hamburger made of: $20,000 in investment, 12 weeks of mentoring, office space with beautifully decorated cubicles, coffee with cream, exceptional mentors and unparalleled network all in exchange of 6% equity, aren’t consumers asking the same questions that I am? Where are the scalability metrics? So far, TechStars & YCombinator provide clear metrics.
Startup Competitions & Startup Noise
A San Francisco based company is taking a step towards optimizing startup competitions. YouNoodle is a software as a service platform used by competition organizers. It allows users to handle the screening and judging process of competitions. With a data based approach, the tool can help evaluate hundreds of participants at a time making judging at competitions a fair and transparent process. The company serves universities, nonprofits, governments, corporations and alike.
Recently, YouNoodle evaluated and published aggregate data gathered from the top 1,000 winners of global startup competitions. Aggregate data was the result of analyzing more than 17,500 participants in 232 global startup competitions judged by 4,465 judges. The study had some interesting outcomes. There was a clear regional variation from continent to continent about how easy or hard is for women to win startup competitions. When global data was analyzed, there was over representation of North American women amongst the top 1,000 startups winning these competitions (45%). European (22%) and South American (18%) women followed this statistic. 28% of competition finalists were women. This percentage was roughly equivalent to the share of the total competition entrant population.
After reading this study, I began to wonder what percentage of these companies would actually scale. While researching the percentage of today’s companies founded by women that have received venture capital (VC) investment, I couldn’t find reliable numbers. There is however statistics about the venture capital industry itself.
According to a recent article published in the Boston Globe, a constant at most venture capital firms in Boston, US (a Mecca of the Biotech industry) is the lack of women partners sitting at the table. Another recent study conducted by Fortune Magazine shows that in the US, only 4% of senior venture capitalists are women. The interesting chicken and egg problem that we might have on hand is that a great majority of VC partners are entrepreneurs who have had significant exits. Assuming that women are indeed having a hard time scaling companies because of difficulty securing capital, how do we change the gender composition of the venture capital industry? Do we need to? I personally tend to align more with the interesting 2012 report written by the Kauffman Foundation . According to their report: “Venture firms have a misalignment of incentives, are too big, not delivering returns, and not adjusting to the times”. I am not sure if there is gender inequality when it comes to VC investing practices.
Innovation from the Outside In
Corporations could offer startups a different scaling route. An observation that comes from YouNoodle’s experience in the marketplace is that there has been a change in how corporations interact with startups. In their effort to innovate from the outside, corporations are looking for specific startups in very specific stages. For the startups, this can be a significant opportunity not only at the level of product co-creation but also at the customer development level. Successful startups in the B2B environment find corporations to be an attractive target market. Given the global nature of corporations, corporate engagement can become an interesting outlet for entrepreneurs coming from and/or operating in emerging markets. In this regard, it is not surprising to find companies in the biotech, healthcare and science sectors winning a large proportion of global competitions. Corporations are looking for strong intellectual property.
When looking at the big picture, though most accelerators have yet to prove a profitable business, they are an important part of the startup ecosystem. According to YouNoodle, corporate startup interest seems to be moving upstream with early stage becoming more attractive. A good place to spot interesting partnerships is via competitions fostered by different incubators/accelerators.
Given the difficulty trying to filter prototypes that matter, there is still opportunity for companies focusing on reducing the Startup Noise with a data based approach.