Excelerate Labs, Just the Facts Please

Posted by Jeff Carter
on May 19th, 2012

I read a story yesterday about Excelerate Labs. I commented, but my comments don’t show up. Someone must not like them. Here is a link to the article I commented on.

For the record, Hyde Park Angels was an early advocate for Excelerate. I personally have invested in some of the companies that have matriculated out of the lab, and I continue to support them. Believe me, if I thought they were doing things incorrectly or simply to glorify themselves, I wouldn’t. But, they continue to do a first class job and are an essential part of the Chicago entrepreneurial ecosystem. We could use more places like Excelerate Labs.

In general, there is a plethora of incubators all over the country. I think it’s a good idea to take a look and see if they are producing good companies or not. However, in angel investing it usually takes at least five years to even know if you have a winner or not. Unfortunately, with a good idea that was basically started by TechStars, some imitators don’t do accelerators well. However, Excelerate does do things the right way and the article doesn’t really examine facts and inserts opinion.

An example, “On balance, Excelerate has been very successful in finding, funding and supporting young Chicago companies. To date, however, there haven’t been any big exits or breakaway successes.”

If your yardstick is five years to know if an angel investment is a real success or not, then Excelerate’s first class is going to be ripe in 2015. Let’s examine that first class and see what’s happened.

Alltuition-received funding after Excelerate program, and recently won the prestigious Silicon Valley Launch competition. It is the number one place to take care of all of your student loan and financial needs.

Fango-received funding and was bought by Grubhub. They were an ordering platform for sporting events.

Feefighters-received funding and was bought by Groupon($GRPN). This was in the payments space.

GiveForward-received funding and is working on getting more funding. They are doing well. It’s a place to raise money for good causes in a crowdfunding way.

MathZee-I don’t know if they are a going concern or not. Strike one by my calculation. Correct me if I am wrong.

Noblivity-going strong. It’s a cutting edge B2B platform and clearinghouse where designers meet boutiques.

PVpower-in business, has received some funding. If you are interested in installing solar power in a simplified manner, this is a one stop shop.

ScholarPro-innovative way to match up students and scholarships. ~~Don’t know if they made it or not-someone will tell me.~~ Raised 1M and are in operation.

Tap.me-the most innovative in game ad platform in the world. Received seed, first and second round funding. Has customers, and is doing well.

WeGather -where your church connects online. As far as I know, they are still operating. ~~I don’t know about their funding.~~ Didn’t need to fundraise. It’s a cash flow positive business!

So let’s say the first class was ~~70%~~ 90% successful. That’s Hall of Fame material when it comes to angel investing. Already 20% of the class has been acquired. No breakaway successes yet, but you could see where a few of them really are poised to bust out.

Hey, what about 2011?

BabbaCo-in business and well funded. The BabbaBox is a monthly subscription box that has all the physical materials + know-how content to really engage with your kids.

Buzzreferrals-in business and well funded. With one line of code, any company can launch its own referral program to acquire new customers and engage existing ones.

Cookitfor.us-puts foodies in touch with people that make food for them. There are in business. I don’t know about their funding.

Exchangery-is defunct. But this was a fabulous idea that didn’t get off the ground because of all the regulation around exchanges in this country.

Food Genius-has raised some money, is still in business and has the most in depth database in the entire world about what people eat.

Goshi-a mobile storefront for you neighborhood. I don’t know about their funding.

Introfly-how passionate people change their careers and lives. They are in business. I don’t know about their funding.

JoyStickers-pivoted, and now makes a paint brush for the iPad.

Power2Switch-an electricity cost reduction/management portal for residential & small business customers to comparison shop rates and switch to a lower cost supplier in 5mins. They have funding, customers and revenue.

Shortlist-Shortlist helps you make more meaningful connections at professional events. We turn the traditional business model on its head to create a triple-win for attendees, organizers and exhibitors. Shortlist has customers, has revenue and has received some funding.

Based on my knowledge, they hit 80% in their second class. Still Hall of Fame numbers for seed stage investing. Way too early to know if anyone is a breakaway success or not.

I am all for being data driven when it comes to start ups. It’s very good to keep some sort of score to gauge the success or failure of an incubator, an angel group, or an accelerator. Companies that get funding from and interact with these entities give up valuable equity stakes in their company to participate. Companies ought to know the score.

It’s also important from an investor perspective to know the score. If companies are more or less successful coming out of certain places, it’s good to know. It can help you make, or more importantly not make an investment. An incubator or accelerator probably doesn’t make the difference between success or failure, but it can play a big role in the success part.

Too often, we look for warts when we should be looking objectively at the product. In Excelerate’s case, by any objective measure they have been a smashing success. “Breakaway success” rarely happens in start ups. Pinterest would be an example of a breakaway success. It was founded in 2009. How many other companies were founded in 2009 that aren’t breakaway successes, but still are successful based on objective measures? A bunch.

Too often we read headlines, anchor on numbers and our objectivity becomes skewed. The percentage of companies out there like Facebook, Groupon, Yelp, Zynga, and LinkedIN are so small it’s not worth measuring. If your goal is to start a company and IPO, you might as well smoke something and dream. Building start ups isn’t about the IPO. It’s about creating value for customers. Do that, your company will probably be bought by another company. In rare cases you hit gold and an IPO happens. But to do that, you have to create tremendous value and have gazillions of customers. Not every business that starts up is designed to do that.

My advice to anyone that wants to start a company is simple. Find a pain point, like Smarteys did. Figure out a way to solve it. If the pain point is big enough and your solution elegant enough, you will create lots of customers. Revenue will cause investors to notice. They will give you money so you can scale your company and create more value. Create enough value, someone will pay you a nice penny for your company. Create massive value, and the public markets will want to pay you. Then do it again.

UPDATE

I am an investor in some of, but not all of these companies. In my links and about me page you can see which ones. Thanks Troy for updating me, and if anyone has any updates on the 2011 class, please don’t hesitate to comment or email me. I will update the post.

Good luck to the 2012 class. There is a high bar set for you.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.