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The Founder Partners' Approach

 by Greg Baszucki

One of the questions I get asked most often about FounderPartners is, what’s an accelerator, what’s an incubator, and what are you?

My favorite short answer is that with us, the “there there” is actually there.

What I mean by that is that we don’t exactly fit into either the accelerator or the incubator box, but if you come and work with us, based on our track record, chances are your company will succeed.

Accelerators usually have a process that’s defined and predictable. If you go to the Y Combinator website, for example, you can see right up front what you get with them in terms of their capital investment and equity stake, and the program structure, and it’s the same package for everyone.

Now that type of structured environment might work for some, but we just don’t believe that a one-size-fits all approach is the one most likely to succeed. Suppose one day you’re in the middle of executing a sudden brainstorm for improving your product. Would you really want to stop the actual work because that happens to be the day you’re required to present your progress to the rest of the group?  

Or say you’ve bootstrapped your company to the point of having gotten a MVP out to market, and now you’ve got all this customer feedback to help you refine your product. Why should you have to shift your focus to preparing an investor pitch now, when clearly a capital infusion and all the attendant headaches and responsibilities is the last thing you need, just because that’s what the schedule says you have to do?

We think that every day should be about doing what your company needs right now, and that determination is made by analyzing and reacting to what happened yesterday. That doesn’t mean we don’t believe in planning and deadlines and schedules. But your advisors have to be fluid and flexible enough to adjust their plan according to what is actually needed on any given day, rather than being stuck on an unyielding steamship, unable to course correct no matter how many icebergs pop up along the way.

In contrast to the rigid, short-term nature of the accelerator program, incubators take a more open-ended approach, often taking on multiple pre-product companies in a particular vertical and putting them to work together in a shared physical space. The incubator may have its own engineers on staff, and may have a direction in mind for your product as part of a larger scheme for entering or dominating the particular market they’re after.

This type of collegiate working environment certainly has some appeal - no one’s denying that it’s fun to take foosball breaks with your new mates or go for a midday swim in the house pool - but we don’t feel it’s necessarily the quickest route to building a viable business.

One of the key differences between us and the other guys has to do with money. In our case, it’s our own money we’re spending so there are no outside interests to look after. We’re not beholden to the whims of angels or the skittishness of VCs, so we can focus on what’s really best for the businesses themselves. Accelerators and incubators are usually funded by various types of syndicates, all of which eventually require bending over to satisfy the guy who signs the checks, regardless of what you, the founder, actually want to do.

Another thing we see is accelerator-backed fledgling companies spending tons of time and money and energy on pumping up the PR for a product that doesn’t even really exist yet. We think that there’s a lot more bang for the buck to be gained by flying in stealth mode for awhile, getting your MVP out to market and fine-tuning it with some real customer feedback, all the while letting your customers themselves fund your development.

Getting to cash-flow positive is probably the most important immediate goal for any start-up, and I’m constantly surprised by how often this crucial point seems to be skimmed over in the literature for some of these accelerator and incubator programs. They seem to be really focused on raising outside capital and generating PR, which feels like putting the cart before the horse in terms of figuring out the best way to turn an untested, unfinished product into a sustainable business.

The reality is, if you have your own revenue stream and reach cash flow positive, you can control your own destiny, so getting that should be your top initial priority. Full stop. Everything else is just ancillary. You can have ten million VC dollars and the best-looking website ever created, but if you don’t have a product that consumers or businesses want to pay for and a good way to get it to them, all those dollars are just going to end up trapping and suffocating you in the end.  

Now, there are lots of different ways to accomplish this goal, which is where we come in. We help you hone in on the right product/market fit and prepare your business model and distribution strategies.

And yes, of course there does come a point when raising capital is the right move, and we know how to do it at the right time and on the right terms. We fish in the same VC pond as everyone else, and we’ve got great, long-standing relationships with all those guys. We just don’t think the best approach is to get them all in a room at the same time and throw a bunch of different ideas at them all at once, so that your company could easily get lost in the crowd. We prefer to set one-on-one meetings between our founders and investors who we hand-pick as the best fit for their particular business.

Then there’s the question of planning and navigating your exit. This can be an unexpectedly fraught minefield, depending on whether your interests actually align with those of your investors and advisors. You may find yourself forced into a quick exit if your investors get nervous about the state of the market, which might yield them a decent ROI but could leave you with nothing. Or you may find yourself stuck with an inflated valuation, which may make you sound cool at parties, but which will end up crippling your company and your financial prospects in the end.

Both Brian, my partner at Founder Partners, and I have been doing this a long time, and after awhile, you start to get really good at pattern recognition in terms of the way the markets are trending and in terms of what works to drive a business forward. I like to think we’ve come up with a way to turn art into science here, so that we can confidently promise that if you let us help you, there’s a good shot you’ll reap the same benefits as the people we’ve helped before.

The reason we only work with a few, select founders here is that we give all of our portfolio companies as much help, advice, and direction as they need, so we have to make sure we’re available to do that. Some of these accelerator programs are like massive state schools - there are advantages of scale, and the parties are probably more lavish, but at the end of the day you get a better education and more one-on-one attention from the small private college - in this analogy, of course, that would be us - that you had to work really hard to get accepted to.

The bottom line is that we’re in it with you for the long haul, whether it’s a quick flip with a nice payday, or a twenty-year investment into building a business that your grandkids will be running long after you’re gone.

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