The end of Accelerators as we know it
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Transcript: English(auto-generated)
00:15
Joerg Reinbold, who I know from a different time when
00:21
he was one of the founders of Better Plays. Maybe some people know that. But now you're working for, what's the name again of this little company? Axel Springer. Right. And they do also accelerators. And then we have Yatan, who is representing. Can you say again your accelerator background?
00:41
Yes, it's hardware.co. It's a hardware accelerator here in Berlin. And we've also built the accelerators for Deutsche Bahn and have customers like Audi, Siemens, Bosch. And we also have people who are coming from a big company and making accelerators. My name is Alexander. I'm with Techstars.
01:01
We have been founded in Boulder, Colorado and doing 26 accelerators worldwide. I'm leading one here in Berlin and happy to join you. So that's the stage. We have three little introductions, and then we have a little talk and a little Q&A later. Have fun. Thanks for being here, by the way, and hi.
01:21
And we'll sit and you talk. Yes, yes. So hello, everybody. Welcome to our session. Thank you for Republika and for Global Innovation Gathering for making this possible. So today I'm here with two of the representatives of very big accelerators here in Germany.
01:40
And just to give you a little introduction for those who don't know what it is, I'll give a micro-introduction of what this is about, the context, so to say. So what is an accelerator? An accelerator is commonly defined as a fixed-term cohort-based program, which might or might
02:00
not include funding, but definitely include some kind of educational bit to help the startups. Why do accelerators exist? Accelerators exist because of this. Some of you might be familiar with this. You can see in the bottom here the valley of death.
02:20
This is how a startup or a product is generally developing. And accelerators are there to help startups bridge that valley of death, so to not go bust in the meantime, but to go in and in a very short amount of time through funding, through mentoring, and so on, reach the other side and become successful.
02:41
Sometimes as to the benefit of a corporate, sometimes it's just for an investor or a government. So why the ends of the accelerators as we know it? We've seen some developments going on in the last couple of years. There's a lot more corporate accelerators.
03:02
Accelerators are changing, and the execution of how accelerators are built is under question and is being rewritten. But we'll talk more about that with the panel. So the introduction has already been done. Another reintroduction, Joerg Reinboldt,
03:20
CEO of Axel Springer Plug and Play. He's been doing business in Berlin and in Germany for 22 years and has founded a couple of companies successfully and is now leading this accelerator. Axel is now the managing director of Techstars Metro Retail Accelerator.
03:43
Previously, he was doing MakerBot Europe, so he founded that and sold that successfully. And me, I'm the hardware co-founder, and we've done services, so to say, accelerator services for a bunch of companies
04:01
such as Deutsche Bahn, Siemens, and Bosch. So without further ado, let's start it off. So gentlemen, welcome again. Thanks, by the way, for the intro. Yeah, double intro today.
04:21
So let's get started. So from your experience as a successful entrepreneurs, what is the one thing that you learned that helps you accelerate companies? Start with you, Jaak. To be honest, I think it's the network
04:40
that you provide to companies that provides shortcuts to founders to execute better and an environment where you can share and learn experiences and get better at what you are doing and a little bit of money and access to future investments and a lot more, but I think those are important things.
05:02
I did found two companies as a single founder. Because I thought it was good, and probably when I did it, that was a long time ago, it was the way to do. Basically what I found in acceleration, it's always better if you've been able to do that as a team,
05:21
and if you've been able to talk to people who did it before. So the mentorship and the possibility to think about what you're doing, what your team's doing, in a short amount of time. Our acceleration runs for three months. And I would say if I would have done it, I would have learned things that I learned in three years.
05:42
So it's condensing time and speeding up, which is kind of very important this time of day. Interesting. So how does the mentorship work in your accelerators? Like you're saying this is your experience,
06:01
but are there people and what do they do to actually help out the companies? I think there's several ways how to do it. The way we do it at Access Springer Plug and Play is we have quite a lot of mentors, and we ask not too much of them. We ask of them to spend time with the startups
06:23
in a very organized way, and then if they want, they can continue to work with them, share experiences with them, or quite a lot of the mentors are also business angels to think about if they want to invest into them. But I think what is important is that you provide an environment and you do some matching,
06:40
where you match relevant mentors to startups with relevant challenges, questions, and then give them a platform where they can connect and then see where they want to take it. The minimum that we want is that they spend 45 minutes with each other and share experiences.
07:01
Most of the time, it grows out of that. I think one thing that we're gonna see if we talk about the programs that we do is that things run similar if they have to be successful. So it's with us, it's the same. We call it Mentor Madness. It runs for two to three weeks
07:21
the first month of the program, and the startups, 10 startups that we run there, gonna see probably 60 to 70 mentors at that time. That sounds kind of crazy because they get a lot of impressions from some people more, others less. I'm doing a program that's focusing in retail,
07:42
but still we bring mentors in from all the kind of spaces, can be finance, funding, technique, sales, marketing, technology, different industries. And what is kind of very important for me is that this kind of mentorship, that's an ongoing relationship.
08:01
I think I was not, I couldn't imagine when I joined the company how far that bonding goes. It can be venture-based, so as Joerg said, it's mentors also invest into companies at that stage. But the bonding, if it's based on technology
08:20
and lead mentorship, which continues over the program in the past, is kind of very strong. And I think our network and mentors that we have worldwide that come also into Berlin, or I'm gonna see, next month they're gonna see mentors coming in from the West Coast or the States. They spread the message,
08:40
they spread the idea, they bring in other people, and we have over 7,000 mentors in the network, so that helps companies a lot to build their ideas into companies. Okay, interesting. So it's basically a network of people who have a lot of experience, so then pass on that experience
09:02
whichever way they want to the startups, right? And they do it for free. It's pro bono they come in, because they like, as I decided to do it, they like to share what they've learned by themselves, hard way or on the software. Yep, I agree. This usually gives a lot of energy back to mentors.
09:20
And I think also, probably that's also very similar, one of the things I enjoyed a lot was when the first mentors came from alumni companies of the accelerator. That was like a day of celebration for me, just for me personally, but I liked it a lot. Okay, great then. So picking up on the mentors
09:41
from the now graduated companies, can you share a success story from one of the companies that came out of your accelerator or that you have founded yourself? And what made these companies different from the others and how did maybe the accelerator play a role?
10:03
So if I start, we have invested into 80, 90 companies so far. And roughly it's 30%, I think will go away. 30% are in kind of like a limbo state or zombies or however you want to call them where neither we nor they are sure
10:22
where they are going to develop. And 30% are doing fine. They are in a way sustainable on a venture path as much as you can be sustainable on a venture path. And then 9% something good is happening. So they are doing continuous financing round
10:41
and one company is doing exceptionally well. That's N26. They, when they joined us, they already had, were very like special founders. I don't know if any one of you knows them. Super, they had a very strong reality distortion field where they already were in the future
11:01
that they want to create. And we just needed to make sure to translate sometimes between our world and theirs. And we introduced investors to them and they took what they wanted out of what we offer to them. And I think that's also a pattern with the other companies that are doing well
11:21
is if we would need to tell them what to do, I don't think they would be very successful. And that's also a challenge when you select companies. Usually the founders, and it doesn't matter if they are female or male, they have a very strong idea of what they want to do. And they also have a very,
11:41
very strong execution idea and power. And at the same time, and that's something where we always try to get better at identifying this, this attitude in combination with an openness for experience sharing, I think that creates good company
12:04
and investor relationships. And as we understand ourselves as an investor who also provides additional value through networks and platforms, we always look for founders who are ready to do something about this.
12:21
And we have several companies, but we can talk about that later if you want. Okay, about companies that went through Techstars. Techstars is with acceleration for the last 10 years. So basically, and that was not me doing it because I joined the company last year.
12:40
We had thousand companies going through program till now. What I find great is that basically, if you see startup, the startup scene, startups not going through program, probably 90% fail, which is okay. I think that's one of my findings is the freedom to fail.
13:01
We don't have that in our German culture, but that's kind of very important. But 90% fail. Companies going through acceleration, in our case, and I think also with Joerg, we are able to turn it around. With Techstars, still 90% of all companies that went through program are still existing.
13:20
10% on exit were kind of sold. Companies like Rapcat. And there is one company that's called Sphero. I don't know who knows Sphero. I didn't know them. It's a kind of robotic ball, which is kind of programmable, and it was built to use in schools in the US so that kids can learn how to program a robot by using their iPhone.
13:41
Which is kind of very cool. And they ran through program in 2010. And then they built a kind of really cool company, and they've been already 50 people or something like that. And normally at that stage, you don't go through a program a second time because you're well-funded and what we provide, we provide money for shares, but that's a fixed basis.
14:02
But they decided we want to go through another program. And the Disney accelerator that we did together with Disney in 14, and then they built something out of that robotic ball, which probably everybody knows. It's called the BB-8. That small robot, that's a ball with that head on there,
14:21
and it runs through that last Star Wars film. So they changed a company that was basically built on robot technology for schools, educational field, edtech, into a toy company. And that's a huge market, and that company has seen so far over 100 million
14:41
in funding, and they've sold millions of those toys. So this is what we provide. We also provide change or pivot. Could mean that a company going into a program with a specific idea, we find out it doesn't work in that market, but we provide you access to another one. And then helping them making that hard decision
15:03
because sometimes they are too focused. If you're in that tunnel and you think, I have to solve that, I want to solve that, otherwise I'd fail. Now we say, just do another thing and you'll be more successful. So that's probably one thing that relates to our way to do it. So it means that people who are willing
15:23
to change their way, even if that wasn't their original idea, just to have a better market fit. I think that really is a pattern. Like N26, when they joined us, they wanted to do a credit card for teenagers. Something completely different.
15:41
They pivoted. Yeah, because I'm an N26 user and I know that there was a Vuba and these guys before, but it didn't work out, so impressed that that one went so far so fast. So let's go to the next point. We've seen recently that, I think by now,
16:04
more than 60% or so of accelerators are corporates. And they come with the promise of, some of them, they want to invest, like maybe Axel Schringer, plug and play. Others come with the promise to somehow integrate these startups or generate
16:22
a business relationship between the startups and the corporate itself. What do you think about this? Do you think this is a model that can work? And if so, then how? When we started, our decision was we want to invest into early stage companies
16:43
and we have two shareholders, Axel Schringer and plug and play. And we don't have any special rights for any of our shareholder with the startups. So Axel Schringer is not closer than a plug and play to the startups. It's just that people know each other.
17:02
So I think what we can do is we can offer the network, but we can't force anyone to do anything. So we can't force the startup to accept any investment by Axel Schringer, but we also can't force any of the 200 Axel Schringer companies to do anything with any startup. It's just they do things together when they want to do things together.
17:22
And for us, it's really important. And we always are very strict on having a very clear strategy, what do we want to do. And our strategy is we want to do early stage venture capital investments and sell our shares later at a high price. That's our business model.
17:43
But I know and I see that there are a lot of other accelerators who have different models. And what I think is very important is you have to be very clear on what your strategy is and you must make sure that what you want to do is not a poison pill for any future financing round.
18:01
And if you want to invest into startups, that's one thing. If you want to partner up with startups, I think you have to have a completely different setup than what we have. Yep, 50% of our programs, by the way, are run together with corporates. So my program, we do that together with Metro.
18:21
I think it's very important. But the decision about what kind of startups go into program are solely based on my final decision. We have meeting, we have teams, and think about could that be reasonable for a corporate? Could that be used as a product or as a corporation?
18:40
But basically, we decide on the capability of a team going into program, being able to leverage. Leverage and scale a company with a relationship to a corporate, but not just based on a deal with one corporate. That's gonna fail. That's basically gonna fail.
19:01
A corporate whose thing's gonna integrate a startup is gonna kill it. It's gonna hug it to death. And saying that is if we want to be successful, we have to be widely open to work with the teams and give them time to develop. So corporates are very useful
19:22
because they themselves learn a lot too. And I think accelerators close, especially if a company is not basically too deep into technology, we close that gap of R&D that a lot of companies, a lot of big corporates like super tankers are missing at that time. So we bring a lot of R&D and technology
19:42
and free thinking back into those companies. Okay, so as the last point since before we open it for a quick Q&A, the companies that we work with so like Deutsche Bahn and Bosch, Siemens and so on, with the programs that we do, we actually advise them
20:02
and believe that they should give out freebies, so to say, right? So for example, Deutsche Bahn or Aon, you get 20, 25K for free, no equity. And we advise that because we see that if you're not a plug and play or Techstars or Y Combinator,
20:22
you don't really have the pull and you don't have the, say the credibility for startups to approach you because it has become increasingly competitive in the accelerator market. What do you think about this free money for startups? I wouldn't do it.
20:41
I probably would have done it when I built my first company. Well, I wouldn't do it because it's, I better give 6% of my company to a company like Techstars or Y Combinator or plug and play Axel Springer and have them help me building and scaling my company
21:03
from an evaluation of one million to an evaluation of 10 million. They still probably own, if they don't get diluted, they probably still own 6%. But my, if those are still 94%, which normally at that point doesn't happen
21:21
because you give away some other shares, but let's say my shares grow. So that's the advantage of being part and that feeling and being able to scale, not just being an extended workbench of a, not local, but a corporate.
21:43
I have to play, they have to play their own game getting really great entrepreneurs. They can do that. I've seen those companies. And I think as a corporate, I think you'd rather look for a little bit more mature companies. So if I look at the companies that come out of our accelerator,
22:01
they are like five people, have first MVP running. They have a clearer understanding of how their unit economics work. But if they were about to partner with a large corporation, I don't know if they'd be able to grow that fast. Maybe like five out of the 89 companies
22:21
are able to do something like this. For the rest, that would be too early. So I would rather look at later stage companies and I would not invite them for an investment, but rather for like an opportunity to do business with each other. And then there's the question, do you need to give them money just to show up? Or do you pitch to them,
22:43
hey, I've got a business contract for you. We don't even want to buy you because we want to work with you and we want to be your customers and you will make money with us. I think that's a very sustainable model, making money with customers. And then while doing business,
23:00
you can still decide if you want to unleash your M&A department and do a true transaction where you buy the majority of the company. Because that's sometimes I think an issue when as a larger corporation, you invest too early into a small company. You are like a poison pill for all future financing rounds
23:20
because the VCs will consider you as the exit partner who's already a shareholder and that can be quite bad for everyone. Yes, well, I think in this subject it's all about funding the company so they can make a prototype for the corporate
23:42
and then see how that goes further. But since they don't have the network, I think that's the only way that actually works. Yeah, just to say that what we've been starting talking about by funding and shares and exits and stuff like that, it takes the discussion also a little bit away
24:02
from do accelerators change? There's one way they will change. They will help, they will have one site or we will have one site where we will help more later stage startups that went through program that need more help related to corporates and their business,
24:22
growing a company from 25 to 100 people, but also, and that's to you, talk to us even if you have an idea. That's not that we just talk with you if you are valuable going into acceleration. I've been doing nothing else
24:41
but talking to startups for the last six months. My program's gonna start in June so the last six months we're talking to people that had ideas, they wanna change, they wanna come to Berlin. We had applications from all over the world that wanna come here, that wanna exchange within Berlin and that field and wanna learn from us.
25:00
So yeah, come visit us, ask questions. There are never stupid questions like that. Likewise. All right, I think we have another three minutes or something if there is one or two questions. Yeah, you here in the front.
25:21
You who just turned around down here. Thank you. I wanted to ask you, do you have any experience with accelerating startups? Which product is open source software or open hardware and which don't want to close it
25:42
but want to really keep it open? Because for me this is extremely interesting as a business model. Do you have any experiences accelerating those? Yes, only in software. And as long as you can build a sustainable business model and keep your software open,
26:01
we are totally fine with that and we've invested in some Bitcoin startups and other companies who saw other ways to build sustainable business models than closing their software. I would totally agree. It's basically if your idea is sustainable and leverageable,
26:21
there are a lot of models that are not based on monetization probably. Do it. The only one thing you have to be clear and I was part of a company as MakerBot went from open to closed, as we've been told. I think we didn't. But that caused a lot of problems within the company. So you and the founders have to be clear how you do it.
26:42
And yeah, but it's cool. My name is Marcos. Thank you very much for the great insights. My question is like when we talk about accelerators, we always talk about startups and like as a target group.
27:01
But I think sometimes my challenge is like, are the investors also really the target group in this case? I can even go as far as I say, like the accelerator programs for investors. Cause I'm coming from Ethiopia, for instance. Today, like in the news, it says like entrepreneurs in emerging markets
27:21
make as much personal investment into their startup as of the high income countries like Germany, but their external investment fund is like flow very less. And there is a lot of like disconnect between the investors. And as a target group, I mean, do we really like need to teach like the investors as well?
27:40
Yeah, I think there needs to be some more programs offered and or some more offerings for investors to learn how to invest. I think we just don't focus on that at Axel Springer Plug and Play. Although we, since we connect our mentors and a lot of them, they are either business angels or they turn into business angels.
28:01
They learn from each other a lot. And I, when I started to invest into companies, first I tried it for myself. And then I also joined networks of investors to just learn more about how you can really do it. And there are networks, but maybe we talk about that later. But we actually discussed, maybe we should offer something
28:20
for people who want to invest into startups and get a clear understanding of what kind of path they put startups on with certain investments. So are you a dividend-oriented investor or are you a venture-oriented investor? And yeah, it could go on for hours about this.
28:40
I think it's also, we can talk later. There is a strong network on investors, angels or later stage investors that cover I think most of anything that's going on out there. So that's also a thing that we provide with the programs at the end of the programs basically,
29:01
connecting them to investors and helping them to talk to them. Well, if you have a short question, that is for the last question, but I'm sure after that question, you will be maybe a little bit more available outside. So one more short question, please.
29:21
Yeah, thank you. The title of this session was the end of accelerators as we know it. What is ending? True, true. I think if we meet again in six months,
29:42
our setup and what we do will be similar but different. So we would still always invest into early stage companies. I think there are a lot of things that you can do, how you do it better, the setup, how you do it better, the platform that you build can be done better.
30:01
And as Axel said, the stages in which you invest might also be different and the connections that you build with corporates might also be different. Yeah. We can talk about that and we should have talked about this on stage. Very good points. The time ran away a little bit.
30:21
Basically what you see now is that a lot of accelerators are closing down and it's consolidating into a few hands and it's going much more in the direction of venture or very methodology-based, network-based accelerators. So that's the change of it. Thank you for bringing it up, though.
30:41
We closed it down like that. Thank you, Jochen, thank you, Alexander, thank you, Joerg. This is the end of the end of the accelerators and a little more question outside. Thank you.