Not BI, AI

A product business can double its revenue and quadruple its margins by moving to a service business. What is service? It's information, personal and relevant to you.  

Amazon delivers information that is personal and relevant to you, for example, with its recommendations: customers like you bought this book, or customers like you like this music. Now think about your favorite banking site and log in. I will contend that there’s very little personal and relevant information. The only reason you’re being asked to log in is for security reasons. After that you are really looking at a big shopping cart to move money from savings to checking, buy stocks, sell a bond, etc. 

Could the bank deliver information that’s personal or relevant to you? Could they say that people like you bought this stock, or people like you re-financed their mortgage? Yes, they could, so why don’t they? Well, you probably never thought about this, but the consumer Internet that Google and Bing let you see through search is believed to only be about 100 or 200 terabytes. That’s it. Now, I’ll guarantee your current IT systems have 10, 100, or 1,000 times that amount of information; so why can’t they deliver information that is personal and relevant to you? Well, I say they are held hostage by the SQL monster. So let’s just have a little fun here.

It’s the late ‘90s and I have several SQL engineers in the room. I come in with a brilliant business idea. My idea is that we are going to index the consumer Internet and we’re going to monetize it with ads. We’re going to be billionaires! Just guess what the SQL engineers would do?

The first thing they’re going to do is design a master, global-data schema to index all information on the planet. The second thing they’re going to do is write ETL and data cleansing tools to import all that information into this master, global-data schema. And the last thing they are going to do is write reports, for instance, the best place to camp in France or great places to eat in San Francisco.

Any of you who are technical are probably laughing right now thinking, “Well that’s a completely stupid thing to do.” But if you try and attack the problem using SQL and BI tools, you’re also going to fail.  

Furthermore, as you connect your machines, you have the opportunity to bring in large amounts of time-series data. Modern wind turbines have 500 sensors and the ability to transmit those sensor readings once a second. Most analytic techniques depend on the idea that the data scientist can try and visualize the data, but how is that possible if I have a 1,000 wind turbines and data for 12, 24 or 36 months?  How can we learn from that?

Artificial Intelligence (AI) has been increasingly in the news. Google’s DeepMind made headlines when the machine, AlphaGo, programmed to play Go, defeated Lee Sedol, one of the best players in the world, by 4 - 1. Amazon’s Echo and voice assistant Alexa is being widely praised for its voice recognition capabilities, and many people remember how Watson handily beat the best Jeopardy players in the world.

Things have been changing quickly and here is a great example. ImageNet is a database of millions of images. Beginning in 2010 the ImageNet Challenge was established to see how well a machine would do at object recognition. As a point of reference an average person will be able to achieve 95% accuracy. In 2010, the winning machine could correctly label an image 72% of the time. By 2012, accuracy had improved to 85%, and in 2015 the machine achieved 96% accuracy.

So why have things been changing so quickly?

First, we’re continuing to get more computing and more storage for lower and lower prices. Next generation compute and storage cloud services can provide thousands of computers for an hour or a day. AI and machine learning software require lots of computing during the learning phase. The second reason is the emergence of neural network algorithms. Third, it’s not possible to apply these advanced AI technologies without data, and lots of it. Consumer Internet companies like Facebook are able to use billions of photos to train facial recognition systems. AlphaGo learned from millions of games of Go and Alexa learned from millions of voice patterns.

While we’ll continue to see progress in replicating what humans do, we have the opportunity to apply these AI technologies to even more important challenges. Today, many of the machines that generate electricity, transport goods, farm food, or sequence genes have large amounts of data. If we were able to connect these machines and collect the sensor data from them, we would have the opportunity to use AI and machine learning technologies to operate a more precise planet. Imagine a future farm that can use fewer pesticides, which not only reduces the cost of the food, but also makes it healthier. A future power utility could be based on a vast array of solar panels, wind turbines, small hydro generators and batteries to generate more power, much more efficiently. A pediatric hospital could share the results of millions of MRI scans and diagnose patients far faster.

Next-generation machine companies could not only double their revenues and quadruple their margins, but build a better planet in the process.

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Timothy Chou, Ph.D.

Timothy Chou has lectured at Stanford University for over twenty-five years and is the Alchemist Accelerator IoT Chair.  Not only does he have academic credentials, but also he's served as President of Oracle's cloud business and today is a board member at both Blackbaud and Teradata. He began his career at one of the first Kleiner Perkins startups, Tandem Computers, and today is working with several Silicon Valley startups including as the Executive Chairman of Lecida, which is building precision assistants for the IoT using AI technologies. Timothy has published a few landmark books including, The End of Software, and Precision: Principals, Practices and Solutions for the Internet of Things, which was recently named one of the top ten books for CIOs.  He's lectured at over twenty universities and delivered keynotes on all six continents.

Service is Not Break-Fix

As a student of business, you may have come to realize that with a recurring-service-revenue business, you can not only double the revenues of the company, but also quadruple the margins. I recently spoke with an executive of a large European company who has a 50/50 business; 50% of their revenue is selling machines and 50% is service on those machines. He said, “In 2008 our revenues went down, but our margins went up.”

But what is service? Is it answering the phone nicely from Bangalore? Is it flipping burgers at McDonald’s? No. Service is the delivery of information that is personal and relevant to you. That could be the hotel concierge giving you directions to the best Szechuan Chinese restaurant in town, or your doctor telling you that, based on your genome and lifestyle, you should be on a specific medication. Service is personal and relevant information.

I’ve heard many executives of companies that make machines say, “Our customers won’t pay for service.” Well of course, if you think that service is just fixing broken things, then your customers will think you should be building a more reliable product.

Service is information. In 2004, the Oracle Support organization studied 100 million support requests and found that over 99.9% of them had been answered with already known information.

Aggregating information for thousands of different uses of the software, even in a disconnected state, represents huge value over the knowledge of a single person in a single location. Real service is not break-fix, but rather information about how to maintain or optimize the availability, performance or security of the product.

Above is my Amazon home page. Every time you log in, Amazon attempts to deliver information that is personal and relevant to you. For instance, people like you bought this book. If you look closely at the image, you might guess who uses my Amazon account. Now, let’s point something else out, namely the little shopping cart in the upper right hand corner. That’s the transactions processing system. It has to operate securely with scalability, but how important is it?  Not very.  Instead, most of the real estate of the page, and therefore of the company, is dedicated to delivering information that is personal and relevant.  

Service is information.

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Timothy Chou, Ph.D.

Timothy Chou has lectured at Stanford University for over twenty-five years and is the Alchemist Accelerator IoT Chair.  Not only does he have academic credentials, but also he's served as President of Oracle's cloud business and today is a board member at both Blackbaud and Teradata. He began his career at one of the first Kleiner Perkins startups, Tandem Computers, and today is working with several Silicon Valley startups in roles from investor to executive chairman. Timothy has published a few landmark books including, The End of Software, and Precision: Principals, Practices and Solutions for the Internet of Things, which was recently named one of the top ten books for CIOs.  He's lectured at over twenty universities and delivered keynotes on all six continents.

Not Machines, It’s the Service

If your company builds agricultural, power, construction, healthcare, oil, gas or mining machines you’ve probably heard about the Internet of Things.  All of us in the tech community are excited to tell you about our cool technology to run on your machine, connect it to the Internet, collect data from it, and then make predictions from that data using advanced machine learning technology.

But maybe the question you’re asking as the CEO of one of these companies is why should I care?  Isn’t this just stuff my geeky R&D staff cares about? How can it be meaningful to my business?  

I’ll be making the case that with IoT software; you can not only double the size of your business but also create a barrier that your competition will find difficult to cross.

Next generation machines are increasingly powered by software.  Porsche’s latest Panamera has 100 million lines of code (a measure of the amount of software) up from only 2 million lines in the previous generation.  Tesla owners have come to expect new features delivered through software updates to their vehicles.  Healthcare machines are also becoming more software defined. A drug-infusion pump may have more than 200,000 lines of code and an MRI scanner more than 7,000,000 lines. On a construction site a modern boom lift has 40 sensors and 3,000,000 lines of code and on the farm a combine-harvester has over 5,000,000 lines of code.  Of course we can debate if this is a good measure of software, but I think you get the point.  Software is beginning to define machines.

So if machines are becoming more software defined, then maybe the business models that applied to the world of software will also apply to the world of machines. Early in the software product industry we created products and sold them on a CD; if you wanted the next product, you’d have to buy the next CD. As software products became more complex, companies like Oracle moved to a business model where you bought the product (e.g. ERP or database) together with a service contract. That service contract was priced at a derivative of the product purchase price. Over time, this became the largest and most profitable component of many enterprise software product companies.  In the year before Oracle bought Sun (whilst they were still a pure software business) they had revenues of approximately $15B, only $3B of which was product revenue, the other $12B, over 80%, was high margin, recurring service revenue.

In the world of machines, you might wonder why General Electric is running ads on Saturday Night Live talking about the Industrial Internet.  Why are they doing this?  All you need to do is download the 2016 10-K (http://www.ge.com/ar2016/assets/pdf/GE_2016_Form_10K.pdf) and look on page 36.  Out of $113B in revenue they recognized $52B, or nearly 50%, as service revenue.  Imagine if GE could move to 80% service revenue, not only would the company be tens of billions of dollars larger, but also margins for the overall business could easily double. And let me remind you this is all done without connecting the product (software or machine).  Once connecte you can provide even more service and ultimately deliver your product as a service.  As we have already seen in high tech software and hardware moving to product-as-a-service is transformative.

So if you’re an executive at a power, transportation, construction, agriculture, oil & gas, life science, or healthcare machine company, how big is your service business?

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Timothy Chou, Ph.D.

Timothy Chou has lectured at Stanford University for over twenty-five years and is the Alchemist Accelerator IoT Chair.  Not only does he have academic credentials, but also he's served as President of Oracle's cloud business and today is a board member at both Blackbaud and Teradata. He began his career at one of the first Kleiner Perkins startups, Tandem Computers, and today is working with several Silicon Valley startups in roles from investor to executive chairman. Timothy has published a few landmark books including, The End of Software, and Precision: Principals, Practices and Solutions for the Internet of Things, which was recently named one of the top ten books for CIOs.  He's lectured at over twenty universities and delivered keynotes on all six continents.


CANDID CONVOS: Angel Fundraising with Ahryun Moon, CEO at Goodtime.io

Introduction


 Ahryun Moon is CEO and Co-founder at GoodTime.io, a recruiting enablement platform that automates interview scheduling for companies like Airbnb, Stripe, Yelp, Thumbtack and more. She is a financial professional turned engineer! She taught herself how to code while building her first enterprise software at Freescale Semiconductor, Inc., at which time she was a financial analyst. The software got adopted company wide.

Some interesting things about her:

1. She caught a thief using Twitter (check out http://bit.ly/2gmr5P4) - gone viral on Hacker News, Reddit, Facebook, Twitter and Youtube

2. Her team at GoodTime.io won 3 hackathons - Salesforce $1M, Toyota and Launch hackathons

3. Her team built Etch Keyboard which was featured on the App Store for 3 weeks.

4. She still has a CPA license in good standing


The Convo


Interviewer (ZP): What was the size of your first check?

Ahryun Moon (AM): $100 was the first check. What happened was right before Alchemist, I was down and depressed and going to a bunch of people asking for advice and feedback and money. I then went to Edith and she, after hearing me out, said, “Hey I'll be your first investor, here's your hundred dollar check. You can put me on Angel list.” With investors the very first check is important so you can put someone's name on your angellist. That’s hard to get. The very first person that wants to be on your investor roster is always challenging. She said to just use her name she’d give us the one hundred dollars. I have kept our hundred dollars even today. So that $100 is still on my cap table, as I really love the fact that she believed in me when no one did. So my first check was $100, and then the second check was 10k.

ZP: What about the first check over 25k or more?

AM: Oh 25k or more. The first time that a check was larger than 25K was 50k.

ZP: And when was the closing date you received it.

AM: We closed the check on the day of the demo day.

ZP: And it was just that simple?.

AM: He came up to me and said he was just ready to write the check.

ZP: What industry is your company in.

AM: HR and Recruiting.

ZP: Tell me about the process of closing that check and from start to finish. How you were introduced all the way through to actually having a check in hand or money in the bank.

AM: For the 50k check, he was in the audience at the demo day. He loved it. He came up to us and he was literally ready to write the check. I think we got the check within a few days or a week or so. He didn't have any other references. He just saw us at demo day and liked us. Sometimes you can really run into someone that just believes in you and gives you unconditional love for the product that you're making. So I am lucky with that. But I think you just get lucky sometimes.

ZP: So what was it like doing that to the first 10k check.

AM: The 10k check was when we were going negative, negative, negative, and we were about to break our 401k. It was one of the Alchemist Mentors and he liked our product from the beginning. We were so afraid of asking for money at the time.

ZP: How did you meet him?

AM: He was one of the mentors that we paired up with at one of the events, the CEO mentor event. We did speed dating, he was one of the three people there we met. He liked the idea and we never asked for money. We didn't know to ask for money at the time. We invited him over to our office and we talked for another hour or so after the event. That was after a month or two after we met for the first time. And then we mentioned, “Hey we are looking for investors”. And he simply said “How much”. We told him we were looking for 10k. And he's said, “OK. I don't have a check with me. I'll wire you the money as soon as I get back to my office.” He wired it within a few days.

ZP: Wow. Was there any back and forth between you or was it pretty straightforward?

AM: It was really straightforward. People who argue with you and nitpick on this or that and say “I want to see more proof”, they never work out. Investors that ended up giving us money, you can tell from the first meeting that they believe in you and will give you support. So I'll say my advice is this: it's the ones that give you bullshit excuses and say you’re too early, you're too late in the stage, you're pre-revenue you or your team is too small, move on to the next person. They will not give you money. They never gave me any money. People who said those things never gave me money.

ZP: Those things were just an afterthought when they just believe you.

AM: Yes. I think I took them extremely personally in the beginning and that made me really, really depressed. Whenever I get that kind of excuse next time I wouldn't too depressed. I will just say, “Ok fine. Next person.”

ZP: Is there anything else you'd like to share? Maybe something that stuck out with a new kind of angel fundraising process in general or specifically with all the checks that you're trying to close.

AM: Yeah. Everyone told me not to cold email. Everyone told me not to cold call investors. But I did. I closed our last 100k check with a cold call. So I wouldn't say cold calling is the worst thing you can do. Once you run out of referrals you have to cold call and sometimes you really meet the right person while doing that. So I would not advise against cold calling.

ZP: That's good advice. cold call. OK. Well that's really good thank you.

PRESS RELEASE: ALCHEMIST ACCELERATOR ADDS JUNIPER NETWORKS AS BACKER

Contact: Danielle D’Agostaro                                                                                                   RELEASE: May 23, 2017

Email: danielle@alchemistaccelerator.com


                                     ALCHEMIST ACCELERATOR ADDS JUNIPER NETWORKS AS BACKER

                             Juniper Networks Joins Alchemist Accelerator’s Second Round Fund as Backer


San Francisco, May 23, 2017 – Alchemist Accelerator, an accelerator dedicated to enterprise start-ups, today announced that Juniper Networks has joined Analog Devices, Cisco, Ericsson, GE, and Johnson Controls as a backer in the accelerator’s second fund. This brings the total fund to $6.5 million.

Alchemist Accelerator is a six-month program, accepting about 20 companies every four months. On average, accepted companies receive $36,000 in seed funding. Alchemist structures the program around mentorship, sales and fundraising to help early-stage companies raise their seed or series A round and secure their first few customers.

Many founders who have gone through the program would agree that a major perk of joining Alchemist comes from the large network of high-caliber experts and coaches who mentor Alchemist founders.

“We are thrilled to have Juniper Networks join as a backer of Alchemist. Few companies think as deeply about next gen trends in AI, cloud, analytics, and networking – all core areas to Alchemist – as Juniper does. We are excited to have Juniper join the Alchemist family,” said Ravi Belani, Founder and Managing Director of Alchemist.

Since the debut of Alchemist’s first class in January 2013, 14 Alchemist companies have been acquired (including Cisco’s acquisition of Assemblage and Dropbox’s acquisition of Mobilespan). More than 50 percent of its graduates have gone on to raise significant seed or institutional funding rounds. The average raise of these companies is $2.6 million. Many of these are from the top venture capital firms in the valley, including Andreessen Horowitz, Bessemer Venture Partners, Draper Fisher Jurvetson, Foundation Capital, Founders Fund, Greylock Ventures, Menlo Ventures, Redpoint Ventures, Social + Capital Partnership and True Ventures. The complete list is provided here.

“At Juniper Networks, we believe that venture investment is an integral part of our innovation engine. Alchemist fills a gap in our portfolio strategy, acting as a vehicle to invest in seed-stage companies, a stage we are eager to participate in,” said Rita Waite, Investment Manager at Juniper Networks. “We are thrilled to be joining Alchemist Accelerator as a backer and look forward to working with Alchemist start-ups and its network.”

Today, Alchemist held its 15th Demo Day at Juniper Networks in Sunnyvale in conjunction with the announcement. They were joined by more than 200 customers, partners and investors. The event debuted 18 companies.

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Learn More

Anyone interested in getting involved as a mentor, investor or customer or members of the press, should fill out this form: https://vault.alchemistaccelerator.com/register-profile.

For more information on the accelerator, please visit http://www.alchemistaccelerator.com/.

About Alchemist Accelerator
The Alchemist Accelerator is a new venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. The accelerator seeds around 60 enterprise-monetizing ventures / year. Over 50% close institutional rounds within 12 months of their Alchemist Demo Day[LM1] . 


 [LM1]I removed our boiler plate and media contacts. This is a third party release distributed by Alchemist without our ticker or a classified joint release.


PRESS RELEASE: ALCHEMIST ACCELERATOR ANNOUNCES FOCUS ON INVESTMENTS IN COLLABORATION

Contact: Danielle D’Agostaro                                                                                     RELEASE: DATE March 3, 2017

Email: danielle@alchemistaccelerator.com

 

                            ALCHEMIST ACCELERATOR ANNOUNCES FOCUS ON INVESTMENTS IN COLLABORATION

                                             Cisco Investments will continue as an investor in Alchemist’s new fund


San Francisco, Calif., March 3, 2017– Today, Alchemist Accelerator announced that it will be focusing a part of its new fund on early-stage collaboration startups. This includes startups that integrate with the Cisco Spark Service or use Cisco Collaboration APIs to enable voice, video and messaging.

Earlier this year, Alchemist Accelerator announced their new fund. Today, Cisco Investments, an existing Alchemist investor, joins the investors in Alchemist’s new fund. Cisco Investments had invested in Alchemist’s prior fund, which focused on accelerating the development of a number of seed-stage ventures. As part of that fund, Alchemist ran an Internet of Things focused accelerator that helped encourage IoT entrepreneurs and startups through funding, mentorship and resources.

With today’s announcement, Alchemist will expand its focus and support to early-stage innovation within collaboration. Cisco Investments and Alchemist will work together to identify, invest in and develop early-stage startups that focus on enabling collaboration in the enterprise. Alchemist will also dedicate a portion of their fund to invest in early-stage startups that are part of the Cisco Spark ecosystem. Cisco is making this investment via the Cisco Spark Innovation Fund it announced last March.  Cisco Spark is the industry’s first integrated and cloud-based collaboration service. It provides users the ability to call, message, and meet, and access those services with apps, cloud-connected hardware, and a rich set of cloud APIs. These APIs, at developer.ciscospark.com, are the integration point for investments from Alchemist’s fund.

“Our relationship with Alchemist has given us exposure to a wide variety of enterprise startups,” said Rob Salvagno, head of Cisco Investments and vice president of Cisco Corporate Development. “With this new fund, our goal will be to support a new generation of startups that are disrupting the collaboration industry by developing new features and functionality on top of Cisco Spark.”

Alchemist already has made investments in a number of collaboration startups, including Assemblage and Synata, two companies that were acquired by Cisco.

The Alchemist Accelerator is a six-month program, accepting about 20 companies every four months. On average, the companies that are accepted receive $36,000 in seed funding. Alchemist structures the program around mentorship, sales, and fundraising to help early-stage companies raise their Seed or Series A round and get their first few customers.

 

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Learn More

Anyone interested in getting involved as a mentor, investor or customer or members of the press, should fill out this form: https://vault.alchemistaccelerator.com/register-profile.

For more information on the accelerator, please visit http://www.alchemistaccelerator.com/.

About Alchemist Accelerator 

The Alchemist Accelerator is a new venture-backed initiative focused on accelerating the development of seed-stage ventures that monetize from enterprises (not consumers). The accelerator’s primary screening criteria is on teams, with primacy placed on having distinctive technical co-founders. The accelerator seeds around 60 enterprise-monetizing ventures / year. Over 50% close institutional rounds within 12 months of their Alchemist Demo Day. 

Generation IoT: The Key to Business Survival in the 21st Century


“The only constant is change.” It’s an adage that goes back 2500 years to the Greek philosopher Heraclitus. But never has it been as true as it is today. Technology adoption is growing exponentially, driving change at a dizzying pace. Billions of devices are connecting to networks — most of them the sensors, controllers, and machines that power the Internet of Things (IoT). You probably see the rapid growth of connected devices in your own organization: on the manufacturing floor, in your logistics system, hospital or retail store. But are you seeing the corresponding business impact generated by connected processes and business models enabled by IoT?

Over the last 25 years, organizations have had to reinvent themselves every three to seven years to keep up with the pace of change. Companies that missed one technology transition might scramble to catch up, but missing two meant a slow fade to obscurity, irrelevance, and death. Just think about the rapid evolution from records, to cassettes, to CDs — with each transition creating new winners and losers. Today, the evolution has come full circle as digital streaming services have made any kind of physical media obsolete.

That kind of relentless change threatens the survival of many businesses. According to The Boston Consulting Group, only 19 percent of S&P 500 companies from 50 years ago are still in existence today. How can you ensure the survival of your business?

A new generation of leaders, makers, thinkers, and doers is meeting that change with flexibility and optimism, and transforming it into opportunity. In my upcoming book, Building the Internet of Things, I call these pioneers “Generation IoT.” These are the people who see the transformational power of IoT-driven processes, business models and new revenue streams. They are eager to champion and drive these opportunities in their organizations. These people know that IoT is not just one project, one training session, one change. They know that in order to succeed they and their organizations need to adjust and re-learn, over and over again.

Generation IoT is first defined by openness — open standards, open collaboration, open communications, and open, flexible business models. Members of Generation IoT can be found in IT or operational technology (OT). They can run the plant, or be part of the supply chain. They can be vendors, contractors, or CXOs. They can be young or old. All are willing to learn and take risks, and are good at building virtual teams internally and partnering externally. You can recognize these new winners not by their age or their titles — but by their ability to build and deploy agile, flexible business solutions.

Here’s an example: a decade ago, visionaries talked about mass customization — building mass-produced products to each individual buyer’s specifications. But it was difficult to implement efficiently and proved to be an idea ahead of its time. Today, IoT makes this concept much more practical and cost-effective because information can be shared in real time between every element in the supply chain. Buyers can click on the components they want. Suppliers and logistics providers can see what is being ordered and adjust their scheduling accordingly. Production systems can be retooled as needed. With the information flowing up and down the supply chain, all the necessary materials are at the production line when that customer’s order is being assembled, whether it’s a car or a three-piece suit.

With IoT, mass customization is not just a future possibility — it’s starting to happen. Daihatsu Motor Company is already using 3D printers to offer car buyers 10 colors and 15 base patterns to create their own “effect skins” for car exteriors. Each car rolls off the line customized for that individual buyer.

The key question — and it’s the focus of both my book and this blog series — is how it’s all supposed to happen.

Yes, vision is important. Pointing your organization toward where and how it needs to transform itself is key. But the road to realizing such vision is a multi-year, multi-phased journey and it starts with you successfully tackling one of today’s business problems. A low-risk, small project based on a well-established use-case is all that is needed to get going. Armed with the initial success, you can then pick a more complex problem and an IoT solution that will also have a bigger impact. IoT is a journey.

Along the way, you will break down silos and build understanding and cooperation among IT, OT, supply chain and finance. You will also bring in an ecosystem of partners for a complete, converged solution. The good news is that thousands of your peers have already started on the IoT journey. Based on their experiences, a set of best practices has emerged:

• Have a big vision, but start with a small project using one of the four fast payback scenarios I outline in my book: connected operations, remote operations, predictive analytics, and predictive maintenance.

• Build you own business case by comparing industry benchmarks with your own total cost of ownership data.

• Get a C-suite sponsor, because you are not implementing one IoT project, you are starting on the journey that will transform your organization, your industry, and your career.

• Build a cross-functional team; you need complementary skills, so maximize the chances of success by building support and buy-in across your entire organization.

Finally, recognize that we’re all relatively new at this. None of us have spent our careers on IoT — not yet. You can be an extremely valuable member of this transformation with the skills you have today. Whether you’re in Generation X, Y, or Z, you can be part of Generation IoT. Stay tuned for my next blog, where I’ll take a closer look at the four fast-payback paths to IoT.

- Maciej Kranz, VP, Corporate Strategic Innovation, Cisco Systems

How to get Momentum when Fundraising


The most powerful tool you have in closing an investor is fear of missing out (FOMO). FOMO only occurs when you have momentum in the round. Once you get that momentum, you start closing investors and a virtuous circle begins, increasing FOMO and carrying you to a great round. Here’s three ways to build momentum when you’re fundraising for your startup.

Low Round Targets

Setting a low round target does 2 things: first it broadens the number of investors who can participate in the round, increasing competition. Second, the round looks almost closed with even a small amount of investment. You can always increase the size of the round later as demand catches up. The only cost of this approach is creating a credible business plan for each successive target.

For example, you only need one investor with $50k to be half full in a $100k round. Conversely, if you tell an investor you’re raising $3M and have $50k raised, the situation seems less attractive. When you start getting yeses you can increase the size of the round in stages and still have the majority raised at all times.

Reserving Space

You can also build momentum by getting smaller investors to earmark parts of the round. This usually comes in the form of new, angel investors and existing investors participating with their pro rata (or more). Ask the investor if they’d like to reserve a spot while they decide? If you get a verbal yes, you can’t give that space to another investor and thus more of the round is now ‘earmarked’, ‘spoken for’ or ‘wrapped up’.

For example, say you’re raising $500k and currently have $150k committed. When talking to a new and interested investor, Investor-A, you ask their usual check size, which is $100k. Next, ask if they want you to hold that space for them while they decide, as the round is filling up. If Investor-A says ‘Yes’, then going forward you can’t offer that space to any other investors. Thus, your round is now half full.

Maybes are worse than Noes

One of the hardest parts of fundraising is hearing noes. Your fear of these noes can hinder momentum. All great companies get a lot of rejections during fundraising and being willing to push for a decision will actually help your process. Leaving a potential investor for weeks in the maybe column will almost certainly result in a no. Follow up regularly with updates but don’t blast everyone with fake success to push for an immediate decision.

To avoid hassling a deciding investor without cause, your follow ups should be focused on good news. Provide updates on new investors, or reservations, in the round, customer wins and product launches. At the end of each email you can ask if they’ve decided or need anything else. Eventually, you have to give a deadline to avoid dragging out the conversation too long. Even if that leads to a ‘no’, it’s still progress.

Hi Joe,
Wanted to quickly share some great news, the team closed Hooli today and the contract should be signed next week. Let me know if you have any questions or if you’ve come to a decision?
Thanks
Ash

Raising money for your startup is a grueling test for any founder but it gets better once you have momentum. Making use of these strategies makes it easier to get started and increases your chances of getting the round you need.

Thanks to Duncan Davidson, Pejman Nozad, Mar Hershenson and Kaego Rust for reading drafts of this.

Cofounder & CEO @SendHub (Cameo Global), Faculty @AlchemistAcc. Alum@YCombinator@UniofOxford. Prev: @Klout (Lithium), @OneRiot (Walmart). IG: ashrust

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10 Due Diligence Points When Selecting a Startup Accelerator

Last week Samir Kanji (First Republic Bank) published a blog with a list of the accelerators ranked by graduates who received more than $750,000 in funding.  Cromwell Shubarth of the San Jose Business Journal pointed out a change in the rankings for the Alchemist Accelerator.

Game Changers Silicon Valley had a chance to catch up with Ravi Belani and Danielle D’Agostaro from the Alchemist Accelerator a few weeks ago.  This interview, conducted for the Game Changers Silicon Valley show, as part 1 of a two part show.  Here is a 2 ½ minute segment from the interview with the Alchemist Accelerator.

Accelerators provide an Education in Entrepreneurship

Accelerators are very similar to educational institutions, and it is important to separate “the signal from the noise” to allow company to identify the best fit among the many accelerators.

The Alchemist Accelerator admits only companies that monetize from the enterprise and who have established technical teams.

A focus on the enterprise allows companies to identify customers and generate revenues from the enterprise which improves the viability of the startup.

The classic enterprise entrepreneur is the person with 10 years of experience, although there are very disruptive companies who have never worked in the enterprise space.

Valuable learning can be gained from the mentorship via coaches and experts, every companies has a CEO coach, a Sales Coach and Goal coach plus domain knowledge experts.

There are five venture capital investors and five corporate investors who provided the working capital of the Alchemist Accelerator.

Both segments of the Alchemist Accelerator can be viewed at the link for Game Changers North America

Take-away considerations for entrepreneurs:

Not all accelerators are created equal:

Founding teams should review and qualify accelerator program in your geographic area.  Most of this information can be taken from blogs and articles.  Some of the areas for a general assessment should be:

  1. List the terms of the accelerator program including program duration, working capital provided, common stock contribution to the accelerator, physical work space, frequency of meetings, and training sessions such as pitch training and business plan reviews.
  2. What is the reputation and value proposition of the accelerator?  Most accelerators have a mission statement, a primary value proposition and an operating plan ( number of classes per year, number of companies per class, and a list of participating investors at their demo day)
  3. Does the accelerator have domain expertise via mentors or coaches in the markets or the technology areas being addressed by the startup?
  4. Does the accelerator do an in-depth review and qualify companies applying to join the program?
  5. What is the level of investor interest, traction and engagement with companies during the program, ideally there should be engagement well before the demo day.


Once a startup company narrows the list of accelerator programs that would be a fit, the founders should conduct their own due diligence on the accelerator.  The following our list of starting points:

  1. Contact companies who completed the program, including both companies who received follow on funding and those who did not receive the follow up funding. Speaking with co-founders of companies who did not receive follow on fundingwill provide insights into the perceived reasons funding was not obtained as well as help verify the quality of the program.
  2. Review the alignment of the accelerator’s domain and mentor expertise to your company and the founder.
  3. Review and evaluate if the listed investors who invested in previous graduating companies are the appropriate type of investors for your company.
  4. Review the connection and relationship maintained by the accelerator with post graduate companies, can a company who has completed the program continue to draw upon the resources and advisors connected to the accelerator.  
  5. Review published videos from the demo-day presentations.  These publicly available sources provide insight into the type, status ( pre-revue, revenue) and quality of the companies in the various startup accelerators. Some accelerators have a webpage listing their demo day presentations, or do a quick search on YouTube for “accelerator_name demo day”.

Summary

The first decision is to determine if an accelerator will materially promote a startup company's progress both in development and execution of the business plan and engagement with potential investors. 

Choosing the wrong accelerator can result in a disappointing experience.  All accelerators will quote metrics on the average follow-on funding received as a result of the program.  However, the average funding percentages for companies in past programs represents only one data point. Conducting additional due diligence can significantly improve your chances for the right decision as well as a successful engagement and outcome.

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Jim ConnorExecutive Producer at Game Changers Silicon Valley; Angel Investor