This morning I received an email from an entrepreneur who asked me if I would be willing to introduce mobile app developers you. He explained that you have started an ‘accelerator‘ that offers office space, mentoring and $20-25K to companies who are within 90 days of launch of their mobile applications. In exchange you take 15 to 20 percent of the company. The entrepreneur who sent me the request indicated, “The challenge they are having is being in front of their target audience which are mobile app developers.” My initial thoughts:
- 15-20% is ridiculous!
- mentoring? really? how much mobile experience do you guys have?
Now if we were talking about Y Combinator where you would get access to Paul Graham, Trevor Blackwell and Harj Tagger I wouldn’t spend much time worrying about the equity. The mentoring would be well worth it – ironically Paul and his team typically only take between 5-8% of the equity for about the same amount of money. Gabriella’s TechWildcatters has turned into a pretty neat operation with office space + real mentoring. Again they only ask for about 5%. Without the mentoring you are really talking about a setup like Dogpatch Labs. The Dogpatch guys with either sell you a desk by the month or give it to you free if they think you are on to something. The best part about the Dogpatch is the community of entrepreneurs – sharing space, ideas and referrals. Some contribution of equity might appropriate, but (of course) they aren’t asking for equity.
The irony is that if you demand 15-20% of a mobile startup for $20-25K the group of startups you attract will be subpar (no offense to those who have already joined your accelerator). You won’t be able to attract high quality startups or experienced entrepreneurs with your model. It is super easy to find free or cheap office space in Dallas like Blake’s Co-Habitat facility or Ben’s Workhaus Co-Working Lodge. Hell, if anyone wanted to borrow a few desks at my offices I would be happy to share some space for free (just ask Best of Texas). Finally, finding mentors and advisers is pretty easy too – typically for a quarter or full point you can get the PERFECT adviser. Lots of us (like me) do it for free (to date I have never taken stock for advice).
My advice (and you won’t need to give me any stock)? Take the $200,000 you were planning to invest in startups that leased office space and invest it in TechWildcatters. Their lease is up in the next month or so and I suspect they would become a tenant if you made the investment. You could then become mentors and really make a difference in the lives of entrepreneurs. If you need Gabriella’s number email me (amuse-at-startupmuse.com). Remember the supercollider, sometimes acceleration in a vacuum isn’t good…
Dude, you really tell it like it is. Love it.
Thats a pretty robust list of mentors:
http://techwildcatters.com/mentors/
Good insight.
Why not embrace others that are trying to help the start-up ecosystem in Dallas?
I have spoken with Rohit and they haven’t finalized how they are going to approach this yet.
Finally, why would a random “entrepreneur” email you asking you to send them mobile startups? Is this person affilitated with Rohit and Bill?
Alexander,
It sounds like you enjoy being controversial. That’s great. However it does not seem to me to be responsible to pass judgment – especially such harsh judgment – on something based on unsubstantiated hearsay. Even the worst reporters will try to corroborate a story with the principals. You show no sign of having done so. But, I guess that’s what makes blogging such fun, right? I know something about the Cawley/Mehrotra program and you have done entrepreneurs in the Metroplex a big disservice by criticizing it incorrectly. Your facts are ridiculous. This model could be an extraordinary boon to early-stage companies in our community. One example I saw showed this program taking just 0.8% equity in a sample valuation for a year’s worth of rent in a Class A building. With your experience and sophistication, the start-up community looks up to you as both informed and a good example. When you get the facts on this program, and see a couple of deals get done, you will likely either give it your enthusiastic support, or remain on record as having embarrassed yourself.
Dennis Cagan
I have a saying – you are on to something good when strangers are trying to fuck you !!
If you truly want to help, call me.
TechMultiplier is not predatory if that is what you are implying:
“WE” [founders / investors / mentors] evaluate all opportunities. The primary criterion for investing is:
a) Can “WE” meaningfully help the entrepreneur by bringing them real customers / revenue. If we cannot, then the start-up is not a good candidate for us.
b) Are “WE” willing to invest our time in making this company successful. Our investors and mentors are successful businessmen who have had multiple liquidity events – Time is the most precious commodity we have.
c) If the qualified start-up can benefit from saving money in the short term by using their equity for space, then TechMultiplier has the real-estate available to help them. The real-estate deal structure is simple: If you are going into a space where the rent is $20000.00 / year and your current valuation is $2MM, then for one year of space TechMultiplier will own 1% of the company.
We obviously want companies who have a promise to grow substantially in the future, and we can help them with their real-estate needs for a long time.
From my personal experience “Mentorship” is a highly misused word. Every VC or Incubator wants to talk about their mentorship program, however most of them have no metrics to quantify that.
In order to be a associated with TechMultiplier, a person has to effect the success of the company in a quantifiable way. I have walked away from good startups / ideas which I felt we could not help build.
We expect to participate in all future rounds of funding for the companies that are accelerated as part of the TechMultiplier venture. Ideally, these companies never have to go out looking for money once they are part of our program.
Rohit
Are you serious about having an extra desk or two? I know a new startup whose founders (there’s 2 of us) might be interested as they prepare for seed funding.
Sure, come on by…
@Dennis – being controversial wasn’t really my goal. At the end of the day I talked to three different people about the program AND read the information Rohit had released to the press. My post is simply my opinion. If you notice Rohit’s comment, his current model is different than the one he explained to the Dallas Business Journal.
@Rohit – I am not trying to f*ck you. I simply shared my opinion primarily in response to the article in the Dallas Business Journal and to a lesser extent your associate who reached out to me for deal flow. Your new model is different than the old one, but at the end of the day I am generally against these sort of arrangements for entrepreneurs. It isn’t personal – I have written about a number of programs I thought were a mistake for entrepreneurs. Send me your number and I will call you – or you can call me at 214.550.2003.
At the end of the day, lots of companies pray on entrepreneurs who are desperate. Is your program praying on entrepreneurs? I am not sure, but based on my experience it sounds a lot like a lot of other programs that do… Of course, I am willing to be proven wrong and I will be the first to admit it as soon as you do…
Alex,
How on earth is providing a service where both parties enter into the transaction voluntarily “praying on entrepreneurs”?
Are you preying on your customers?
FYI – Rohit never called or sent me his number…