What I Learned Running Startup Programs Around the World Over Five Years
Multiple program formats, 100+ companies, tens of millions in funding, lots of customers, exits, all across three continents.
This past July marked five years I’ve “formally” led startup programs.
Here’s a synopsis of those five years and an intro to what I learned along the way.
The beginning. Hong Kong Startup Bootcamp. Cohorts 1, 2, and 3. 2012 — 2013. 13 companies.
I was living in New York City in 2011 so you might ask yourself why the first startup program I ran was in Hong Kong. It wasn’t a random choice.
Back then, I led a founders’ round-table series in New York that had become pretty popular. I gathered eight to 10 startup founders every couple weeks to share what they struggled with and to receive feedback and mutual support. I did this with six groups of founders over almost a year. People loved it and I wanted to make it into something bigger. This was a benevolent “selling shovels” approach to value creation.
But back in 2011 there already were 10 startup accelerators in New York City. I didn’t want to start the 11th one.
Instead I started to look for a new market to go into. For this, Hong Kong wasn’t a random choice. I lived and worked there years earlier and the conversational Cantonese I spoke (I like languages) helped a lot. I knew that Hong Kong — at least the part that was relevant to startups — was a flat society where I could get connected quickly.
My next step was to cold email the judges from a recent local Startup Weekend followed by traveling to the city to scout the market. Everyone I met introduced me to two others and my three weeks quickly filled with meetings.
In those meetings I asked similar questions: “What’s going well here for startups?” “What do you wish you had here?” “What opportunities do you see?” “What missed opportunities are there that you wish you could solve?”
I kept the conversation going after returning to New York. But after months of talking there was no progress on funding a startup accelerator. And no one I met in New York had the slightest interest to fund a program across the world, especially in a very small tech location.
Everything looked lost. After all this time working on the program I also had developed a strong desire to see it through. I didn’t want to join the other international groups who had recently visited Hong Kong making promises about running a startup accelerator only to pull out without doing anything.
There was no choice but to flip the model. Instead of funding startups and taking equity, I’d start by charging tuition and take no equity. Part of the tuition would include a workspace for the companies. The question was, would anyone apply and join?
I put out a call for applications and expected the worst. In order to pay for my flights, temporary housing in expensive Hong Kong, and pay the co-working space, I needed to accept three good companies. I had four. I was going to be slightly profitable! The payments were coming in!
Then I saw the news. The fourth startup — the one that convinced me to book everything and go to Hong Kong — withdrew their application. Two computer science grads from Hong Kong were not going to build their startup after all because… their parents were making them get corporate jobs.
So I went from being slightly profitable to losing money on the three months.
This is a good time to explain why the above (“our parents are making us get corporate jobs”) happened in Hong Kong. For the last couple generations in Hong Kong, the following historical and economic factors have combined:
1. Universities put subjects like programming and design lower in status, meaning that students with top grades instead are encouraged to study medicine, law and business.
2. Young people, before marriage and while working, continue to live with their parents. What’s more, it is expected that they pay rent to their parents and otherwise support the family. You need a stable job to do that.
3. There is an expectation that couples planning to get married will buy a home. Hong Kong is an incredibly expensive property market.
4. The status of startup founders was nonexistent in “normal” society. As one founder told me, “If we met a potential date, we would never say that we’re startup founders. What would be heard is ‘this guy has no job and no money.’”
5. While there is a lot of money in Hong Kong, there was a very small early-stage investment community.
Not understanding reasons like these is why those other international groups thought they could just pop in and start an accelerator. Hong Kong is not New York on the South China Sea.
But there was something unusual about one of the remaining three companies who applied to the bootcamp. They were from Silicon Valley and were intrigued by what I was trying to do.
That first cohort gave me the opportunity to make an impact on their growth while growing a network of startup mentors that would continue to be helpful. We held the first ever Hong Kong Demo Day (#demodayhk) in September 2012.
By this time we had press and more importantly, word of mouth. Lots of word of mouth. I brought seven companies into the second bootcamp, which I started right after the first ended. There was something unusual about some of these companies too. Apart from Hong Kong companies, more international startups heard about the program and wanted to join.
The continuation. AcceleratorHK cohorts 1 and 2. 2012 — 2013. 12 companies.
AcceleratorHK was the first funded startup accelerator in Hong Kong. Focused on mobile app development (mobile being a strength of Hong Kong), the accelerator was a natural next step after the bootcamp.
Most of the mentors I brought in for the Bootcamp went on help at the new accelerator. Plus two of the Bootcamp teams that proved themselves were funded in the accelerator.
Apart from Hong Kong-founded companies we also attracted founders from around Asia, the US, Europe and Latin America.
I ran a lot of other program and product experiments too, including building the first list of startups in Hong Kong.
We had our first exit a year after the last cohort graduated. Today there are 10 startup accelerators in Hong Kong.
The transition. Building the Incubator at the University of Southern California. Cohorts 1 through 10. Late 2014 — Present. 80 companies. Teaching and creating new classes in entrepreneurship.
For family reasons I moved to Los Angeles. I had some time to reflect on my past year and wrote Startup Sacrilege.
I was soon hired by USC’s Marshall School of Business to build a university incubator. USC is a great university. And a huge university.
This program was my biggest (on every measure) and most difficult. Here’s why.
- No local network when I started. Unlike in Hong Kong, where it was easy to get connected quickly, Los Angeles took “standard” amounts of time.
- Things move slowly in universities.
- Universities, like large companies, have territories. There already were other incubator-type programs on campus. Not all of them were interested to talk to the new guy. People operated out of a zero-sum mentality.
- A modest budget and no other staff. I was used to having other people work with me.
But in spite of the above, within a year and a half it was the largest incubator program taking applicants at USC.
The Incubator grew to the largest number of companies served at USC, ran more annual cohorts than any other — three cohorts per year (crazy, right?), the most total company funding raised, the most funding per company, the most Kickstarters/Indiegogo crowdfunding campaigns, competitions won, startups going on to funded accelerators, exits, mix of company types, mix of founder types. Amazing to see it.
This is how I did it.
- I spent the first few months talking to as many people as possible around USC. I interviewed close to 100 people, mostly student founders, about their entrepreneurial work, about what was going well for them and what was needed. Basically, I repeated the process that worked well for me when starting the first program in Hong Kong.
- Opened the program to a wider range of applicants so that the program became representative of USC as a whole, with many founders from the schools of business, engineering, communications, medicine, arts, and cinema — well beyond the business school.
- Opened the program to all alumni. Other programs limited themselves to current students or very recent grads. Why? Isn’t there a lot to be gained from bringing in alumni with work and industry experience? Today, alumni represent a little more than 50% of our company founders. While the average founder age is around 29, I’ve had founders ranging in age from 19 to 60+.
- Got rid of the most common points of failure. Founder issues are a common cause of startups falling apart. Therefore, I started to require that startup founders in the Incubator discuss and write up a founders’ agreement. This change alone decreased the failure rate by 10% — 20%.
- Brought in relevant resources. We bring in a law firm and an accountant regularly. Brought in design help from an alum. Selectively brought in subject matter experts for example in pricing, marketing, online advertising, investing and more.
- Transitioned the group meeting. When I started, the entire cohort met every Friday for two hours. When we grew the cohort size these meetings became unwieldy. At the same time, the founder population changed. There were more alumni and faculty — people who didn’t live near campus. More individual meetings and fewer group meetings worked better.
- Embraced competition. I’ve heard variations of the message that there should really be only one incubator at a university, that it should only be run by the business/engineering/etc school, that multiple programs cause confusion. To be honest, when I was first hired I didn’t know that USC (and most other universities) had multiple programs. But don’t we teach the benefits of competition? Competition is good for those who can compete.
During this time I also teach classes as an Adjunct Professor of Entrepreneurship, something which makes me better at the accelerator work, while being very different. That’s a post I’ll leave for another time.
Laudato Si’ startup accelerator in Rome, cohort 1. Summer 2017. 9 companies.
Earlier this year the Vatican-blessed Laudato Si’ startup accelerator came along. I have to admit, I thought this sounded like an unusual idea when I first heard about it, but I was honored to be Program Director in Rome with environmental technology businesses from around the world. This program is in its early stages so stay tuned for how it evolves. I’ll be happy if another 100 groups around the world take this hybrid model and run with it.
The common themes that worked for me
- Change is a part of learning. Try lots of things in small experiments. Treat your accelerator or incubator as a startup. Over time and based on location and founder mix, what works will always be a little different. In my case, I swayed my programs from education-focused to growth-focused, from funding-focused to bootstrap-focused, from scalable business-focused to mixed business model focused.
- Quietly build a reputation for getting results. Like those companies from around the world who went to Hong Kong, and the non-business school founders who sought out the incubator at USC, they came because of what they heard from other founders. We spent a lot of effort to understand how to move the needle for startups.
- Build a strong group of mentors. They help your startups and also focus you on doing your best.
- Stop inviting “experienced” people if they are poor mentors. One well-known mentor I brought in would regularly leave founders feeling depressed when they left a meeting. I sat in on the meetings. It was his problem, not the founders’ problem. I haven’t invited him back. Turns out people can be successful and also give terrible guidance.
- Go beyond VC-backable tech startups if you can. The different thing about the Incubator at USC is that while 75% of the companies are highly scalable tech startups, another 25% are not. These other companies include food companies, apparel companies and lower-tech products. At Laudato Si’ we looked for size of potential impact as well as good businesses.
- Avoid celebrities. Celebrity judges and speakers draw crowds, but they are probably not the crowds you should spend time in. For those who say that inspiring young people is their goal: their goal is also often building their own personal brand. I have had great results focusing on founders who have already gotten inspired and who don’t need “startup entertainment.”
- Focus on fundamentals. Business sustainability wins in the end.
- Remove the most common sources of failure. Charlie Munger calls this the Inversion Principle. I estimate that we reduced failure among my founders by 10%-20% just by requiring them to discuss and have a written founder’s agreement in place.
- Create a community where people are comfortable to share difficulties and get support. The reason I don’t invite outside observers in to meetings is that I want the startups to feel comfortable. The stories you hear in closed door sessions are much more real than those shared in public.
- Be willing to make people upset for the good of your founders. I have done that — unintentionally — over the years. Don’t give a second thought to people who can’t handle you shaking things up.
Now I’m discussing building on the startup accelerator model for corporations, governments, and other large institutions. I can’t wait to see where things lead. It was certainly the startup accelerator experiences across Hong Kong, Los Angeles, and Rome that broadened my perspective and gave me the tools to work with.
If you’re running a startup accelerator or incubator somewhere around the world I hope that this article was helpful to you. If you’re trying to start one, let’s talk.
Many people helped me along the way, but special thanks to
Susan Joan Mauriello, Steve Forte, Jean-Marc Ly, Troung Lam, Charles Ng, Kevin DeWalt, Jonathan Lowenhar, Tristan Kromer, Simon Yu, Chris Eckman, David Bland, Kevin DeBre, Ray Wu, Trev Lattin, Ed Lee, Steven Kopecs, Mike Michelini. Thank you!