Accelerating Innovation
We got the 140 characters… Have we forgotten flying cars?
If Nikola Tesla raised venture capital - what would the pitch meeting look like? Over the summer Northern Imagination showed us with a short 4 minute clip titled: “Nikola Tesla Pitching Silicon Valley VCs.” It was an excellent marketing strategy for their Kickstarter project - to build a life-sized statue of the man himself. They raised just north of their $123,000 funding goal, turned imagination into reality, and today a Wi-Fi equipped Tesla statue stands in Palo Alto.
A satire portrayal of a VC pitch meeting was the perfect way of reaching the Silicon Valley tech crowd — but it was the unspoken message that convinced 722 backers to donate (and it was all in the title). The very idea of Nikola Tesla running up and down Sand Hill Road pitching venture capitalists seems absurd! This man is responsible for groundbreaking innovations in wireless energy, communication, magnetism, radio, x-rays, robotics, and a host of other fields. His time on Sand Hill Road would be better spent at the Stanford Linear Accelerator Lab. Investors should come see him - most likely in a car named in his honor. So why did 722 open up their wallets for a creation they could have experienced for free? What was the message?
An unintended outcome of Facebook’s $19 billion acquisition of WhatsApp, unsuccessful $3 billion offer for Snapchat, and $1 billion acquisition of Instagram — just to name a few — is the glorification of founding a startup. Silicon Valley and the startup ecosystem at large is not a big game of acquirer roulette! Entrepreneurs see a simple concept with a high valuation and think: Why can’t I? Institutional investors have a fiduciary duty to prioritize the financial motive. Even (most) accelerators are in the business of making money. If we want “flying cars” we must create an environment that enables the required change.
The current environment encourages entrepreneurs and investor to:
- Favor simpler ideas (within the confines of the web)
- Fail fast, fail cheap (not put everything on the line for one high-risk high-reward attempt)
- Chase the new “hot thing” (financial rewards justify it)
- Start and/or invest in companies (because everybody else is doing it)
The Accelerator Model
The accelerator model was popularized in 2005 by Paul Graham and his founding team at Y Combinator. With various levels of success; the model is being replicated all over the world — facilitating entrepreneurial knowledge — and undoubtably accelerating the rate of innovation.
An accelerator is defined as:
“A modern, for-profit type of startup incubator. Through an open application process, they take classes of startups consisting of small teams. Seed accelerators support the startups with funding, mentoring, training and events for a definite period (usually three months), in exchange for equity.” Source: Wikipedia
The accelerator model works — it creates an environment optimized for learning at the earliest stage. The best programs work from a total return perspective as well. With that being said… The current model puts a “cap” on the scale of innovation top entrepreneurial talent choose to go after. This limit is directly related to the financial motive most accelerators are structurally based on: acceptance into the program is an investment decision, while the short-time horizon effectively rules out undertakings of a longer-time frame (non-web based). So taking a step back from the opening video; the question should be asked:
Would Nikola Tesla get into a modern day accelerator?
Accelerators are for-profit enterprises. They invest a fixed amount of capital and would not survive if they did not make financially motivated decisions to generate a return. To do that entrepreneurs are accepted into the program if they fit a certain type of risk-return profile (which is very high-risk and high-reward) but there still has to be some probability of a return at a future date. So if an entrepreneur was thinking of building the next messaging app, or another service that can quickly reach internet scale with a modest amount of capital, then it would be within the roams of what an accelerator can accept.
It’s difficult to see the next Tesla Motors or SpaceX get started in a 3 month program — no matter how talented the entrepreneur or the certainty of the plan. But what if there was a way to remove the inherent conflict of interest while enabling the possibility of innovations at the largest scale?
The New Accelerator Model
Accelerators are entrepreneurial learning institutions. They are the new graduate schools, except:
- Instead of paying to go you get paid to go
- Instead of going out and getting a job you go out and create jobs
- Instead of doing derivative work you do original work
- Accelerators are a better graduate school, and they are shorter/faster
Harvard University has been around since 1636, Y Combinator since 2005. Both started in Cambridge. So in the spirit of Silicon Valley’s propensity to improve (and sometimes disrupt) what can we make better after nearly a decade of seeing the YC model at work? Well, for one thing, the model itself is continually changing; recently adding a rule that requires all YC partners to wait 3 weeks after demo day before being able to invest in the current batch of companies (to overcome the signaling it may or may not send to other investors on demo day).
What can we change about the structure of the program to embrace education — and ultimately innovation — ahead of financial success?
What if:
- We set up a not for profit entity
- That was affiliated with a university (with a reputable brand)
- It would attract the best talent (when they need resources most)
- It would not take an equity stake (which would elude any bias)
- It would develop the entrepreneur (rather than their current idea)
- It would be completely free (and supported through grants)
- It would be industry agnostic (so it could attract any idea, from the simplest to the grandest of scale)
- It would have fixed session dates (but would not kick you out)
- It would benefit financially in the event of a successful outcome (through a separate legal entity and only when it made sense)
- The university would benefit too (even if the entrepreneur drops out — or succeeds later in their career)
What if it already exists? (just where you suspect)
What if this concept existed in all universities?
- It would be independently operated (but closely affiliated)
- Cost a fraction of the endowment (and could generate a healthy return)
- Enable the school to benefit from it’s top entrepreneurial talent (directly; without pleading for donations)
- It would prepare students for the real world (through experiential education)
Could this be the first step to fixing our higher education system? What if the only risk was failing in the right direction? Unlike most Silicon Valley innovations — first-mover advantage does not make a difference, and the competitive environment is not zero-sum.
Some words of advice to all universities:
Recommending is good; replication was hard (prior to the 140 characters)
I’d like to thank @rrhoover @drkshow and @bastiaanjanmaat for their feedback and necessitating context for this post.
