By Francis Moran and Leo Valiquette
We recently conclude our two-part discussion with Jon Bradford, the man behind The Difference Engine and Springboard, two U.K.-based startup accelerators that took their inspiration from TechStarsand Y Combinator in the U.S.
The Difference Engine was an initiative supported by public funds that launched in the north east of England two years ago. While that program was successful, funding cuts to regional economic development, as well as a desire among angel investors to regroup in a more central location, led to what was essentially v2.0 of The Difference Engine, Springboard. Springboard is an intensive 13-week program based at the ideaSpace Enterprise Accelerator, part of Cambridge University’s state-of-the-art Hauser Forum.
We recently spoke with Jon about the role that Springboard plays in the commercialization ecosystem, how it selects teams for its program, and the characteristics of a winning team. Today, we continue with his thoughts on why companies fail, how Springboard measures its effectiveness and what it takes to create a successful startup accelerator.
What are the common reasons why teams in your programs have failed?
Sometimes teams fail because it’s just a stupid idea. I was having this conversation this afternoon. One of my first graduates who took part in the first program wound the business up a week after the program ended. What was interesting about him was, essentially, he had been running his business for two years. We thought it was an interesting proposition. I think there were massive risks associated with it, but if the risks had been mitigated, it could potentially have been a game changer.
But it became very quickly apparent that to achieve those targets without a lucky break or two was never going to practically happen. So having run the business for two years, he took part in the program and shut it down. I cc’d that, ironically, as a success as well. Because in a world where one has a limited number of entrepreneurs, one has to find ways to ensure that they use their time productively.
The other thing to think of is that (accelerator) programs have to be people centric. In the process of (entrepreneurs) taking part in a program, essentially you’re giving them the tools, the access, the contacts, the experience, which should give them a platform, that, even if the first business, or the business that takes part in the program, fails, they’re a bit older, a bit wiser, a bit more savvy to try to do the next thing.
Where one is kind of shamelessly business centric, I think you lose that.
Please describe the specific role that government and public money plays in the development and delivery of Springboard’s programs and services.
Minimal. Angels represent over 80 per cent of the funds. IdeaSpace is effectively the location where we are, it’s part of the university, and they were keen to help support the program in Cambridge … they gave me some money, they also took some of it back as rent. The much more interesting thing is NESTA(National Endowment for Science, Technology and the Arts).
NESTA was brought on board from my perspective because they had access to resources that I would never be able to reach … they were interested in taking part in the program because it was a really interesting way for them to see how a program worked from the inside out … they could foresee that if this could work, it could serve as a model that could be used by other angel groups elsewhere in the U.K. and beyond to help stimulate innovation.
Why is Springboard’s model of interest to angel investors?
The reason why it’s interesting for angels is it allows them to diversify across a wide portfolio of teams with a limited amount of firepower. To give you some numbers around that, my program costs about a quarter of a million pounds. It is essentially paid for by 10 angels all putting in around £25,000, but with that £25,000, they get diversification across 10 different startups, which they couldn’t achieve themselves.
One of the things I say to people when they look at these models is it’s an interesting way of engaging angels in early-stage businesses by de-risking that process. But what you do with the angels is you don’t just get the cash, you also get the contacts and you get their experience as well.
And for most of my angels, when we’re talking £25,000, that’s chump change. They’re interested in writing bigger cheques. The process itself allows them to get up close and personal so that they can make a much more educated guess as to which of the teams they would like to invest and write that bigger cheque.
Where do individuals from the private sector come into the picture?
With the Difference Engine it was mentors, given that it was essentially publicly funded. With Springboard it is investors and mentors.
How does Springboard measure success?
I really don’t know how to answer that question. If we rewind to my angels, they all invest in the teams for different reasons … I’ve got certain angels who do it because it’s good for the ecosystem. Again, that £25,000 represents a very small amount of money to them. They want to do it because they want to give something back.
Most of my angels don’t actually see this as an investment opportunity. It comes back to that notion that first they invest in 10 teams, and then they make a decision during the process on a team they would like to invest in. Think of it almost like due diligence money, but with a return built in. I always start out from the perspective that if I take a pound from an investor I expect to return at least a pound to them. But there is so much more value that comes from around the program itself, both tangible and intangible, that (participants) will reap the benefits from the program, not just financially.
How do we measure the success of the program? Where we can create sustainable, long-term businesses, some of which may chose to raise venture capital, some of which may chose to bootstrap. Because we get our funding from angel investors who are successful entrepreneurs, none of (our teams) are wedded to the idea that they need to go and raise venture capital. It’s whatever is seen as most beneficial for the team going forward.
SpringBoard is obviously still in its early stages, but what kind of hard numbers are there from the Difference Engine?
Cycle 1 (June 2010): Nine teams took part – five funded post program – raising > £1 million.
Cycle 2 (April 2011): Nine teams took part – two funded to date.
Where do we go from here? How must we repeat this model elsewhere and establish a supporting network?
The TechStars model is much more replicable than the Y Combinator model … because of (Y Combinator’s) geographical location and because of (founder)Paul Graham, there are some very special attributes that if anybody believes they can replicate that, they’re a fool. TechStars was actually built with the ability to replicate in mind from day zero.
I think the point is well made, why did TechStars start in Boulder? Because it was person centric. David Cohen had a passion and desire to do this. Why did TechStars go to Boston? Because someone, after Y Combinator withdrew, stood up and said, “We want to do this.” Why do they pop up in these geographic locations? The reality is, that they are very personality centric … someone shows a desire to genuinely get stuck in it and do these things. Nobody in their right mind would ever have started a program like this in the north east of England, except for “I just wanted to do it …”
But interestingly, even though it was personality centric, I was talking to people who had a desire to do something similar. (The Difference Engine) cost the best part of £750,000. If it hadn’t had a public sector that had the desire and the willingness to try something new and different, I would still be in the north east of England and neither Springboard nor The Difference Engine would exist today.
So there has to be a hunger to try and do something different and to shake it up … I was very privileged that David Cohen actually took three days out of his life and we just sat in a room and we just talked about everything he had done. His attitude was, “I’m never going to run a program like this in the north east of England, so I am happy to help you start such a program.”
That demonstrates the willingness to help out the ecosystem. The more there are people like that, the stronger the ecosystem that will exist. That’s how the ecosystem can exist outside of Silicon Valley.
This is the 21st article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.
