Brett Noyes believes the prevailing startup accelerator model is an expensive, cumbersome, and often pointless machine designed primarily to service the needs and desires of investors. Someone has to pay for these expensive buildings, and that's where founders come in. Every founder wants to be the next unicorn and most are willing to blindly give away equity and pay high service fees before they really understand what it means to do so.
Based upon his years in Silicon Valley I believe him. We fleshed out several problems around how to make his virtual incubator Unbank Ventures into something more than just an online meetup for startup founders to get a little advice and mentoring.
Turn Off The Bright Lights
We both agree accelerators and incubators have become more a fashion show than anything else. Many programs brag about how many mentors they bring in. That's great influencer marketing, but if the material and guidance provided doesn't fit the needs of business and product, another day is wasted sitting in a meeting instead of further developing the idea. Either that or founders are pushed to buy a service they don't really need when it comes recommended by a name.
Ryan Negri said the exact same thing to me when I talked to him about Iron Yard Ventures in Las Vegas. He told me he's tired of mentors using the platform to peddle their services and make money instead of mentoring.
In a virtual environment, founders avoid the drooling dog and pony show and save their application fees for something more important like product development and marketing.
Founders Still Have To Eat And Sleep
The high cost of living in a major urban technology hub is often prohibitive. In a recent streaming podcast, Brett said a founder moving to San Francisco with $25,000 for his product burns it up quickly in living expenses. Rent and food in SoMa is crazy.
Sure, desperation is often the mother of innovation. However, startups usually fail due to of lack of cash because the first and second iterations didn't gain traction. What if founders could lower their burn rate by working virtually and lowering basic living costs? Doesn't that make more sense?
100% Virtual Isn't The Answer
If holding cohorts via Skype or GotoMeeting was the answer, someone would be profiting from it right now. There are some global virtual incubators right now. Here's a list. However, there is some inherent distrust of a 100% online program of anything. University of Phoenix and other online school are good examples. I earned my MBA from Western Governors University, and I still have to explain to program to people who doubt its veracity because I never had to visit a campus.
Online coding programs are nice, but most successful ones have a physical location. Some of the best online Masters programs by major universities require students to visit campus a few times for testing and other necessities.
Another factor around being at a physical location is forcing potential founders out of their comfort zone. Eating and sleeping in your own bed is nice and easy. It's familiar and comfortable. Entrepreneurs who grab the brass ring force discomfort upon themselves and being a new physical location is a key component.
A Complete Package?
Brett and I agree the new age MBA coursework is startup incubation. It teaches all necessary business concepts and provides practical application in a compressed period of time. There are few experiences quite like being in a cohort. I can't personally attest to it, but I've written about it many times.
So if the brick and mortar model is a lumbering behemoth that eats founder's money giving little in return, and if a 100% virtual/online model doesn't truly capture the startup life and the entrepreneurial experience, the answer must contain a mixture of the two.
While Brett and I can't agree on the right percentage mix, I believe 75% virtual interaction 25% on site mentoring and experience is the right ratio for the moment. The cost effective nature of working remotely lowers barriers to entry allowing access to people who would otherwise never be seen or heard. Much of the due diligence and research necessary for product development can be done on a laptop or tablet.
There is something to be said for meeting customers and mentors face to face, shaking hands, and looking people who might buy your product in the eye. Pitching to a live crowd is just about as nerve racking as it can get for a founder. It's about taking that leap of faith off the high cliff then learning to fly on the way down. Either that or you hit the ground real hard.