January 2014

Paul Graham Reveals Telling Y Combinator Valuation Stats

Laura Baverman, Upstart Business Journal

I found this article very interesting and relevant to the global conversation taking place around the relevance of business incubation.  Or, the lack of relevance from which business incubation suffers, or so I have been hearing lately.  Of particular interest is the revelation that the Y Combinator, and by extrapolation all other accelerator model programs, spin off more lifestyle businesses than high-growth potential ones. 
 
NOTE FOR ALL INCUBATORS:  Graham even addresses it in the Hacker News stream: "We're not intentionally spinning off lifestyle businesses, but that is a common outcome for seed investments. For investors it's a failure, but for the founders it could be good."
 
I like the final point of the article (emphasis added by me): “If the best in the (accelerator) business has such small potential for creating a $1 billion business, the chances of any other program doing it are even smaller. Probably best if accelerators out there focus less on the $40 million valuation, and more on the number of sustainable companies actually created (and incremental returns gained).
 
--Sandra Cochrane, MBIA Vice-President

Paul Graham Reveals Telling Y Combinator Valuation Stats

The UpTake: The likelihood of building a $1 billion business, even with the help of Y Combinator, is still really slim. Perhaps this new data from the accelerator will help other programs and venture capitalists set more realistic expectations and goals.

Y Combinator hasn't always been transparent about the 630ish companies that have trained with Paul Graham and friends since he dreamt up the accelerator in 2005. And perhaps that's why it was so intriguing to see Graham reveal some juicy Y Combinator stats on Twitter last week.

It came through two data sets. The first, a tally of the number of companies sold for or valued at $40 million or more, and sorted by Y Combinator funding year. The second was the percentage of companies that reached that status, based on the total number of companies funded in the year.

Mattermark has since plotted the data on some fancy graphs on its blog.

But to help you make sense of it all, here are some insights we (and others on Hacker News) drew from the data:

The tally of 42 companies means about 6.7 percent of all Y Combinator-funded companies have hit the $40 million figure so far. That's based on a total of 630 Y Combinator funded companies (figure from YC website). What does it all mean? Harvard researcher Shikhar Ghosh revealed in 2012 that at least 95 percent of startups fail to meet a projected return on investment. So even if a $40 million valuation is Y Combinator's benchmark for getting returns, the accelerator already has a rate of success better than most.
Graham has said in the past (and again on the Hacker News stream) that a $40 million valuation indicates the company has launched and is growing consistently (vs. a typical $20M valuation after its Demo Day). It also means to Graham that a company has a 10 percent chance of eventually reaching a $1 billion valuation. That means less than 1 percent of all Y Combinator startups will actually reach $1 billion, based on his calculations.
Y Combinator spins off more lifestyle businesses than it does high-growth potential ones. Shocking, huh? But the reality is that many companies get some nice steady traction without raising much venture capital, and ride that wave until they sell. Graham even addresses it in the Hacker News stream: "We're not intentionally spinning off lifestyle businesses, but that is a common outcome for seed investments. For investors it's a failure, but for the founders it could be good."

If the best in the (accelerator) business has such small potential for creating a $1 billion business, the chances of any other program doing it are even smaller. Probably best if accelerators out there focus less on the $40 million valuation, and more on the number of sustainable companies actually created (and incremental returns gained).

Venture capital, despite all the hype, makes few billionaires. But, with realistic expectations and good decisions, it can make some millionaires.

http://upstart.bizjournals.com/companies/hatched/2013/12/16/paul-graham-reveals-y-combinator-stats.html?page=al

Company Pitch Opportunity

Sandra Cochrane

The National Council of Entrepreneurial Tech Transfer (NCET2) is gearing up for The GLOBAL 1000 Meet | Partner | Deal :: Startups Showcase + Conference, an important transaction-based conference for Fortune/Global 1000 companies. Angel investors, VCs, universities, accelerators, incubators, state startup programs, and SBIR programs that have potential deals for the Fortune/Global 1000 companies come to the conference to discuss transactions and do deals. The event will take place in Washington DC on March 19 & 20, 2014. 

Startups and high-growth companies are allowed to attend by invitation only. We have a Startup Scouting program that invites startups and high-growth companies from around the world to request to showcase to the Global 1000 companies at the conference. Startups and high-growth companies go through a 3-tier vetting process to be selected as the startups/high-companies that are invited to come to the conference to showcase and meet with the Global 1000. More information on the Startup Scouting program is at http://g1000mpd.com/.
 

New Competition for University and Incubator Startups

Steve Lundin

You may be reading about the next Steve Jobs in the April/May 2014 issue of Connected World magazine when the winners from the first annual startup competition are announced. Startups located in incubators and universities are encouraged to throw their hats into the ring for a shot at national press and notoriety during the Connected World Competition for Media Coverage (February 8-16 at the Chicago Auto Show). Selected entrants will be given show space on the Auto Show floor and a shot at competing for national media coverage in Connected World magazine.

Startups within universities and incubators that are working on technologies involving any type of data collection or remote operations technologies are invited to participate in this unique competition. These technologies can include monitoring and tracking devices, drone technologies, monitoring and control apps for home, fitness, healthcare, security, vehicle technologies, supply-chain technologies, or remote manufacturing technologies. If a startup’s hardware or software has been or is being developed that utilizes data gathered remotely, or accesses transmits or controls anything via a data network, then it is a candidate for this competition.

“We’re inviting the national investor community to attend this special event. They’ll have open access to all groups that participate. We truly hope that our competitors emerge from our conference with both fortune and fame,” says Peggy Smedley, editorial director for Connected World magazine.

All qualifying applicants who are awarded showcase space will be given the opportunity to deliver a seven-minute judged pitch during the first round of the competition in the Connected World Start-Up Pavilion. Only 15 applicants will advance to the final round and will have the opportunity to present a 20-minute judged pitch. The winners will receive coverage in Connected World magazine. All applicants must have an on-going startup; this is not a business plan competition.

Incubators applicants compete February 8-14 with final judging on February 14. University applicants compete February 15-16 with final judging February 16. Applications are being accepted at www.surveymonkey.com/s/CWCapp. Competition is open for application from now until Jan. 18, 2014.

About the Connected World Conference:

The Connected World Conference is the window into the emerging technology trends shaping the future of connected devices. The conference is a destination for everyone interested in learning, sharing, and presenting their ideas and visions about the future of our digital lifestyle, connecting to our vehicles, our homes, our energy, our apps, and our health/fitness. This event gives attendees a chance to explore the strategic shifts that new technologies will have now and into the future. www.connectedworldmag.com/conference
Read more at http://www.virtual-strategy.com/2013/12/27/new-competition-university-and-incubator-startups-launches-connected-world-conference-dur#J6h9m5HaWBE6LM3I.99

Read more at http://www.virtual-strategy.com/2013/12/27/new-competition-university-and-incubator-startups-launches-connected-world-conference-dur#J6h9m5HaWBE6LM3I.99
 
MBIA Template 1 - January 2014