Explicit story: remarkable years of everything from startups to acceleration
Photo credit: www.verslilietuva.lt
Note: The article is based on a true story.
If you have been involved in the European startup scene lately, you must have noticed the miscellaneous supply of startup accelerators across the whole region. If being asked, you would probably know somewhat of their portfolios, investment numbers and could probably even name few notorious names of their mentors.
But have you got any clue what lies behind those fancy names and titles? Think of accelerators as of former startup-like companies – they have once been just fantastic ideas that, with a hell of a lot of hard work, eventually transformed into business speeding fountains. So let me ask – do you know any good accelerators’ stories? Well, the one to be told is definitely worth sharing.
Startup acceleration – is it magic?
StartupHighway, now a solid trustworthy Baltic startup accelerator, once was a vague dream of few youngsters a.k.a. startup ninjas in Lithuania. Rokas Tamošiūnas, the CEO and the co-founder of StartupHighway, recalls the times of accelerator’s establishment in 2011 as an incredibly completed mission. Back then in 2010, when the thrilling idea came up, it was a mission indeed to make it come true. If you bear in mind all the contradictions at that time, such as the threat of a tiny market, absence of robust accelerators in Europe, sceptic attitude by surrounding people and a very doubtful confidence in success, you may get a hint of the difficulty of bringing such an ambitious initiative out to the daylight. Despite the fact that Lithuanians are now among the most highly skilled nations in the region, years ago the society hardly used and recognized international terms. Just imagine fostering the concept of a startup accelerator in the country where such buzz words as “startup”, “mentor” or even the “accelerator” itself didn’t trigger any positive emotions. No wonder it’s been a great challenge to replicate the acceleration model and build the trust among entrepreneurs.
In the Eastern Europe accelerator is commonly perceived as an intense programme to a certain number of selected startups, based on a cohort structure, wide network of mentors, pre-seed funding and limited time frame. With this in mind, R. Tamošiūnas recites the main circumstances that led to an actual StartupHighway’s creation. Prior to setting up the first Baltic startup accelerator, there was a strong belief that there’s got to be something magic about it which seemed so impossible to achieve and what made existing accelerators look so superior. In 2010, having seen close-up similar activities in western Europe it has been one of the eye opening moments. “That was a curious revelation of the reality. It suddenly hit me that there was nothing magical behind the leader of the time, just great preparation and hard work”, said Mr. Tamošiūnas.
The blissful launch of a Baltic pioneer
It became clear that the key things needed for accelerator’s foundation were network, money and know-how. All the main components have been gained quite immediately. The know-how has been acquired by adopting the priceless advisory of Jon Bradford, the would-be MD of TechStars, and by following the traces of Startupbootcamp, having been founded at the very same time. Before going deeper to this venture, the waters have been tested with a mentoring day – 53 mentors squeezed in one room proved future accelerator’s network capabilities. Finally, the fortunate acquaintance with the two early backers and co-founders, Martynas Nikolajevas and Darius Žakaitis, enabled to secure financial aspect. And voilà, list successfully completed! StartupHighway was officially launched on 9th September, 2011 with 7 private investors and Rokas Tamošiūnas, as the CEO.
The start was exciting. Since the first Open Call was older than the accelerator itself, the programme started right after StartupHighway’s set-up. Astonishingly, it worked out just like planned. “First months were ecstatic. Startups were smart, pieces started coming together, the world was for the taking”, R. Tamošiūnas describes the emotion. He admits that most of the efforts and time was dedicated to the first startups. In fact, with some of them it was an extra mile and beyond. For instance, Sellfy team was staying in the apartment next door during the programme. Therefore, at least on several occasions there have been hangouts until midnight, ending up with improved strategic and action plans. The first batch was complete with four startups – digital e-commerce project Sellfy, digital magazine Llamas’ Valley, B2B leads generation system Relead and effective building management tool Utilimon.
The joy and excitement were soon tested. The pressure to show results started to rise. Even before the program had started, there was abundance of scepticism from outside that it simply wouldn’t work, that mentors wouldn’t arrive or that startups would just make a use of money. Later on the pressing inquiries about follow-on investments and exits began to hover over StartupHighway team. There were moments when everything seemed possible and, likewise, there were times when everything seemed less bright. 3 out of 4 startups continued to operate after all, Utilimon dropped off. Rest of the startups received angel investments. What a relief! While Sellfy and Llamas’ Valley are still continuing to grow, Relead, previously considered the front-runner, unfortunately, does not.
Anyway, lesson learned the hard way – startups sometimes fail. It was an enlightenment that a jaw-dropping idea is not enough. In order to accelerate there has to be something to be accelerated, at least a prototype.
So what that you believe in a project or a team, if it falls into parts unexpectedly? Even the best and the most trusted professionals, having most qualified skills, can let down, quit or step back before you notice it. And even millionth investments cannot always prevent from an unpredictable fatal breakdown.
Going beyond limits with fearless experimentations
2012 started with a renewed pressure. Estonian startup accelerator Startup Wise Guys launched with what seemed a much larger funding, and another would-be competitor seemed to be taking off the ground on home turf. StartupHighway determined to announce the second Open Call. The new round began with large road show across Europe, even including locations like Kazakhstan and Belarus. The program started with 11 startups on board, out of which 6 managed to cross the finish line – WithEvent, Responsell, TV Backstage, Eglessum, Dragdis, Place I Live. The first four weren’t lucky and have closed already while Dragdis, drag & drop digital tool, and Place I Live, open data neighborhoods’ information platform, have successfully received seed funding from Practica Capital, the new venture capital firm set up in 2012. The increased competition in the Baltic region made StartupHighway bring innovations to the Demo Day – they were held not only in Vilnius, but also in London with the aim to magnify investment chances.
Looking further, 2013 has been a year without unexpected slaps in the midway. The accelerator could have been distinguished by its matured approach – no rush in the selection process, decisions were being made in cooperation with Practica Capital representatives. StartupHighway has been continuing its experimentations by offering exclusive conditions to its aspiring teams. Startups from the third class have been granted with Practica Capital’s White Check of 30k EUR – no other accelerator in the region could have boasted of such a sustainable partnership at that time. Lastly, the third acceleration round revealed some substantial statistics, stating 30 years the average age of StartupHighway’s startups’ co-founders. The starring startup of the year was MoboFree – a social marketplace in Africa, that has recently raised significant growth funding from Netherlands based eVentures Africa Fund (eVA Fund) and Million Monkeys. Other startups from 2013 batch – INAA, Vetiary, Albumator and ManoDaktaras, doctor’s booking system, later backed with seed funding from Practica Capital.
Third class got StartupHighway to think about few crucial aspects. General mentorship sessions held for the whole batch didn’t seem effective anymore – teams, despite their needs, participated and listened to the same lectures. It was decided to try out a new approach by classifying the needs of different startups and matching them with specific mentors’ skills. So to say, general mentorship had to be upgraded to individual consulting in order to fill the gaps of actual skills in separate startups. Another barrier was a matter of distance – unless a startup could relocate to Lithuania, it was too difficult to maintain a long-term relationship. Since accelerator is a minor shareholder, the only way stay involved in startup’s further development is through sharing qualifications and, in reality, it doesn’t work well remotely. So there was plenty of space to improve.
The constant purpose to create a better acceleration programme continued to evolve in the next year. The fourth round was distinctive as it was held in cooperation with Barclays and BaltCap in addition to extended partnership with Practica Capital. Notable mentions from 2014 include digital design tool Planner 5D and mobile app development toolbox DevtoDev. Later in the year 2014 Igor Matsanyuk, the founder of IMI.VC and the Chairman of the leading game development company Game Insight, also joined StartupHighway as an investor. It is exciting to see what will be the fruitful outcomes.
Rock solid, yet daring to change
So to sum up, StartupHighway has achieved a lot so far. Despite a few bumps on its road, the journey has been a genuine mix of magic and everlasting innovations. The accelerator has invested in 17 companies from 6 countries. 9 of them received seed funding by VCs and angel investors.
StartupHighway is a continuous experiment and is looking to prove it in 2015. The lessons have been learned and the strengths have been gained during the last 3 years of it’s amazing lifetime. The excitement and persistent improving has always been the fuel for driving accelerator’s success. Understanding the importance of top-notch expertise led to develop a newly shaped acceleration program that combines the proven model with a flexible individually tailored program. This year, major attention will be put on this new innovative approach. Startups from the whole CEE region are welcome to apply, get bigger funding and be awarded with a dream working spot in the novel technology hub Vilnius Tech Park. Who knows, maybe this year will be jubilant.
Key learnings: how to escape from fatal fails
To tell the truth, there is no secret sauce for selecting perfect startups. But there are ways to minimize the risk of failures. As for StartupHighway, there have been times when the things got really spiced up and when breakdowns were inevitable. But what doesn’t kill you, makes you stronger, right? Here’s the summary of lessons the accelerator learned so far:
- Timely rejection of those who are likely to fail. You can never take absolute control of the situation but you can surely examine profiles of the founders in advance, to get a clue of their history, financial obligations and previous unfinished projects. The flashbacks of previous failures prompted to take additional precautions, even such as a check-up of previous conviction of co-founders, their marital status, possession of loans. Let’s be honest, no investor wants unnecessary problems.
- Elimination of potential conflicts. There are options to reduce the future risks and to ensure the continuation of projects by adopting such proven methods as vesting and put options.
- Keeping the proportion of qualifications in the team. There must be a balance of technical and managerial skills among the co-founders. The team without programmers won’t have a product and, on the contrary, the team without marketers won’t be able to sell it. Simple math.
- Verification of the exit strategy. The vision and comprehension of the business case, monetization, financial metrics and exit scope determine the entrepreneur’s business mindset and ambitions. Realistic understanding of startups’ potential by it’s founders is a must-have quality.
- Individual mentorship taking startups to the next level. General mentoring sessions aren’t always effective – they may not be relevant for the whole batch. Therefore individual mentorship focuses on the most actual startups’ needs and supplements the missing knowledge.
- Keeping startups close. The distance results in a gap of communication, it’s too difficult to hold on a team which is hard to reach. However, great teams cannot be let go, they can be relocated though.
- There’s no place for part-timers. Founders who cannot dedicate their full attention to the growth of startups almost always end up failing. Likewise, founders who spend overtime and don’t count the hours are among those who succeed.
- And there’s definitely no place for lazy-asses. If you don’t work hard, don’t have a discipline and are not willing to follow the process, you are not meant to be a founder.