Entrepreneurs Have Not Because They Ask Not

The world of entrepreneurship is becoming more divided almost daily between the “haves” and the “have nots.” In this context, we would be referring to technology. Whether a start-up is seen as a technology company or not is determining not only valuations, but access to resources. One of the more common resources available to tech companies that “have” what others presume it takes to cash out somewhere in their trajectory for a very favorable multiple is an incubator, increasingly referred to synonymously as an accelerator.

Until very recently, these accelerators extract an equity position in the start-up company’s cap table in order to justify the risk of helping them for very little compensation up front. Most tech entrepreneurs learn to play the game this way and progress through the angel–Series A–Series B–etc process if they hit their milestones. But…the “have nots” bristle at the model and try to create worthwhile businesses without giving up equity. Unfortunately, they also try to go without mentoring and systematic instruction–to their detriment.

There is an emerging trend toward fee-based offerings that is on the horizon. Organizations like EntreDot, with a fashion innovation center and an industry agnostic innovation center in downtown Cary, NC, prefer the fee-based “pay to play” model. The premise is that a Main Street entrepreneur (otherwise known as “have not”) needs access to resources just like a tech start-up. In order for the innovation centers to provide services like instruction, mentoring, and space, they charge the entrepreneur on a “pay-as-you-go” basis. While this may be an affront to the typical “have” start-up mentality, it meets with less resistance among “have nots.”

Leaders of accelerators around the country who are trying to convert to more of the fee-based services model point to the fact that competition is stiffer than ever to get into the top  accelerators and too many entrepreneurs are being left by the wayside, just as the “have nots” have been for a longer period of time. What the newly disenfranchised and ignored sectors of entrepreneurship have in common is that they are trying to figure out how to commercialize an idea.  They each need help to do so!

Alexander Taub, the director of business development at the Des Moines, Iowa-based mobile-payment network Dwolla, spoke recently with Lauren Cannon for an article on the topic for Young Entrepreneur. Really young companies that aren’t necessarily ready for the big time may not benefit from accelerators, he says. Still, Taub does use General Assembly’s offices, which serve as Dwolla’s NYC home base. The value from using the co-working space stems from connecting with other companies that are also being incubated there, he says. “That’s definitely worth it… We’re part of the community.”

Plus, the experience might be worth paying a little extra for. At the Cary Innovation Center, less than six months of involvement has lead to strong growth for its initial two residents, Shelten Media and the CaryCitizen. Shelten saw an increase in billings of over 60% in her first 60 days and is now looking for larger space at the Center. CaryCitizen has seen their staff grow from two to five people as advertising revenues have increased. Both companies appreciate the value of the mentoring, but are committed to the program due to the cross pollination occurring among the residents. While it is definitely a significant and personal choice to decide to become a part of an accelerator (or innovation center as EntreDot calls theirs), the proof is in the results. As long as those serving the participants help them achieve desirable results, they will enjoy helping both the “have nots” and some who would otherwise be in the “have” category.

 

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