Back in college, I asked a friend why – even though they didn’t like the professor – they didn’t drop their painting class. Their reply – it gave them a space and a time to focus on painting, and their disagreements with the professor helped them better articulate the goals of the work.
Excelerate Labs in Chicago is now taking applications for their ~12-week mentorship program for early stage startup founders. Like the legendary YCombinator program, Excelerate provides a small amount of capital (< $20k) in exchange for a percentage of the company. It seems to me, the goal for the startup founders in either the Excelerate or YCombinator program, is to use the introductions, connections, and 3 months of focussing on their project's value proposition to transform that <$20k investment into much more through pitches to larger investors. The professional introductions, mentorship, and focus these programs offer are hugely valuable for any professionals on-going success. Though - at the <$20k level - the success of the specific project is mostly irrelevant. In fact, I'm guessing these mentorship programs make their money back for the entire program in 1 successful company. My 4.5 years of formal education was financed through a combination of loans, credit cards, friends & family, and part time jobs. During that time, my primary job was to focus on developing salable skills that I loved. My tuition payments purchased the time & space to do so. I left college with <$20k in loan debt and a monthly reminder to get a return on my investment as quickly a possible. Unlike Excelerate or YCombinator, my loan providers didn't ask for a percentage of my future earnings (which could be possible through an income contingent loan). Instead they opted for a fixed monthly payment – arguably a decreasing percentage of my future earnings.
Late last year, I figured building a prototype for a custom web-based software takes 12 weeks. If you’ve estimated the duration for building a website, I’m sure this is a familiar timeframe. I’m also sure it’s no coincidence both the startup mentorship programs mentioned above use this timeframe.
It’s extremely difficult to do anything new & meaningful in less time.
And <$20k is a relatively easy amount to raise for the time and space to focus on building a revenue-generating project. What if, rather than providing startup founders with this money in exchange for a percentage of their project - mentorship programs charged the startup $5k/month and took no percentage. Seed tuition rather than seed investment. The mentorship programs could still offer the same connections, introductions, workshops, and focus - but the founders' incentives would be different as would the stakes for the mentorship program. The thing that feels closest to is a Masters of Fine Arts program where the students enter with a project idea and spend 2 years executing it. Maybe that's just my BFA talking.
This is a worthwhile idea Garrick. Worth further consideration. It also avoids some of the problems with identifying interesting opportunities to invest in.
It would also be interesting to see if there is a way to tie SBA loans or other types of funding to make it work that may already exist. In short, are there ways to help fund these early investments that may already exist.