For startups developing web-focused businesses, the ecosystem has changed enormously in the last 2-3 years, almost entirely for the better. In contrast, in the world of new ventures based on hardcore science (cleantech, medical devices, biotech, etc.), as far as I can see it is more or less “business as usual”, and in some areas things have gone significantly down hill (think FDA and medical devices for example).
Being an eternal optimist, I see grounds for excitement here. It seems to me there is now a great opportunity to take some of the ecosystem improvements pioneered by the Web 2.0 folk, and adapt them to the world of science-based startups.
One of the most striking changes in the startup ecosystem over the last 3 years (at least here in Silicon Valley) is just how influential and dominant the programs like Y combinator and 500 startups have become. Of course, they have done a great job at creating their own buzz. But I think an important aspect of their success has to do with just how attractive it is as an entrepreneur to become part of a group of peers all attacking exciting goals, and living the lives of entrepreneurs. Because it is very exciting being an entrepreneur, but it’s also traditionally pretty lonely. Now, it’s not lonely. And in fact here in Silicon Valley, it sometimes seems like anyone who is not dropping out of Stanford and starting the next Airbnb meets Groupon meets Facebook is a bit weird.
For all the same reasons, I think there is a great opportunity for founder collectives of some similar type to form in the world of hardcore science startups. The problem is perhaps the business model. Because biotech/cleantech/medical devices/telecom etc typically need a lot more capital than IT startups, there probably needs to be a different business model for the cleantech version of 500 startups to make sense. But I bet someone is working on that right now.
The other way in which these seed stage accelerators are having a big impact has to do with domain experts and mentors and advisors. Traditionally, finding these helpers, and getting them to engage with a startup has been a bit hit or miss. At least conceptually, the benefit of a top notch accelerator is bringing together a critical mass of real domain experts, and doing some quality control on the people and processes, and creating time-effective and cost-effective ways that these experienced individuals can contribute, and share in the upside of a pool of startups (rather than one at a time). This is definitely translatable to science-based ventures. And in fact that is one of the things we have been trying to do with Acceleration Co-op.
Angel groups: web-enabled
The changes in the angel ecosystem over the last couple of years are enough for a post of their own. To pick one example, I have recently started to experiment (as an angel) with AngelList, and you can immediately see it has huge potential. The things that get me excited include the critical mass (large group of expert angels); the potential for sharing of due diligence; the reduction of friction between angels and founders; and the potential for geography, and middlemen, and “who you know” to play a smaller role.
It’s obviously a great hit with IT investors. Not sure yet how it is going with the science-based verticals. But I think there are lots of aspects that should translate very well across verticals, so long as the core “vetting” function being done today by the AngelList founders can be reproduced in areas where they might be less well connected.
And then there are all the crowd funding experiments. GrowVC, Profounder, and many others. Even the government is making promising noises (HR2930 etc). As with the other topics above, it seems to me that a lot of the momentum here is coming from IT startups and investors. But I see a great opportunity to apply these crowd funding techniques for early seed financing in the science-based verticals too. Sort of an expansion of the “three f’s” that traditionally contribute the initial seed funding of a new venture.
It’s certainly not the case that venture capital is no longer relevant. In some ways, the need for very large investments by professional investors is more important than ever, later in the life of a science-based venture — and that is clearly when you need professional investors. But I think VCs are becoming an important part of a much broader ecosystem, rather than it just being VCs and entrepreneurs, as perhaps it was in the past.
The bottom line here is that I think we are in the middle of a transformation of the “new venture” ecosystem. It all started with the IT entrepreneur/investor community. And now I think it is going to gradually ripple out to the science-based entrepreneurs and investors in medtech, lifesciences, cleantech etc. But along the way we are going to need some adjustments to the models that worked for IT. And there will be room for some new ecosystem participants.
If you are interested in brainstorming about these trends and trying to accelerate them, or take advantage of them, I would enjoy discussing the topics. Leave me a comment or contact me.