Moving Product #2: Unbundling The Accelerator
"Fundraise From Home", new Snap & TikTok features, suburbanization, & Netflix's Midnight Gospel
Could you build a Y Combinator with just the Demo Day? Or just the social network for founders? Or just the educational sessions? If you think of the startup accelerator as a product, it’s being unbundled right now. Steep equity price tags for long curricula like the standard 7% for YC’s $150K invest and 3-month regimen don’t fit every startup. So increasingly, we’ve seen new players with different business models focus on a particular piece of the springboard.
The latest which launched yesterday is “Fundraise From Home”, where seed and pre-seed stage founders apply via short video pitch and the best are selected to do a longer video presentation for a cadre of top seed investors. It’s like a weekly Demo Day for free without the rest of YC.
Fundraise From Home was started by some of the sharpest microfund leaders: Ryan Hoover (Product Hunt) and Vedika Jain (TrueLayer) of Weekend Fund, Alexia Bonatsos (TechCrunch) of Dream Machine, Niv Dror (Product Hunt) of Shrug Capital, Harry Stebbings (Twenty Minute VC), of Stride.VC, and Jeff Morris Jr. (Tinder) of Chapter One.
Weekend Fund and Fundraise From Home’s Ryan Hoover
In their first interview about the project, Hoover tells me “Over the past few years I’ve seen an increased appetite among early stage investors to collaborate and experiment together, particularly among new entrants into VC. We’re seeing a rise in angel investors and small funds. As a result, there’s more competition in early stage investing and more opportunities for investors to collaborate, especially those that write smaller checks.”
Fundraise From Home is powered by TypeForm’s Video Ask feature, and each investor will vote on the top three applicants from whom they’d personally like to hear more. This ensures those invited to do a full pitch don’t face a chorus of “you seem great but you’re not in our wheelhouse”. For example, for the first of the three planned Demo Days, founders apply by May 8th, finalists present the week of May 11th, and hear back from interested investors within seven days. For now, Fundraise From Home isn’t bringing in more or bigger investors, but it may later for vertical-specific Demo Days.
The ability to pitch and get a quick response could be especially attractive to startups that need cash to finance their sudden scale after receiving the Quarantine User Loan I discussed last week:
Due to shelter-in-place orders, it’s an easier time than ever to get users on most synchronous apps (travel, IRL events etc excluded). But the opportunity is fleeting. These users aren’t a gift. They’re a temporary loan that will have to be repaid with a usage decline when social distancing orders relax. That means apps need to do everything they can to prove their worth and boost retention, knowing they won’t keep everyone once quarantines end. If they can stay above a sustainable concurrent user count after the loan is repaid, they’ll have a chance to snowball even bigger.
Fundraise From Home is a win-win for everyone involved, especially right now with the cancellation of all the IRL industry and social events where founders and investors might meet or pitch each other. Founders get a little of the Demo Day exposure to multiple investors at once without paying equity or having to perform back-to-back Zoom pitches all day. The investors get proprietary deal flow while attracting startups that might not have had the interest or access to pitch them one-on-one.
Other approaches to unbundling the accelerator include:
On Deck, which centers around community and is basically the inverse of Fundraise From Home. On Deck charges $1,490 for its four-month program that fosters a peer network for founders and prospective founders of very early stage startups. It fuels company creation with co-founder dating and a speaker series, and while there’s no formal Demo Day, it acts as a scout for several venture funds that back it.
Founders Embassy [Disclosure: My wife Andee Constine’s company], which concentrates on unbundling the educational aspects of an accelerator. It charges cash for its two-week IRL bootcamp for international post-seed startups. Founders Embassy is designed to get foreign companies connected in Silicon Valley with five hours per day of in-person expert instruction on every aspect of entrepreneurship, though it’s running a special week-long remote program this summer.
“As with most things, competition encourages differentiation” Hoover explains. “I believe Y Combinator will continue to thrive as the leading startup accelerator, but I don’t see this space as zero sum as founders seek additional support from other investors, advisors, and programs.” University and regional accelerators duplicating YC’s model with lower quality may fall out of favor, while there could be a fresh opportunity amidst the COVID recession for programs designed to rehab stalled mid-stage startups. You could see the emergence of these programs as the logical next step after the seed fund explosion that happened a few years back.
Charity as a product sandbox
Facebook's first experiments with payments came through allowing donations back in 2013. It's a shrewd approach since no one will complain the feature is interruptive, and it gets people comfortable with a new spending behavior. Now TikTok is launching its own donation stickers that let users pay without leaving the app. Turner Novak wisely suggests could be a pre-cursor to in-video commerce. That could let creators earn money so they focus on shooting content for TikTok, and meanwhile power direct response ads where spend hasn’t dried up like brand marketing has. Instagram just launched its own donation stickers, plus food order stickers to support restaurants during lock-down. Be on the lookout for more apps conveniently using philanthropy to test powerful expansions into commerce.
Snapchat, The Compass Company
Remember crowds? And trying to friends lost within them? Ahh, the sweet nostalgia. Well Snapchat has a fun though awfully timed new feature in the works called Friend Compass. It uses your phone’s gyroscope to light up green when you’re facing towards one of your buddies. Spotted by Nick Aguirre, Snapchat confirms to me that it’s looking to widely roll out Friend Compass soon. While dedicated social mobile location sharing apps like Foursquare were once all the rage, the need for messaging to arrange meeting up means these kinds of features are likely to instead end up integrated into chat apps like Snapchat, WhatsApp, and Messenger — though Snapchat’s acquisition Zenly has made progress as a standalone social map. It even built a shelter-in-place leaderboard to gamify safety.
Deep thoughts on: Suburbanization
“The features of cities have become bugs”, my friend & artist Ronen V told me. All the reasons people have been flocking to cities for decades — to live close to work, bars, restaurants, culture venues, and events — those are all liabilities in the coronavirus age. We may see a reversal of the trend and a rise of suburbanization if the crisis stretches on for years.
Why pay higher rents for less space crowded near more potentially infected people if you can work from home and the gathering places are closed anyway? It doesn’t matter if you live 1 or 1000 miles away from friends and concerts if you only interact with them over Zoom. You could pay less and get a private backyard for grabbing some air while most everything else stays the same. And thanks to the normalization of remote work, the worst parts of suburban life are less problematic. You don’t have to commute long distances by car and brave the danger of traffic accidents. As always, the drawbacks disproportionately impact the poor, as increased distance to health care and fewer public transit options in the suburbs hinder those without spare cars or time.
But what’s most exciting, if anything is allowed to be about this crisis, is what might happen to cities in the aftermath: they become affordable playgrounds for the young again. Suburban flight could finally stem the skyrocketing rents, allowing the young, underemployed, and creative to move back in. After a decade of impending tech monoculture, could we see artists from Oakland & the Outer Bay eventually creep back towards San Francisco? Less vulnerable to the virus, more inclined towards social interaction, and unconcerned with school districts or a freshly mowed lawn, cities might refill with the people they’re best suited for, or at least become less expensive for those that can’t leave.
“Steve Jobs famously fought for a singular bathroom at Pixar HQ so workers from different departments would mix, talk, and there would be emergent culture. I often used to tell this story explaining my love for my city, joking that New York is the Pixar Bathroom of the world” Ronen told me. “Unfortunately, the germy metaphor now applies much more literally than I'd hoped.”
What to consume: The Midnight Gospel
The Midnight Gospel from Netflix is brilliant because it reimagines podcasts as cartoons.
The show takes existing podcast conversations between comedian Duncan Trussell and a range of philosophers and authors, and then sees Adventure Time’s Pendleton Ward animate them as if the discussions were happening during different psychedelic visions of the apocalypse. Sometimes the cartoons recontextualize the chat in thought-provoking ways, while sometimes they just layer absurd technicolor comedy on top to make your brain work overtime. It’s reminiscent of Spotify’s lovely Drawn & Recorded videos (the backstory of ‘Smells Like Teen Spirit’ is hilarious). I think The Midnight Gospel will inspire many more experiments with visual accompaniments for podcasts, especially since the format could unlock new audiences and monetization for the spoken word.
I’m starting my new job tomorrow as Principal and Head Of Content at VC fund SignalFire, and am honest thrilled to be starting this new learning adventure. Many of you have been incredibly kind offering your time and recommendations as I get up to speed. I just wanted to say thank you to you all, and to everyone reading this as I find my post-TechCrunch writing groove. Hit me up at joshsc [at] gmail.com with any feedback or ideas!
And your tech meme of the week
The ATMs knew…