Posts from DreamIt Ventures

Financing Options: Contests/Prizes/Accelerator Programs

This is the second in a series of posts about financing options for startups. By "financing" I mean obtaining cash to fund your business. There are all sorts of strategies to avoid needing funding, but this series is not about them.

I did not have this option in my original list but it was suggested so many times in the comments that I added it. This is an option that has become a lot more available to entrepreneurs in recent years. There are so many programs out there that target entrepreneurs where the winner(s) is/are awarded cash prizes or small equity investments.

The accelerator programs are probably best known to this audience. TechStars, Seedcamp, DreamIT, Startl, SeedStart, ER Accelerator, and the Fintech program are all active in NYC. Y Combinator is the pioneer of this kind of program. And there are similar programs all over the country now. These programs will require you and your founding team to relocate to a set location for around three months and participate in a program. The equity investment varies but is generally in the range of $25,000 to $30,000. The equity you will give up for this cash is usually in the range of 5-6%.

I believe the accelerator programs are excellent for teams that are just getting started and that have not had a lot of startup experience. The money is usually sufficient to fund the founding team for the three month program and often can last a bit longer. But the biggest value comes from the mentoring and the opportunity to pitch to a large group of angel investors on the last day of the program.

Contests and prizes have been around for a lot longer but there has also been an explosion of them in recent years. One of my favorite is the NYC Big Apps contest where developers compete to build the best app that uses data from the NYC open data project. The winning team gets a prize of $10,000 with no equity dilution (total prizes are $40,000). The winners of NYC Big Apps the past two years have gone on to create real businesses with funding and user traction.

The company that coordinates NYC Big Apps is called ChallengePost. They coordinate many of these contest/prize programs. When I visited ChallengePost just now, I learned that Lollapalooza is running a contest to create apps for concerts. There are $5000 of prizes available.  There is stuff like this going on all the time.

I just participated in the judging of the Disrupt NYC contest. The winner Getaround recieved a check for $50,000. Again there is no equity dilution for that cash.

You are not likely to fund your business all the way to cash flow breakeven on the money you get from an accelerator program or winning a contest (although I'm sure someone has done it). Funding startups is like climbing the stairs. You have to go up the first stair to get to the second one. These kinds of events/programs can be a great first or second stair for an entrepreneur. It can give you the money (and connections) you need to get going and get somewhere and set yourself up for the next funding source. And we will continue next week with the next post in this series.

#MBA Mondays

Startl Design Boost and Startl Accelerator

Startl is a very interesting new project based here in NYC. It's a startup accelerator (like Y Combinator, TechStars, Seedcamp, etc) but focused entirely on entrepreneurs working in education. It's a non-profit backed by the Hewlett, MacArthur, and Gates foundations which is quite a collection if you ask me. 

Another thing that makes Startl interesting is the partnerships it has with IDEO, DreamIT Ventures, and Berkeley & Noyes (leading investment bankers in education).

Startl has two programs that anyone working on "hacking education" should be interested in:

Design Boost is a five day bootcamp here in NYC from March 15th to 19th. This first Design Boost will focus on the design of mobile apps for learning and will feature designers from IDEO who will help the selected teams with their design and development process. Up to 15 teams will be selected for Design Boost. Details on how to apply are here. The application deadline for Design Boost is February 22nd.

Accelerator is part of the DreamIT Ventures summer program in Philadelphia from May to August. Startl will select five "learning companies" to participate in the regular DreamIT Ventures program. Details on how to apply are here. The application deadline for Accelerator is March 15th.

Startl was started by two friends of mine and our firm, Diana Rhoten and Laurie Racine, and their colleague Phoenix Wang. We've known Diana and Laurie for a long time, they are committed to the concept that the innovation/startup world can have a big social impact, particularly on education. I am excited by their work on Startl and hope that some of you will apply and take advantage of these two programs.

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#VC & Technology