Posts from Seedcamp

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.

I had the pleasure of spending all day yesterday, from 9am to 6pm, listening to pitches from the finalists selected out of the mini seedcamps from all over europe this year. Seedcamp is Europe's premier startup accelerator. It is like Y Combinator, Techstars, Seedstart, and many other programs of this sort. Like Techstars, Seedcamp heavily emphasizes mentors and mentoring. It is a big part of the value proposition of going through the Seedcamp process.

I am not going to talk about the companies/pitches I liked best right now. But I will say that I came away with three interesting opportunities (out of about 20 pitches I saw). That is a good percentage. In talking to the other judges (there were about a dozen judges), there were another handful of companies that others took an interest in. So almost half of the presenting companies interested at least one or more judges in taking a closer look. That is a great percentage.

The thing that is most interesting about Seedcamp is that it selects teams from all over Europe and Israel (and now South Africa). They do mini seedcamps in Zagreb, Prague, Barcelona, Paris, Tel Aviv, Copenhagen, Berlin, Lodon, and they just added one in Johannesburg South Africa in a couple weeks (Aug 11th). This allows Seedcamp to find teams that might not fly to London on a whim but will travel to a regional hub to see if their project is interesting to Seedcamp.

I was particularly impressed with the quality of the teams coming out of places like Zagreb and Prague. Eastern Europe, from Ljubljana to Tallinn and everywhere in between, contains a ton of smart entrepreneurial technologists looking to build businesses on the web and on mobile devices. I am not going to leave NYC and focus on this emerging market but someone should. It is ripe.

Kudos to Saul Klein and Reshma Sohoni for creating and building Seedcamp. It is building an ecosystem, slowly but surely, throughout Europe and other emerging technology markets that I believe will result in new vitality to startups in this part of the world.

The Seedcamp finalists for 2010 will assemble in London for Seedcamp Week this September. If you are in the VC business and want to see what is going on in Europe firsthand, Seedcamp Week is a great place to start.

Related articles by Zemanta

• Seedcamp Goes Global, Announces Mini Seedcamp in South Africa (readwriteweb.com)
• European Accelerator Seedcamp Recruits African Startups (socialentrepreneurship.change.org)
• Seedcamp Johannesburg (seedcamp.com)
• Seedcamp Announces a Sizzling slate of Startups for Mini Seedcamp London (seedcamp.com)
• Mini Seedcamp: highlighting Europe's young digital entrepreneurs (guardian.co.uk)