22 November 2011
18 September 2011
THE FIRST FIVE YEARS: KNOWING WHEN TO PIVOT
by Eric Mathews, co-founder of Seed Hatchery and LaunchMemphis
Brad Feld, co-founder of TechStars, stated 'that in order for a community to transform its entrepreneurial ecosystem six people need to work tirelessly without stopping or being distracted for twenty years'.
I agree. I'm one of these people for Memphis, TN. I'm a quarter of the way in.
Five years ago on August 31st, 2006 I left my job to chart a new course for entrepreneurship in Memphis. Like all entrepreneurial journeys mine started with a problem. I saw a lot of great technologies being built in our community (universities, etc.), but I could count the number of tech startups on one hand. My working hypothesis was if we coupled the founders with small amounts of capital and experienced mentors, we would have more tech startups in Memphis.
I was armed with neither experience nor capital. For any entrepreneur this is not a problem (or so the story is told). So, I found an experienced partner and we set out to raise the money. It turned out that no one would fund us, so we decided to forget the money and bootstrap. That same year TechStars got its start and so did our entrepreneurial "accelerator" Mercury Technology Labs (disclaimer: it was not cohort based).
Mercury Technology Labs was a tough effort made tougher by the fact that we were in Memphis. To give a little context, when we started there was one incubator and there were three venture capital funds that wouldn't touch early stage tech deals, especially ones in Memphis. There was no angel network. If you were an entrepreneur and wanted incubation, you needed to pay the rent at the incubator. If you needed seed/angel money, good luck. It was not very vibrant.
Our portfolio at the time consisted of three tech startups. Bootstrapping meant operating out of cafes. Thankfully, we were able to get their products to market with some sales, though eventually all but one failed. It wasn't a bad start those first six months, but it was too much of a grind. We realized we would be unsustainable long-term unless we worked to change our community's entrepreneurial infrastructure and culture. If our goal was to increase tech deal flow, it meant we would have to invest our time and energy in new ways.
We had to pivot.
1. Space for Startups to Grow
We needed enough space to enable us to create value faster and make our teams more productive. In 2007, within our local incubator we built the Launchpad, a 1200 sq. ft. co-working space for digital nomads, hackers, and founders. To this day we still charge no money to use this risk-oriented space.
The point is to lower the economic barrier to entry for incubation to be zero dollars. Founders can use the space 24/7, create value, and exchange knowledge and feedback with peer startups going through similar points of pain. Instead of paying for incubator rent (or five overpriced coffees a day), the founders can invest in product development and marketing.
That wasn't enough.
2. Founder Connectivity and Risk Culture
In 2008, we started LaunchMemphis. In five months what started as a community based project became the in-demand source for the dynamic innovation economy programming we saw in other cities -- such things as Startup Weekend, Ignite Nights, Pitch Competitions and more. LaunchMemphis (501c3), reaches out to the invisible potential entrepreneurs of our community and gives them a chance to 'try-on' entrepreneurship and get early feedback on their startups.
Now more potential founders were entering the system and quality of deals began to improve. Others started to take notice. In 2009, the State of Tennessee turned to us to help share our knowledge in ecosystem development to other parts of the Tennessee. This increased our connectivity to peers across the State and elevated our local startups to a higher platform. We now have connections to incubators, investors, and founders across the State and region.
The next year, with a change of mayorship in Memphis, the opportunity seemed right to start changing minds on the home front. In 2010, we reached out to local civic leaders and helped them re-position their economic development strategies to bring focus to entrepreneurship, as differentiated from small business. Now entrepreneurship on a state and local level is a top priority and money is heading towards our work and that of our peers.
The icing on the cake came this year.
You know you are on to something when external investors begin to enter your local startup scene. In 2011, Solidus Company, a venture capital firm in Nashville, invested capital to fund Seed Hatchery, our mentorship driven seed accelerator. We gave the six teams of our inaugural cohort, money, mentors, and milestones in the form of a 90-day marine-style bootcamp for entrepreneurs (think TechStars). The teams are now selling to customers and finding follow-on investors.
It has been a tough yet rewarding five years. Looking back most people won't see the mountain of failures and false starts under my watch, but they were all necessary to get to this day. Both the successes (we had some along the way) and failures were worthy work and will continue to be. To my many collaborators over the years, thank you for diving in and investing … but let me remind you we still have 15 more years ahead -- or at least I do.
I don't know what the next five years will bring, but I know the work is far from done in Memphis, TN.