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Did you know that accelerators are heading for a shake out? We’ve talked a lot incubators, accelerators and cyclotrons. And the proliferation of the accelerator model is generally positive, it started me thinking about a possibility for slightly different model. One that Kevin Swan Follow @kevin_swan posted an insightful comment on the talent shortage for Canadian startups. I don’t think I’m the first to propose this, but it starts to make sense. Incubators/accelerators don’t need to only hasten the formation, creation and ideation of companies. They are fertile grounds to accelerate people. And it’s not just incubators and accelerators, companies participate in HackDays to find talent.
Need proof?
Vuru acquired by Wave Accounting
Vuru founders Cameron Howieson and Yoseph West reached out to the Wave Accounting team for advice on building a free, web-based financial services tool. Over time, the two companies traded notes as Wave took on a an informal advisory role, and that led to a sense that Vuru’s talent and direction were something that would be well suited to the Wave Accounting mission. — Darrell Ethrington, Aug 21, 2012 in BetaKit
Vuru was a 2 cofounder team in the FounderFuel (full disclosure: I am mentor in FounderFuel and I now employed by Wave Accounting investor OMERS Ventures). They were building a “investment tracking tools aimed at managing personal finance, which is not something Wave currently offer[ed]”. It was a great fit, a team that had the entrepreneurial culture to make a difference at Wave and a product that filled a known product roadmap gap.
Algo Anyhere acquired by 500px
Ok, before Zach Aysan slaps me for being totally incorrect. AlgoAnywhere was not in an incubator or accelerator program. But they had raised a seed round and were building very interesting technology.
The 500px founders met Algo Anywhere at their Pixel Hack Day last year, and were impressed by what the team brought to the table. Algo Anywhere’s tech was originally intended to be sold on an SaaS basis, providing companies with the data crunching power of sophisticated recommendation algorithms, without the need for those to be developed in-house or hosted on a company’s own servers – Darrell Ethrington, July 9, 2012 in BetaKit
The interesting point here isn’t about incubators or accelerators. It’s about founders of early-stage companies looking for relationships and gaps in the market left by other players.
Pulpfingers acquired by 500px
It seems that 500px has been strategically acquiring companies. It looks like both Pulpfingers and Algo Anywhere were part of the PixelHackDay (see photo from TechCrunch). Which gives 500px access to see designers, developers working in their domain space. It’s a great way to round out the product roadmap, Pulpfingers was a iOS discovery application. And they aren’t alone. Hootsuite acquired Seesmic and Swift.
Built to Last versus Built to Flip
I’m not arguing that founders should be looking to build companies to flip. There is lots of conversation about building lasting value. I’m arguing that companies that have raised capital to scale are looking for alternative methods to acquire talent. Get access to the API, build a meaningful service, acquire shared customers and go forward, it’s Biz Dev 2.0 (as Caterina described back in 2006). What’s new to the game for Canada (well Canadian startups) is that for the first time since RIM we are starting to have web startups that are reaching scale and are able to acquire talent, teams and companies. The goal isn’t to look for a acqui-hire or a manquisition, but to look at where working with an existing company or API gives you immediate access to distribution or monetization that you might have to work harder to build on your own.
I’m betting that companies like Wave Accounting, 500px, Influitive, Hootsuite, Shopify,Freshbooks, Top Hat Monocle, Wattpad, Upverter, Chango, Fixmo, Desire2Learn, Lightspeed are all actively looking for teams that are building on their APIs or filling product gaps (it becomes a buy versus build decision).
If I was a developer or looking to get into an incubator program, I’d start looking at the hackathons and APIs that are aligned with my vision where I could accelerate customer adoption.
Events
- Ruby Hack Night
- HackDays
- Get Your Bot On!
- Hacking Health
- AngelHackTO
- Pixel Hack Day
- Hackasaurus
- Hack/Reduce
- HackLab.TO
APIs and Developer Starting Points
- Wattpad API
- Yellow API
- 500px
- Freshbooks
- Wave Accounting
- Shopify
- Influitive GitHub
- Upverter GitHub
- TinEye Commercial API
- Top Hat Monocle GitHub
- Hootsuite API
- Hopper GitHub
- Unbounce API
Find an API (be it local or otherwise) that aligns with your vertical, figure out if you can solve one of your immediate challenges (like distribution and customer acquisition). Maybe strike up a conversation with the product teams at shop. But build something that delights customers and users! Go! Now!
Who has something built on one of the above APIs?
This doesn’t even take into consideration larger distribution and APIs like WordPress or Facebook or Google or Twitter. And a broader conversation about the risks of building on someone elses API.
What are you suggesting? That accelerators are fertile grounds for acqui-hires? Gotta say, from where we sit in FounderFuel, that is not the goal
That is what I’m suggesting. Not suggesting that it should be the goal. But for many in the incubator side, doing early biz dev using existing APIs to solve immediate customer needs or validation, may present the opportunity for a potential exit.
That would be a plan B in my books. In some cases it makes sense. And obviously we have direct experience on the vuru, wave transaction. But we are going through the labour of love that is running a World class accelerator program in order to build sustainable companies. For sure, few get there. But that’s the goal!
As an investment thesis it makes sens that can’t possibly what is the goal. It would defeat the probability of aiming outrageous (I so want to use a Spaceballs we’ve gone to plaid reference).
My thought was that bigger scaling companies would start to look at incubators for talent. Not the other way.
Agreed. I was thinking from the other side. If I’m scaling and I’m needing refinement on my roadmap, I’d start to look for developers and startups to acquire.
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I agree with @startupcfo:disqus I agree with The last thing you want is for the mentality to form in Canada that incubators & accelerators are just opportunities to jump ship to other bigger companies.
I think there is a huge pool of untapped talent at universities graduate schools. I can speak from experience when I say that many hardworking and smart individuals with Master or PhDs in different fields are looking for new opportunities. Usually the University doesn’t do a good job in directing them to alternative careers and they don’t get sought after by companies outside of their fields of studies. The big challenge is connecting the different ecosystems within the same city.
I agree with you on the talent and that is something I am working on from inside the University of Toronto. There is both talent and really good ideas/technology being worked on inside of Universities in general.
This is an age old trend just repeating itself. All during the 1980’s and 1990’s big technology companies – IBM, HP, Nortel(remember them?) went out to market and bought many smaller consultancy firms – not for their technology, FOR their talent. The SAP consultancy market in North America was built this way – Deloitte, IBM,, CAP G, PWC etc. all acquired many smaller regional firms and combined them to get to the size they are today.
I think I started upside down. Started with the incubators. I probably should have started with the scaling companies.
If you are doing product development at a big scaling company, have you checked out who is using your APIs or who is doing work in your vertical at the incubators. They might be a great target for acquisition. Check it out folks like @500px:twitter and @waveaccounting:twitter and @hootsuite:twitter are already buying companies that offer talent or products that accelerate their roadmaps. Who can you buy to go faster? Complete your roadmap? Get customers that need a complete product suite like yours?
Yep, there was a second later stage of rollups like Razorfish. And it seems to be a similar approach that Dachis Group is using around “social business” consultancies.
It could be very dangerous for companies to be using their API’s in that way. I look to the companies like Salesforce.com that truly built ecosystems around their product and thus became a platform. In their early stages they made investments in promising app developers instead of buying them out and bringing them into the monolith. Later they started buying up companies like Radian6 and Assistly to build out a larger social enterprise strategy, but from what I’ve heard they are still struggling to integrate them. Meanwhile, there are a lot of great apps on the AppExchange built by external companies that add a lot of value to Salesforce’s proposition, versus for example Oracle CRMOD or SAP.
great to hear. There is amazing research happening inside the universities but in many cases they live in a bubble. This is dependant on the different departments and fields of studies. For instance, in the biological/medical science research field, there are more than a few highly educated and hardworking individuals who would fit in a startup environment very well if the right opportunity comes. More work needs to be done to bridge the ‘academic’ world to the ‘startup’ world in Toronto. Some places such as Ryerson University are doing a good job with projects such as Ryerson Digital Zone.
I think that is a great strategy for scaling companies and is great way to support the ecosystem.
Shopify also picked up Select Start last year for their mobile team. These teams all had one thing in common, they had all developed a product, pushed it out to customers and were savvy on how they worked with partners and mentors.
Amazing, it’s like rocket science.
In the last iteration of Bookneto, we built something with the Desire2Learn API. Never ended up launching it + we had to sign a commitment to pay for access to the API. Also, they eventually ended up filling the gap we were trying to help them with and we were declared competitive. It was an amazing API to work with though.
I guess the lesson here is it really depends on how the company sees startups within its product ecosystem. Product guys in some of these scaled companies get it. The business guys, not so much.
At Microsoft, the product teams had way more power on acquisitions. Ultimately things were handled by corp dev, but if the product teams drove the conversation. I’ve heard the same things about teams at the $GOOG.
I think using the API to build a great experience is like table stakes, it’s what you need to do at a minimum to get in. I used to call it “paying taxes”, help me do the things I need to accomplish my goals. And I’ll find ways to get you access to new programs, meetings with product teams, as long as we are working together.