Bonus material: What happens after the accelerator program, after the demo, after you raise the million bucks?
I wanted to look at what happens afterward for some of these ventures when all of the pieces don't come together quickly enough, and they can't raise additional funding. The story of GreenGoose seemed like a good one to examine. Founder Brian Krejcarek had been through the Betaspring accelerator in Providence, worked out of Cambridge Innovation Center, and attracted as his first investor Bill Warner, a prominent Cambridge angel investor. The company closed up shop earlier this year.
From the start of Sunday's Boston Globe column:
For Brian Krejcarek, Feb. 23, 2011, was the day every entrepreneur dreams about. He was offered a last-minute opportunity to present his product in front of a panel of investors and an audience of peers at a San Francisco conference called Launch.
At the time, Krejcarek was illicitly sleeping either under his desk at the Cambridge Innovation Center or on a mattress stashed in an air shaft of the building. Rather than paying for an apartment, he wanted to put the money into his start-up, GreenGoose. Its big idea: inexpensive wireless sensors that you could affix to any object, like a bicycle or a child?s toothbrush, to track how often it was being used. Krejcarek suggested that adults and kids might be motivated by earning points for those activities, and the company tagline was "Play Real Life Even Better."
Krejcarek's demo could not have gone better. Two investors on the panel committed $100,000 in funding for the company before he?d left the stage. The company won an award at the conference, got lots of ink, and eventually raised a little over $1 million.
Here's GreenGoose's demo at the 2011 Launch Conference, which is followed by several investors on the panel committing to put money in.
Here's a video describing GreenGoose's first product, Brush Money:
I talked with Fred Destin of Atlas Venture about the phenomenon of seed funding so many first-time entrepreneurs (Destin wasn't involved with GreenGoose, but his firm does a lot of seed rounds.)
He says, "You're trying to back crazy outliers — revolutionary ideas. It's often a winner-take-all market. When the companies make it, they tend to scale really fast. If we back a lot more unlikely ideas at seed stage, then we have to expect that more will fail, and if we're honest, failing on $1 million is a drop in the ocean."
The new approach to seed funding, Destin says, "could be a bubble, or it could be a new modus operandi where a lot of companies get funding, but a lot of them fail."
"A lot of these young starry-eyed entrepreneurs probably don't fully realize what it's going to take to get to the next level," Destin continues. "TechStars or Y Combinator is really just the first step. Our business talks a lot about failure in an academic sense: 'A lot of startups fail' is a mantra. But this is the last three years of someone's life. They feel responsible. Failure crushes some people. Not everyone escapes with a smile, unscathed."
Krejcarek says that the company spent much of the money it raised exploring different product concepts. By the time he launched Brush Monkey, there was about $200,000 left in the bank. The product wasn't simple enough for people to set up. And there was no big distribution partner putting it on store shelves and helping to promote it. "Distribution is probably one of the hardest problems for a startup to solve," he says.
"Ultimately, what we were being judged upon before we could raise more money was the ability to bring revenue in the door — to show clear traction," Krejcarek says. "By not figuring out the distribution problem, we weren't figuring out the revenue problem, and we needed to do that to raise more money."
About Scott Kirsner
Scott Kirsner was part of the team that launched Boston.com in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.
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December 9: Web Innovators Group
Demos of new mobile apps and web ventures at the Royal Sonesta Hotel in Cambridge. Free admission; cash bar.
December 10: Fintech Demo Day
Short demos from startups in the financial technology realm.
December 11: Unpitch
Entrepreneurs and investors sit down for lunch, advice, and feedback. Entrepreneurs must apply to participate.