The University of Michigan’s Desai Accelerator, an incubator open to early-stage tech startups regardless of their connection to the school, hit a major milestone this year: It invested its millionth dollar after funding the six companies in its 2018 cohort.
The accelerator, a joint initiative between the Zell Lurie Institute for Entrepreneurial Studies at the university’s business school and the College of Engineering’s Center for Entrepreneurship, was established in 2013 with support from the Desai Sethi Family Foundation, the Davidson Foundation, the Wadhams family, and the Michigan Economic Development Corporation. The program runs for three months during the summer and provides each participating company with assistance from mentors and interns, office space in downtown Ann Arbor, and an investment of up to $50,000 each.
With more than 20 startups in its portfolio, Desai managing director Angela Kujava says the program has learned a lot throughout the past five years.
“After the first three cohorts, we got some data back regarding how to improve the experience for our startups,” she explains. “We found that both mentors and companies wanted a longer-term engagement and to have consistency in collaborating.”
Kujava says that those revelations were a learning experience for the program. Desai thought by providing connections through rapid-fire, speed dating-style mentor introductions, it was creating a “network effect” that students would find valuable. However, portfolio companies wanted a longer-term relationship with their mentors, so Desai switched to a “lean mentorship model,” matching companies to mentors based on their work and personalities.
“That has worked out really well,” Kujava says. “We didn’t want to completely eliminate the network effect—we have over 150 mentors—so we made introductions but left the onus on the companies and mentors themselves to build the relationship.”
Another change the accelerator has made recently is to create a post-accelerator program to build on momentum participants gain while at Desai. Kujava says there were a number of factors that went into that decision, but one of the biggest was challenges program alumni have finding mid-stage or follow-on funding.
“Early-stage venture capitalists are making larger investments in fewer companies—even the companies doing well in our portfolio are affected,” she says. Desai has built a robust group over the years, where company founders continue to stay in touch on the accelerator’s Slack channel, she adds. “We have a real community here that we’re trying to serve meaningfully.”
New in 2019 will be a CEO master class, which the accelerator piloted it this year with Ann Arbor SPARK and Arbor Dakota Strategies. Twelve CEOs participated in the six-week, invitation-only class led by Arbor Dakota CEO Ted Dacko, who ran HealthMedia before it was acquired by Johnson & Johnson (NYSE: [[ticker:JNJ]]) in 2008.
“How can an early-stage CEO become the CEO of a high-growth company?” Kujava says of the motivation behind creating the master class. “What does that look like, what kind of changes do they need to prepare for?”
Next year, Desai will also increase the number of interns on staff. The accelerator recruits, manages, and pays a multidisciplinary staff of U-M student interns who do “80 to 90 percent” of their work for startups going through the program. The companies submit projects they need help with, and Desai assigns them an intern.
“Startups always need extra hands, but there’s no money,” Kujava says. “By us managing the interns, the companies are able to get more done.”
Kujava describes participant recruitment as one of Desai’s biggest ongoing challenges. “We don’t have the density of the Bay Area or New York City, so we have to dig a little deeper,” she says.
Some program alumni are already making waves. Ash & Erie, a Detroit-based online retailer selling clothes for “shorter guys”—one of the models featured on its website is retired professional basketball player Muggsy Bogues, famous for making a go of it despite his 5′ 3″ stature—appeared on Shark Tank and won an investment from Mark Cuban. MySwimPro, an app that offers custom workouts, training plans, and coaching, was named the Apple Watch app of the year in 2016.
While Desai might tweak or expand its programming, the essentials are staying the same for now, she says, although she hints that more significant changes might be coming in the future.
“We have proven our model works, and now we’re preparing to take on bigger challenges. 2020 will begin to look very different for the Desai Accelerator, and we’re very excited about it.”
The Desai Accelerator is currently accepting applications for its 2019 cohort; click here to apply.
