Running an accelerator that does not promise funding or trot out its startups to woo backers may sound nuts—or maybe it’s a strategy to differentiate a program in a crowded scene.
Edward M. Zimmerman, founder of New York-based First Growth Venture Network, says his four-year-old accelerator might not generate the buzz of other organizations, but he believes the approach puts the focus more on collegial spirit among the startups and less on competition. (Some might question whether this is technically an accelerator or an incubator though.)
The First Growth program, typically held each spring and fall, helps sharpen the ideas of early-stage startups that have not raised more than $ 1 million in outside funding. The companies get guidance from advisors (such as angel investors, executives, and serial entrepreneurs) and a chance to build up their connections—but without receiving funding, giving up equity, or working towards a demo day. Though the program is based in New York, startups from as far as Boston, Chicago, Paris, and London have participated. Notable alumni of the accelerator include BirchBox, FanBridge, and ChallengePost.
Though the decision to nix demo days was made at the birth of First Growth—back when accelerators were few and far between in New York—the decision has helped First Growth maintain its identity as more programs fill this city. “If you are the 17th accelerator to be started for tech companies in New York, why would want to do a demo day?” Zimmerman asks. “How many colas does the market need when Coke and Pepsi are pretty good?”
The de-emphasis on making money also helps set First Growth apart, says Zimmerman, who is also an angel investor and chairman of the tech group at law firm Lowenstein Sandler. “If you help people with no strings attached, you will reap some rewards,” he says. About 70 percent of the startups in First Growth’s prior classes, Zimmerman says, went on to raise funding, and several have had exits.
Eschewing the demo day process and not immediately announcing the startups they have worked with has, for better or worse, kept First Growth off the radar for many. “We sorely miss out on publicity as a result,” Zimmerman says. However, he says that companies at such an early stage tend to shift direction and the stealth-mode approach lets them make changes without overwhelming scrutiny. “They don’t have to live down the first statements they make to the world about who they are,” he says.
By not hosting a demo day, First Growth also believes it steers startups away from becoming rivals with each other for financing. “When we had Birchbox, BaubleBar, and Moda Operandi, three fashion e-commerce companies in New York with female co-founders, they never competed with one another because they did not raise funds at the same time,” Zimmerman says. (Birchbox and BaubleBar later got funding from Accel Partners, though at different times, he says.)
Much like other accelerators, First Growth does see its share of trends, such as fashion tech, that attract flurries of startups. “Last year we ended up with a lot of companies trying to solve the all-important problem of ‘My ass doesn’t look good in these jeans,’” Zimmerman says. He suspects that First Growth will be more choosy in the future regarding startups pursuing similar ideas.
Zimmerman says he expects renewed interest in financial services technology among startups in New York. Alums of First Growth in that sector include mobile payment platform Venmo, which was acquired last August by Braintree; OpenFin, whose platform lets financial providers offer apps on different devices; and PayPerks, which offers a rewards program in conjunction with financial services products.
Part of First Growth’s goal is to strengthen connections between early investors and startups, while making fundraising less of a priority. Zimmerman sees some not-so-positive disruption happening in the angel investing scene. “More people can participate in seed funding,” he says. “The relationships between investors and the companies can be so much weaker than they used to be.”
In prior years, it was much harder to get seed backing, he says. Online platforms such as crowdfunding, he says, offer some startups a way to raise a bit of early scratch—but not necessarily with the acumen of angel investors. “There are equity analogues to Kickstarter,” Zimmerman says, though the regulatory red tape has not yet been removed. “It will be interesting, a few years from now, if those investors feel they’ve been defrauded or if those investors pose problems during an exit,” he says.
