I want to say this up front. All I wanted to do when I started Hackers & Founders three years ago was get together with other geeks that were founding startups. I had zero intention of Hackers & Founders taking on another form, much less an incubator. It just kinda happened.
Why did we do this? Because we got really tired of seeing amazing young startups flounder and die. So, we decided to do whatever we could to help. And, on the suggestion of a couple prominent angels in the Valley, we decided to start a new kind of incubator focused on helping founders help each other succeed.
Introducing The Co-op, Hackers & Founders’ take on incubation.
What does an incubator generally provide? If you’re lucky, food. Also, access to a network of mentors and advisers, introductions to investors and some type of cash for equity deal.
Well, The Co-op, like Hackers & Founders, is completely boot strapped, so we have no cash to give, but three out of four ain’t bad.
The basic model for The Co-op is this:
Founders in The Co-op get together for weekly dinners where they listen to speakers and mentors and become a community. We strongly encourage our founders to become advisors in each other’s companies by trading small (0.25% to 0.5%) equity stakes. Doing this gives Co-op founders a financial incentive to help each other succeed. It also diversifies each founder’s sweat equity portfolio. Hackers & Founders then becomes an advisor to the startups in The Co-op and, in future sessions, we’ll ask for an advisory stake as well.
After working together on things like learning how to pitch and present, as well as the ropes of funding, we connect the founders with the investment community. We set up office hours with a prominent angel in the community. We are scouts on AngelList and can connect startups that way as well as through personal introductions. We’ve also been happy to introduce founders to other incubators like IO Ventures and 500 Startups’ Accelerator program if the individual founders feel like it makes sense for them.
Towards the end of the program, rather than ask investors to sit through an afternoon of speakers and pitches for Demo Day, we make short video pitches for investors to view online. Then we throw a party in honor of our startups and invite investors to come and meet the founders in person. This Thursday is our first Not-a-Demo-Day party. Skip to the bottom of this post for details.
So how did Hackers & Founders go from being just a meetup to boot strapping an incubator? It’s a bit of a long story.
I moved to Silicon Valley four years ago with the idea that I was going to become a serial entrepreneur. I harbored few illusions that I was going to have a home run exit right away. Instead, I planned from the outset to boot strap a series of companies until I got to product/market fit. Because of what I’d read about the failure rate of new startups, I planned on starting at least 10 companies over the course of ten to fifteen years. I planned for some startups to potentially fail but with the idea of learning as much as possible and rolling that over into the next company.
To help me along that process my wife and cofounder, Laura, suggested that I do something to connect with others doing similar things. So, I started the first Hackers & Founders meetup as a way to connect and learn from other geeks who were working on startups.
The first Hackers & Founders meeting was 4 guys in a bar geeking out about lisp, erlang, python, articles we’d read on Hacker News and how to change the world through our startups. Ever since then, we’ve been meeting every two weeks and we have expanded to San Francisco and Berkeley.
Hackers & Founders Silicon Valley’s numbers have increased over the last three years. Four members became over 3,300 members. As we grew, new opportunities came along for us to host great speakers and hackathons as well as to collaborate with other organizers in Silicon Valley’s early startup community.
I also reached out to organizers in other parts of the world that were organizing hacker/startup meetups. Out of conversations with those people, a network of 7 other Hackers & Founders chapters have started across the globe, totaling over 7,000 members.
Since its beginnings, Hackers & Founders has been a magnet for the stereotypical two guys/gals in a garage working on their startup. Our events also function as a port of entry for founders and startups moving to Silicon Valley who want to be a part of the startup scene.
Over the years, I’ve met a lot of amazing hackers building startups that weren’t successful. They struggled to get access to seed capital and to build Silicon Valley connections to the people who could really help them. Once a founder received seed funding, rolodexes opened and the founders were able to make connections and build relationships to help their business succeed. It’s your classic Catch-22. You need funding to get connected but you need to be connected to get funding. This has always frustrated me because it seems insanely inefficient and largely dependent on random connections.
We’ve noticed a lot of other problems with the ecosystem for early stage startups in Silicon Valley over the past few years. For example, I am convinced the most valuable thing in Silicon Valley is its culture. But it takes far too long for arriving founders to get oriented and enculturated to the unwritten rules of Silicon Valley, for example like how to manage introductions. It takes too long for founders to build up a useful network and personal board of startup advisors. Not to mention that it takes too long for founders to figure out where Silicon Valley actually is located, what it is and how to locate resources. It takes too long to figure out what investor to pitch with one’s startup. Too often, founders learn through trial and error by pitching a mobile app to a VC firm with a $1 Billion fund that only focuses on Bio/Green Tech. There is a boom in interest about startups and entrepreneurship in Silicon Valley as well as around the world, and but there aren’t enough mentors to go around.
Adam Rifkin, a founder who has been helping entrepreneurs in the Valley through his 106 Miles community for the last eight years said it best. We promise the entire world that Silicon Valley is the best place to build your startup. But once a founder moves here, we expect that founder to figure out everything on his or her own.
Incubators address these problems in the ecosystem and charge at least 6% for packaged solutions. If a founder doesn’t immediately stand out among the thousands of applications or prove their worth in a ten minute interview, what options do those founders have aside from applying to another incubator or boot strapping and hoping for the best?
I’ve met a lot of amazing people through Hackers & Founders, a point that was driven home after reading Business Week’s 2011 “Best Young Tech Entrepreneurs" three months ago. I personally knew six out of those 25 entrepreneurs from meeting them at Hackers & Founders. Despite that, the most compelling founders that I’ve come across at Hackers & Founders are the people who despite being turned down by incubators, still put everything on the line and moved to Silicon Valley to give their company every chance at success. Two of those startups are in the alpha session for The Co-op.
This winter, we got fed up with seeing talented founders struggle and watching their companies die. So, even though our own startup, a financial news search engine was showing a lot of promise and our own traffic was doubling every six weeks, we decided to put our own startup plans on hold to do whatever we could to fix some of the systemic problems we saw in Silicon Valley. After talking to a number of advisors like Adam Rifkin and Naval Ravikant, we decided to create systems to help founders help each other.
That was the genesis of The Co-op.
We’ve learned in hosting Hackers & Founders events for years that we as individuals don’t scale. We are happy to try to help individual founders succeed but as much as we enjoy getting together for coffee and helping founders one at a time, it is very time consuming and it was too easy to spread ourselves too thin. We needed to find a way to take ourselves out of the middle of the process and decentralize.
The Co-op is based on the premise that a select group of founders can provide a lot of the benefit of a traditional incubator to each other by getting together for dinner once a week. We emphasize cooperation by encouraging founders to become advisors in their fellow Co-op companies. Then through Hackers & Founders, we can leverage our network to provide connections to mentors, investors, speakers, other incubators, education or whatever is needed. It’s a model we hope will scale, not simply within Silicon Valley, but to other chapters worldwide.
Two months ago, we trialed an alpha version of The Co-op model with six startups to see if it would work. And, we’re really excited about the results. Before our Not-a-Demo-Day, all six startups in The Co-op raised at least seed funding. Four of the six companies have revenue from paying customers while the other two are seeing substantial traction in user growth and partnerships.
To celebrate, our Not-a-Demo-Day party occurs this Thursday, June 16 in San Francisco. We are hosting a Scotch tasting in honor of the six startups that participated in The Co-op: Browserling, Codeeval, Pieceable, Tripping, VidCaster and Zerply. You can look at videos of their pitches on Hackersandfounders.tv.
Our Plans.
So where do we go from here? We hope to keep iterating on The Co-op model, work out the bugs and start another session soon. Boot strapping an incubator has been a bizarre and difficult experience, but we are passionate about startups. We’re absolutely dedicated to do the right thing for founders, and if boot strapping is what it takes to fix the problems that we see in the early ecosystem in Silicon Valley, that's what we'll do.
Apart from The Co-op, we want to build solutions for other problems we see founders encounter at the early stages. We want to build a support and advice system for boot strapping founders as they iterate through products. We want to provide better and easier access to education and mentors. We want to segment our Hackers & Founders events to help develop stronger bio, hardware, green, health, mobile and web communities. We want to help potential cofounders to find each other. We want to create a startup wiki that explains a lot of the unwritten rules of Silicon Valley.
In short, we want to help as many founders as possible to build great companies, increasing the number of businesses and jobs in the Valley and elsewhere. Then we want to assist founders to do it again and become amazing serial entrepreneurs.
Finally, we owe a huge debt of gratitude to Microsoft BizSpark, and especially Brett Laffel and Joel Franusic, BizSpark evangelists. Not only did they sponsor the costs of the weekly dinners and our Not-a-Demo-Day celebration, but they participated in our weekly dinners, taking a real interest in our people. They’ve helped us in every way they could from providing introductions to investors, connections to people in the press, and making arrangements with venues. The Hackers & Founders Co-op would have not have been possible without their support. Thank you.
And, if you’re an investor and like Scotch tastings or startups, email us with a link to your AngelList profile, CrunchBase Bio, VC Bio or Linked in profile at ilikescotch@hackersandfounders.com. We’d love to send you an invitation for our Not-a-Demo-Day party happening on Thursday, June 16 at 7:00 pm.
