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Patrick  Blake

Disrupting The Disruptors

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Harvard’s Clayton Christensen caused a major, if not tsunamic wave to wash across the shores of industry with his book The Innovator’s dilemma. Though published over fifteen years ago, the concept of “Disruptive Technologies” is more pertinent than ever - especially when it comes to the field of Startup or Venture investing

Starting in 2007 a company called Y Combinator launched a new version of the accelerator model (pioneered by a Palo Alto real estate-based technology accelerator company called Plug and Play i.e. Pay Pal). I call this new Startup Accelerator model "The Immersive Accelerator Model". My contention is that this new Immersive Model is dropping large loads of “Disruption” on the finely manicured back yards of the entrepreneur community.

What we are looking at is the exact process predicted by Mr. Christensen. The epic irony is that this “Disruption” is affecting everyone involved in the Startup field including, not only entrepreneurs, but their services vendors, consultants, early stage capital firms, angel investors, angel groups and especially venture capitalists who have all made their living from “Disruption”. Now they are falling victim to it. The disruptors are being disrupted!

The incumbent processes previously used to conceive, found, circulate, identify, value and fund early stage companies are changing radically – and now those who have used the old processes successfully must adapt or perish.

Until recently, a would-be entrepreneur would, through talent, inspiration and hard work, find a new and exciting way to create a competitive advantage in a market where they had expertise. Hopefully, If productized correctly and brought to market well, the competitive advantage could create a new and sizable addressable market. If this new addressable market was predatory to an existing market with incumbent leading companies – the competitive advantage of this new company would certainly be deemed “disruptive”.

Traditionally, IT entrepreneurs started out hedging their bets relative to the opportunity costs they faced if their new enterprise failed? Did Mark Zuckerberg quit Harvard first, then code the initial version of “The Facebook”? The CEO of Saleforce.com, Mark Benioff, (according to Wikipedia) spent 13 years in a variety of executive positions in sales, marketing, and product development. At 23, he was named Oracle's Rookie of the Year and three years later he was promoted to vice president, the company's youngest person to hold that title. If he had not been successful with his Startup, was he going to be unemployed for very long? Not too likely….

As a kid, I remember Evil Knevil jumping all those busses on his motorcycle. Often, he executed perfectly - but there were also those times that resulted in him breaking nearly every bone in his body.

 

Here is the point:

Now, almost like American Idol, 1,000’s apply and many audition or pitch to the decision makers at ”Immersive" Accelerator Programs. This model requires you fit a mold that enables you to quit whatever you are doing, move and focus 100% on your project for 3+ months until you demo your product to potential investor on a stage – again, much like American Idol.

In the traditional model, entrepreneurs could limit the opportunity cost of starting a new business, but in this model you are deciding to head for the ramp at full speed and see if you can clear all those buses. This metaphorical leap is now almost tangible, and thus really precludes many from participating because they can’t take the risk of the opportunity cost of leaving their current career, arresting the process of getting paid, risking their kids education accounts, etc. Trust me: mothers-in-law do not understand even a nominal amount of the “bet your life” concept associated with trying to fly over a long line of busses on a motorcycle.

Its possible there is a bubble forming, as according to www.Seed-DB.com there are now over 170 “Immersive Accelerators” worldwide.

For now, those who have the issue of not being able to take the risk of jumping those buses have stiff competition for resources, especially early stage seed and angel capital.

The good news for those with Immersive Accelerators is the line to make the jump is long and getting longer. The question, however, is whether or not experience and domain expertise makes a comeback relative to the success of those who lack this critical element, or any material opportunity cost. I know its popular for Accelerators to list their whole rolodex + and call them “Mentors”...I will let you draw your own conclusion on that one.  

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Comments

Jeff Carter

I quit my corporate job in 1986 to take a leap of faith. It worked out so far. Sometimes you have to leave stuff behind to focus. If you are bootstrapping, don't quit your day job. If you are seeking startup capital-I'd question if you were all in or not if the startup wasn't your only focus.

I agree, in every startup ecosystem there are pretenders. People who speak without action, people who never write checks, people who don't tell the truth, people with their hand out when they make an introduction, people who try to keep things to themselves-while trying to appear open, people who steal ideas, people who steal money from startups, people who live on past reputation etc etc etc. I have met them all, and see them at the same functions.

The best thing the community can do is call them out.

Chicago needs some things to expand our community. 1. More exits. Entrepreneurs that exit can start a new company, or mentor existing ones. 2. More money. We don't have enough money here to sustain companies that need it. 3. More mentorship from the coasts, the corporate community, and successful entrepreneurs. Add what you can-don't overpromise, but make sure you over deliver.

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