From Venture Capital to Accelerators, the Different Ways to Fund Startups

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They're dubbed "schools for startups": the tech accelerators that provide funding and mentorship to young companies. Y Combinator is one of the original accelerators - its success stories include Airbnb and Dropbox. But is the accelerator path right for every business? Other startups opt to join a seed fund, or to cold pitch venture capitalists. We'll explore the business of launching startups.

Show Highlights: 5 Tips for Startups

1. Be a Missionary Not a Mercenary

"Missionary entrepreneurs really want to change the world in some way. And that changing the world could be in the enterprise, it could be in the consumer space. But they have a very deep passion for going and building a product or a company around that, versus someone who just says, 'Hey this is a small problem, but I know that if I can build it up to x, that Google or Yahoo or someone would be interested in buying my company. ... That's not really something that we're interested in backing." - Mike Abbott

2. Capitalize on Your Uniqueness

"We try to make sure that [the entrepreneurs we work with are] actually solving something that's meaningful, and that they have personal experience in.

Guests:

Geoff Ralston, partner at Y Combinator and co-founder of ImagineK12, an accelerator for education tech startups

Malay Gandhi, managing director of Rock Health, a seed fund for digital health companies

Mike Abbott, general partner at Kleiner Perkins Caufield & Byers, one of the biggest venture capital firms in Silicon Valley

Angela Benton, co-founder and CEO of NewMe Accelerator, specifically for minority and female-led companies

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There are a lot of entrepreneurs that are solving real problems that some investors might not really be in tune with. A great example is one of our alumni, Pigeon.ly. Their product basically bridges the communication gap between inmates and loved ones while they're incarcerated. The founder was formally incarcerated, does not have the "pedigree," you know what I mean, at all, however was able to use resources from friends and family, even doing pitch competitions to raise the initial capital that they needed to get accepted to an accelerator like newME, which helped them to get additional funding. And so for entrepreneurs you have to focus on what problem you're solving, regardless of whether people are really willing to invest in it." - Angela Benton

"I think it's a great opportunity for us if other people don't want to fund companies because they overlook them. Those are the things that I get most excited about because other people don't think they're big opportunities because they've already discriminated against them." - Geoff Ralston

3. Achieve Some Success Early On, Fail Fast and Move On

"I have to say that failure tends to make sense over a longer arc of time. It's not great for an early-stage startup to come in and tell you the 40 ways they've failed. You need to have some success as an early company -- it can't always be about failure and all the things you've learned." - Malay Gandhi

I am a believer in failing fast in small ways, like trying out a feature, and if it fails, fixing it. And I do believe that if you fail in a big way, like if your company fails, as long as you extract lessons from that and you are able, spiritually, emotionally to move on, it's great." - Geoff Ralston

4. Get Feedback From Customers

"What companies really ought to be doing, especially in their earliest days and it really doesn't change that much later on, is that they should talk to customers, and then work on their product, and then talk to customers some more, and then work on their product some more. And that's how you find product market fit.

The better you get at building the products that your customers want, the better chance you have of getting lots of customers and scaling your company and becoming that mythical unicorn." - Geoff Ralston

5. Don't Get Caught Up in the Buzz

"A lot of companies that we work with, they get so enamored on the press, that they make [their product] because startups are hot, they're sexy right now, and they don't pay attention to what problem they're actually solving." - Angela Benton