90% Failure

by Shelby Zitelman

Recently, I was called out on Facebook by Dave Gloss – good friend, PresenTense Fellow in the 2011 Global Institute, and founder of Here’s My Chance. He posted a comment “Shelby Zitelman?” in response to the TechCrunch article “90% Of Incubators And Accelerators Will Fail And That’s Just Fine For America And The World” by Peter Relan. Initially Dave’s comment prompted a “like”. But after I read the article, I realized that Dave was looking for a response. So here we go…

The article’s thesis: incubators are limited in their support and as a result 90% of ventures that participate in incubators fail (meaning the amount of money invested is more than the amount of money returned). But 90% is okay because – in short – these are creative individuals who are investing their skills and passions to advance America and taking risks to challenge the status quo.

Before I affirm the last part of this thesis, let’s dissect the reasons why incubators produce the same success rate as the rest of the market (10%) and how PresenTense stacks up.*

Too many companies, too little mentorship.

Peter Relan summary: Providing access to capital is not enough, mentorship is everything for budding entrepreneurs, especially as those entrepreneurs are pursuing the same concepts (often without compelling problems).

PresenTense response: Agreed! At the concept stage during which we work with our Fellows, PresenTense values time before money, and connections to community resources. Each one of our fellows is connected to a personal mentor as well as a cadre of subject matter experts who offer their specific expertise. Mentorship is not always a perfect match, and PresenTense can improve in the oversight of the relationship. But PresenTense believes that the community’s “human capital” is the best investment at the concept stages.

Regarding the repetition of concepts and lack of compelling problems – the PresenTense curriculum encourages our Fellows to address the problem first (their vision for communal change) and through an environmental scan determine whether it is valued by the market, and if so, who else is addressing similar issues. Often our Fellows realize that a pivot is in order, or identify an organization that becomes a future partner, client, or collaborator. Where PresenTense can improve is to help our Fellows with similar concepts to connect with one another and develop better systems for collaboration with each other and with the existing communal infrastructure.

Lack of Business Development resources

Peter Relan summary: Start ups need to be “out there” identifying partners, clients, and financiers.

PresenTense response: PresenTense Fellows are taught how to present, pitch and represent their ventures from the start of the Fellowship program. We teach them skills and tools for identifying clients, reaching out to potential partners, and the importance of fundraising/friendraising. And we connect them to the network that can assist them with that outreach. Not all of our Fellows are comfortable in this role, but PresenTense has a strong emphasis on sales, networking, and developing relationships.

No clear funding path after the “program”

Peter Relan summary: People who run incubators are fundraisers, and the businesses that are developed within these incubators are simply “features” not products (let alone businesses) so there is no funding available post-“program”.

PresenTense response: While PresenTense is simultaneously fundraising for our organization and featuring successful Fellows to do so, we are committed to our serious Fellows’ success. What we can affirm is that the funding community is not yet informed about the opportunities (and challenges) to fund promising Jewish start-ups, and that there is not always a support system in place post-fellowship depending on the community. Where PresenTense can improve is to educate the funding and philanthropic community about investing in start-ups, and request more transparency regarding those funders who are seeking early-stage funding opportunities. PresenTense is also committed to developing the continuum of start-up support alongside UpStart, Bikkurim, Joshua Venture Group, and others so that our efforts are complimentary to one another.

90% failure and why this is still great for America and the World 

Peter Relan summary: Incubators give people the opportunity to explore their dreams, creating innovators who will bring new ideas and innovations to the market (and it isn’t that expensive!).

PresenTense response: Following my blog post last week (“In the Beginning“) I could not agree with the author’s final statement more. The values of entrepreneurship and innovation are vital for the future of the Jewish Community. If 90% of 296 Fellows are committed to invest their creativity, passion, and skills In the Jewish community, then we consider that a success for the Jewish people. PresenTense fosters innovation, and our accelerator programs are catalysts for that effort in 14 international communities. For information on the PresenTense impact visit impact.presentense.org.

* Disclaimer #1: PresenTense does not consider itself an incubator, but rather an accelerator. However we utilize many similar elements of the incubators referenced in this article.

* Disclaimer #2: PresenTense does not have a similar basis of comparison for success. PresenTense has historically assessed success as whether Fellows have received funding, and self-reported answers to the question “is your venture still operating?”. This data suggests that over the past 5 years, 70% of PresenTense ventures are still on-going. We recognize the limitation of our data, and are committed to figuring out more relevant numbers. But we are confident that more than 10% of our Fellows have launched successful ventures.

Shelby Zitelman is Co-Director, PresenTense Group.

This post originally appeared on the PresenTense Blog.