Business Incubator Series: Troy Henikoff, Excelerate Labs – Chicago, Illinois (Part 8)

By guest authors Irina Patterson and Candice Arnold

Irina: What advice do you usually give to those who are not accepted in your program?

Troy: We e-mailed everybody who applied, thanking them for applying and encouraging them in the best way we can in terms of acknowledging that we may have made a mistake. There are a bunch of things that we’re trying to do to further leverage Excelerate’s place in the marketplace to help not just the 10 that we accept, but also the hundreds that apply.

We don’t make a specific recommendation for other accelerators. Some of them may not be ready for an accelerator. Some of them might be great for an accelerator. It’s a daunting process to take the time and meet, interview, select, debate about all of these entrepreneurs. We don’t have the time to make hundreds of individual recommendations, such as “Oh, Accelerator A would be great for you. You should try to apply at Accelerator B. That’s a better fit for this company.” We have a finite amount of resources, and we’re doing the best we can with what we have.

Irina: Once the 10 applicants are accepted, what’s the next step?

Troy: That’s a great questions. There are some things they need to do before the program even starts, things like make sure their corporate structure is in place and that their setup is a C corp, so they can take outside investments.

Excelerate is not a program for people who are doing this as a hobby. We require that they’re in the office full time. You’ve got to quit your day job. A lot of these companies have started with people working evenings and weekends while they’re working on their day jobs. Once you’re in Excelerate, you have to quit your day job.

That’s part of the acceptance. You have to be there full time for the summer with the intention of being full time afterward as well. We’ve already started meeting with the accepted companies one on one to make sure that everything is in place. For those companies that are not set up as C corps, we provide, free of charge, the legal services to get converted to C corps so that they’re ready.

We’re helping them with making sure that everything is in line for that conversion, making sure they already have or are in the process of quitting their day jobs.

We do give them some seed financing, as most of the accelerators do. That’s to help them be able to quit their day jobs. I refer to it as it’s enough money for them to eat ramen noodles and peanut butter and jelly for three months while they work on their businesses 18 hours a day.

Nobody’s going to get rich off of our seed funding. Hopefully, it’s enough that they can work on it full time. If they need to hire an additional person, they have a little bit of wiggle room to do that. We’ve already started that process [for upcoming this year program that begins June 1].

Irina: How does the seed funding work?

Troy: This year we increased it. Each of the companies that was accepted into Excelerate got $25,000. In exchange, Excelerate gets 6% of common stock in the company.

Irina: Does it matter how many founders there are?

Troy: No. They each get $25,000. Last year we had a fancy formula based on the number of founders. It ended up, we decided it was simpler to treat everybody the same. Everybody gets $25,000.

Irina: Once they’re in the program, what other resources do you use?

Troy: We have a rigorous curriculum that goes on during those three months. The first month is what we refer to as mentor dating month. That’s when the 399 meetings happened last year. This year it will likely be even more than 399.

The second month is curriculum all around, training them with the tools, some of the things I talked about, learning how to build a financial model; learning about search engine optimization; unit economics. We bring in experts from all over, not just from Chicago, to talk on these subjects. We give them a lunch-and-learn or seminars. Some are an hour. Some are two hours. Some are three hours.

The third month is about preparing the companies for the investment process, putting a pitch together; understanding negotiating term sheets; financing; and getting ready to leave the nest, which is actually taking financing and growing the company and hiring employees.

This segment is part 8 in the series : Business Incubator Series: Troy Henikoff, Excelerate Labs - Chicago, Illinois
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