MassChallenge, With Lessons Learned, Gears Up for 2011 Startup Competition: A Definitive Debrief
It’s billed as the world’s largest startup competition and accelerator program, and it takes place right here in Boston. MassChallenge, coming off a successful first run in 2010, is gearing up to do it again this year—but not without some important changes and improvements to its structure.
Last year, the Boston-area nonprofit organized a $1 million global startup competition and housed more than 100 startups—across a dizzying array of sectors that included software, life sciences, cleantech, and social impact—during a three-month accelerator/mentorship program in its Fan Pier building. The program culminated in an awards ceremony in October to honor 26 finalist companies, of which 16 received money from the program (either $50,000 or $100,000 apiece).
But John Harthorne, MassChallenge’s CEO and co-founder, is hardly satisfied with those results. His goal is much bigger: to spur innovation in the Boston area, and beyond, by supporting entrepreneurs and connecting them with funding and other resources—thereby creating a large-scale spectacle that will draw more attention and more resources. “I’m convinced we are on the verge of a renaissance,” Harthorne says.
And he wants MassChallenge to be the catalyst. To that end, the program’s budget is increasing from $1.5 million last year to $2 million this year, Harthorne says. The total prize money will remain $1 million, and the extra money will be spent on improving MassChallenge’s website and its resources for entrepreneurs, as well as on hiring more technical and support staff. What’s more, this morning the White House announced the creation of a private organization, Startup America Partnership, that aims to accelerate entrepreneurship throughout the U.S.—and MassChallenge is a key partner in the effort.
In its inaugural year, the nonprofit received $500,000 from the Massachusetts state government in a one-time deal. (No state money is expected this year.) Harthorne has been busy securing the $2 million for 2011 from returning sponsors and some new investors—the overall list now includes The Blackstone Foundation, The Fallon Company, MassMutual, Johnson & Johnson’s Corporate Office of Science & Technology, Microsoft, Xerox, Foley & Lardner, and the Deshpande Foundation.
When you try to do something as ambitious as MassChallenge, of course, you’re going to get your share of criticism. Over the past few months, I’ve talked with entrepreneurs and mentors who took part in the program, and I’ve heard a lot of constructive feedback and suggestions for what could be done better this year. I also recently spoke in-depth with Harthorne, to go over the metrics and lessons learned from the first year—and to address some of the issues raised by the participants.
First, some overall metrics from the 2010 program that Harthorne shared with me. Out of 446 initial applications (from 26 countries and 24 states), MassChallenge selected 111 startup teams (79 percent from Massachusetts) and offered them office space and resources for the three-month accelerator program, which ran from July through October. There were 250-plus judges and mentors involved with the program; the core advisors and sponsors included Desh Deshpande, Josh Boger, and Ken Morse.
The program has led to at least 10 new companies being incorporated and hundreds of new jobs being created, Harthorne says. Since August, more than $20 million in external funding has been secured by MassChallenge teams. And according to surveys conducted by MassChallenge, the startup finalists across the board said the program had improved their access to resources such as mentors, fundraising information, startup organizations, and other entrepreneurs.
“Generally speaking, they did an amazing job last year,” says Vineet Sinha, founder and CEO of Architexa, a Boston-area software startup that made it to the final round of the competition but didn’t win money. “It’s an incubator program, and they provided guidance.”
One issue that came up after the competition was the distribution of “winners” across different sectors. For example, although life sciences startups made up 20 percent of the finalists, only one received money (Energesis Pharmaceuticals). Similarly, only one energy-related startup won (OsComp Systems). The winners were skewed towards the software/high-tech and general/social impact categories.
Harthorne thinks the reason might have to do with the inevitability of comparing apples to oranges—and having the same criteria for entry across sectors. Startup applicants were required to have received less than $500,000 in equity investment, and to have less than $1 million in annual revenue. Since you can get further along in software with $500K than you can in, say, biotech drug development or alternative energy, the funding criteria self-selects for very early-stage life sciences and cleantech companies that don’t have as much real-world testing as a comparable Internet startup.
So, how to address this point? Rather than imposing different criteria or having separate tracks for different sectors, MassChallenge is putting more resources into what Harthorne calls “focus areas” this year. That means developing a curriculum and providing more resources and mentorship in each of the five sector categories—high tech, life sciences, cleantech, social impact, and general. Plus creating a special “early-stage” focus area, specifically targeted at young companies so they get more mentoring. (There is no company age limit for applicants.)
That point ties into another issue raised by some observers: that the competition selected for more established companies that had already been on the fundraising circuit, rather than brand-new startups. Harthorne disputes this notion, pointing out that of the 16 companies that got money, six had no previous investment, and six others had received less than $100K. (What’s more, the great majority of the initial applicants had no previous investment.) But he acknowledges that older companies do have a built-in advantage. “Younger companies have not been filtered by the world at large,” he says.
It seems to me that people will nitpick about any competition where there are “winners” and “losers.” And that raises the deeper question of whether MassChallenge’s competition format works in terms of fostering a collaborative environment for startups. One mentor I spoke with said the “losers”—finalists who didn’t receive any money—felt “really bad,” and that the competitive aspect of the program in fact threatens the supportive environment that MassChallenge is trying to create.
“That was one of our biggest concerns,” Harthorne admits. “We were really nervous that people would be fighting each other. It didn’t pan out that way at all. From day one, we say the competition is a ruse—like a magician’s trick we use to effect the other outcomes. It helps us assemble the resources that are required. It gives us a deadline that forces [startups] to engage. The competition is like a lie we tell the world.”
Entrepreneurs I talked to generally agreed with that notion. “I realized quickly that the more I helped someone else, the more they would help me,” Sinha says. “We were competing with each other, but also hoping to apply feedback [from each other]. So the competition was not negative.” The complaints I did hear from participating startups were mostly logistical: some expectations and instructions should have been made clearer at the outset; there were so many events that it was hard to tell which ones were important; and there should be rewards for the startups that really show up and participate in the program.
But other participants told me it was hard for mentors and judges to add value, for a number of reasons—the sheer size of the program, the disparate sectors, and difficulties in communicating with each other. A couple of mentors said it would be important to provide more structure up front to the entrants and applicants; to “formalize” the structure and guidance; and to provide more checkpoints for entrepreneurs so they get their pitches and thinking straight earlier in the competition.
To that end, MassChallenge is making a strong effort to provide more structure in its mentorship programs this year. For starters, it has hired software guru Karl Büttner, the co-founder of 170 Systems, as full-time chief mentorship officer. Among his charges will be to bring in new mentors (including some younger, hungrier ones), provide better mentor-to-mentor communication, and of course facilitate meetings between mentors and startups in the program.
Lastly, I asked people about the overall size of MassChallenge, and whether it needs to be that big. After all, a more intimate setting might seem more nurturing for startups—see other mentorship programs like TechStars, Y Combinator, and Founder Institute. But it’s clear that MassChallenge is a different animal: its size is what gives it great visibility. Some entrepreneurs said it could even stand to be bigger, because that would lead to a larger pool of other relevant startups to collaborate with and learn from.
So it sounds like this year’s incubator program will be about the same size—100 to 125 teams—and the criteria for entry will be the same as last year. “This is really a game of scale,” Harthorne says. “In a pool of 100 startups, you’re bound to have five great startups. It’s a core part of our strategic model.”
The bottom line: no big overhaul for MassChallenge this year, but there will be a few refinements, centered around improving the mentorship structure and giving startups more guidance relevant to their particular sector and growth stage. This year’s program officially kicks off on March 8, and applications for the competition are due April 11. We’re certainly looking forward to seeing what comes of it all—and what kind of national impact this program will have.