Even if a venture capitalist funds you, they’re expecting you to fail. Most startups in their portfolio do. All they need is that one home run – the billion-dollar acquisition like Instagram – that will make up for all the rest.
But to get funding, you do have to be capable of such a brilliant outcome. And most startups aren’t: their market is too small, or their growth is too slow. And so they don’t get venture funding.
And those startups aren’t right for accelerators, either. The traditional accelerator model, which offers seed funding, is based on the assumption that you’ll raise more funding or have a big exit later. In fact, for TechStars and Y Combinator, venture funding is part of the package. And percentage of funded startups is a metric of success that accelerators boast about.
What about the rest of the startups? Sramana Mitra estimates that 99 percent of companies that consider venture funding don’t fit the venture model.
“This is the stable middle of the economy that needs to have an infrastructure around it to support it, and there isn’t such an infrastructure,” says Mitra. “For a robust economy to function steadily, the middle is where we need a robust set of companies.”
Mitras’s incubator, One Million by One Million (1M/1M), is inclusive rather than exclusive: she hopes to foster a wide range of companies that have the potential for less-than-mind-blowing success. Her goal is to help 1 million entrepreneurs reach $1 million in annual revenue: an amount that most VCs wouldn’t find appealing.
Entrepreneurs pay $1,000 per year for access to the virtual incubator, including classes on everything from bootstrapping to customer acquisition to branding, and introductions to customers and partners. They can attend public and private roundtables to pitch and get feedback. So far, 100,000 people have used the platform, and at least 12 companies have reached that $1 million mark.
Last week, 1M/1M launched their incubator-in-a-box program. As the name implies, it lets organizations like nonprofits, governments, banks, and angel investors start an incubator without the hassle. They pay the standard $1,000 per entrepreneur, and 1M/1M will help them manage the selection process. Startups selected get access to 1M/1M’s offerings, plus any services that the organization wants to add on.
Given fears about the Series A crunch – the abundance of startups who receive seed funding but no more – it’s debatable whether we need more early-stage startup hopefuls. But perhaps the 1M/1M program will spread a new message: being “unfundable” might not be such a bad thing.