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Acceleprise Becomes the Leading Accelerator For B2B Startups

As regular readers are aware, IT Specialist has focused on highlighting what we believe are many of the most interesting B2B startups out there. Although B2C startups may be more visible across a wide, non-IT audience, the real innovation is actually happening with enterprise-IT startups.

One thing that I’ve always wondered, however, is why I’d never seen an incubator or accelerator that specifically focused on enterprise startups. Well, it turns out there is an accelerator out there doing just that. When someone forwarded me a link to Accelerprise, a Washington, DC-based accelerator that focuses solely on enterprise tech startups, I was very keen to talk to them to find out more. In that context, today I am joined by Collin Gutman, one of the founders of Acceleprise, who has kindly taken the time to answer some questions.

1.  IT Specialist:  Thank you for joining us today Collin. To start with, can you provide our readers and overview of the background of Acceleprise’s’s founders? As I gather, you have the core partners, and then also a team of mentors as well??

Collin:  Sure. Acceleprise was founded by our 3 GPs, Sean Glass, Allen Gannett and myself.  Sean previously founded a company called Higher One, a now-public student financial services company.  Allen and I are serial entrepreneurs who were working together (with Sean) at a previous startup, and we all decided to launch Acceleprise together because of two trends we saw in the industry.  We have our team of three partners, then a much larger network of about 120 mentors, all of whom have agreed to meet with any of our companies who requests a meeting.  The mentors are the backbone of what we do, as they’re truly a spectacular group.  The three of us certainly work with the companies and think we add value, but with so many experts from the enterprise software field, we point to them as the true engine behind Acceleprise

2.  IT Specialist: Can you provide an overview of Acceleprise’s core mission, and perhaps provide some background on the inspiration for Sean,Allen and yourself that made you start Acceleprise? What made you decide to focus only on enterprise IT startups?

Collin:  Our core mission really is to be something of a cofounder to promising young enterprise technology companies.  Due to the very quick growth of the very successful consumer companies, enterprise often flies under the radar until the writing is on the wall.  We like to get involved with some capital plus a large network right before enterprise tech companies hit that inflection point.  We decided to found Acceleprise and focus on enterprise tech because of two trends we saw in the startup/VC landscape.  First, we noticed that 70%+ of early stage capital was going to consumer tech companies while 75%+ of venture returns historically came from enterprise tech companies.  Meanwhile, there were literally no enterprise-only independent accelerators in the country, despite a total of about 340.  Everyone else either did consumer only or a mix of anything.  So we saw a huge market opportunity in that the sector in which it’s easiest to call future winners and produce strong returns was underappreciated and essentially ignored at the relatively early stage. 

Secondly, we knew that enterprise tech companies needed a common set of resources, so an accelerator focused on enterprise tech would likely be more helpful than your average accelerator.  While most accelerators can help with product somewhat, or sometimes on how to test, or how to raise more capital, we know what our companies need: help scaling sales.  To this end, we were able to assemble a team of mentors that can advise around this one key topic, focus on companies facing this as one of their major challenges, and really be much more focused and we think helpful in the way we work. 

3.  IT Specialist: It seems like we are seeing unprecedented change the last few years - what is your view of the overall state of the enterprise IT industry today? From Acceleprise’s perspective, are there any particular areas within enterprise IT that you find particularly attractive or ripe for additional innovation right now going forward?

Collin:  I think you’re right about this, on two fronts actually.  There’s unprecedented change in the view entrepreneurs hold of enterprise technology, and that’s having ripple effects on the type of enterprise products being built.  Enterprise tech used to be something no true “entrepreneur” would want to work in.  The products were ugly and clunky, and customers took forever to buy.  We’ve seen a massive change, which has led to an influx of interested entrepreneurs to enterprise tech.  The consumerization of enterprise tech is one of the big trends we talk about on a daily basis - enterprise tech products now require the usability of a consumer product, can be built for the same price as a consumer tech product (no more $5M Sun Microsystem checks at the outset) and can be bought using a Box-like distribution model.  The cost to build has come down drastically, the sales cycle has (in some cases) shortened by a wide margin, and building enterprise products has become “fun.”

All of these trends have made starting an enterprise company much more viable to the most entrepreneurial among us, and we’re starting to see results.  We’ll be publishing a “megatrends” report shortly that will go into more detail on the types of innovation we see as fundamentally changing enterprise tech in the near future.  For now, I’ll give some of the highlights.  One huge trend that’s as applicable in enterprise IT as in consumer is the mobilization of the world.  With the proliferation of mobile, we’re very interested in how mobile enables new functions to be performed in an enterprise context.  Two of our recent investments, Breadcrumb Tracking and UserPod, build off this trend. 

Secondly, we’re interested in how wearable technology changes what an enterprise can do.  Not just what “cool” things come out of Google Glass, but can businesses do something new because wearable exists.  ResolutionTube, which just raised $2M from a brand name Seattle based VC, is one of our deals that follows along this trend, as they enable better repair of machines thanks to wearable technology.  Finally, distributed teams are going to be a part of the future, so we’re very interested in tools that help collaboration between virtual teams and companies.

4. IT Specialist:  It seems like on a national level the Washington, DC area does not get the attention it deserves for what I think is a very successful and growing startup eco-system. From your perspective, are there any characteristics of the DC area that are particularly advantageous for startups?

Collin:  Well, the first key to note is that we’re not focused on DC startups and we don’t force companies to permanently move to DC - we’re focused on using the advantages that spending some time in DC has for an enterprise technology company.  In addition to having easy access anywhere in the world - DC is a short train from NYC, an hour flight from Boston, and a great portal to both the West Coast and Europe, DC itself has a ton of advantages that make it a great place to spend some time for an enterprise company.  Nobody quite realizes this, but trade associations are extremely important to the growth of an enterprise company and, whether you’re looking for the American Association of Community Colleges, the Society for Human Resource Management or the Association of Associations (I forget what that one’s called), they’re all here in the DC area.  These associations are all looking for services to bring to their memberships.  In addition, you’ve got the world headquarters of Marriott, Hilton, Corporate Executive Board, a huge Deloitte office, etc.  In addition to the federal government (the largest buyer of enterprise software), you’ve got all the businesses that sell into government: Lockheed Martin, Northrup Grumman etc.  We like to say DC is a big enough town to have some megolith sized businesses, but a small enough town to be able to get meetings with them.

5.  IT Specialist: How would you compare the state of the B2B startup space versus B2C? From my perspective – and I am going to editorialize here a bit – it still feels like valuations between B2b and B2C can be out of whack sometimes. For example, VMWare recently acquired AirWatch for $1.5 billion. With AirWatch, we are talking about a profitable and growing startup with 1,600 employees that had raised something like $200 million; meanwhile, by contrast, we see a B2C startup like Snapchat with essentially no revenue turn down a $3 billion all cash offer. Is it just me, or is there something wrong with that picture?

Collin: I think that you definitely see financings and sometimes acquisitions of consumer companies based off of something not related to revenues, as we saw with Instagram, Waze or Snapchat.  Part of consumer internet entrepreneurship and investment is this modern day version of treasure hunting/lottery ticket buying.  And when successful, the valuation and time it takes to get there is phenomenal.  Enterprise tech will never appeal to get-rich-quick mindsets.  As it turns out, however, the number of examples we can point to of these types of consumer companies is very, very, very small taken in comparison to the total number of angel backed startups, for example.  It really is more like a lottery ticket than anything else.  Enterprise tech is and always will be more like building a business.  It takes time, but can grow in steps year over year, and you can tell that there’s going to be a business there much earlier.  Also, Snapchat could theoretically evaporate overnight, whereas you don’t see that with enterprise companies.  Overall, I think consumer web quick exits attracts a certain type of entrepreneur and will always have flashy successes that attract this crowd.  I think I speak for most enterprise entrepreneurs and investors when I say we’re content to take a few years to exit for the usual SaaS 16x ARR (calculated off MRR).  The numbers get enormous quickly, and with far less risk than a consumer company!

6.  IT Specialist: Turning now to the specifics, can you provide an overview of the how startups can apply and join your Accelerator? What are your acceptance criteria and how many classes have been accepted and/or gone through your program so far? Finally, can you give us a sense of the terms under which you invest in new portfolio companies – is there a certain common standard you use for the investment amount and your equity participation, or is it really done on a case-by-case basis?

Collin: Finally an easy question!  Startups can apply to us on our website, www.acceleprise.vc.  We have open applications, and welcome companies from all over the world.  So far we’ve had companies from 9 countries participate in the program, ranging from South Korea to Bosnia (or Romania, or South Africa, whichever counts as farther the other way).  We’re about to start our 5th class on March 3rd.   We’ve had a total of 28 companies be a part of our first 4 classes, and this 5th will feature 8 companies.  We can accept any company that is broadly an enterprise tech company, of any stage.  We’ve accepted single founders before, and we’ve had 2 companies that were doing $600k and $1M in ARR before they applied, so we work with a wide range of companies.  Our wheelhouse, however, is probably a company with an MVP already deployed with some customer traction, some proof that this product can be sold, but again, we can really do anything.  We invest only on a uniform, standard term sheet, where for the program, connections, etc as well as the cash we invest, we take a 5% ownership stake.  We’ve found that there’s no sense in negotiating.  The value of your company WILL go up by far more than the equity stake we take over the course of the program, so anyone who tries to negotiate the overall ownership just doesn’t see the value.  We also know it’s nearly impossible to give a better valuation to a company doing $1M ARR versus one with founders with 20 years industry experience apiece versus those who have invested hundreds of thousands in product development, so we have a very fair term sheet that works for any good enterprise company looking to grow and scale.

7.  IT Specialist: From the perspective of the entrepreneur, what are the benefits that Acceleprise provides them? From looking at your site, it certainly seems like there a whole series of perks that Acceleprise provides them on the technology side in such areas as cloud hosting, legal services, hardware and other goodies?

Collin:   The perks are really very little, as is the cash we provide.  Really it comes down to the network.  Whether you’re looking to sell more, learn how to scale a sales operation, raise money to expand sales, etc etc, our mentors and our partnership can help with that.  We believe there’s no faster, more efficient way to get the resources connections knowledge etc you need to build a scalable enterprise tech company than working with the Acceleprise team andnetwork.

8.  IT Specialist: One advantage from working with Acceleprise that really jumped out at me is your “customer pnel”, whereby large enterprises have agreed to take sales calls from your portfolio companies. Can you explain a little bit more about how this process works? 

Collin: It’s pretty simple really… we’ve had companies (like Amazon, Corporate Executive Board, the Washington Redskins and other) agree to meet with all of the companies in a given class as a prospective customer.  It’s a great way to get a few reference customers and big names for relatively early enterprise tech companies - not to mention high value contracts!

9.  IT Specialist: Could you give us a sense of some of your portfolio companies, and are there any in particular that you would like to highlight? 

Collin:  All of the investments we’ve made are available here, and we love all our companies!  Just to avoid selection bias, I’ll focus on three of our companies that have raised a relatively large amount of money as the couple I highlight.  TrackMaven just raised a $6.5M round led by NEA, and is a competitive intelligence company for enterprise marketers. StayNTouch raised $2M (or thereabouts) from Concur, a travel expense management company, to rebuild hotel PMS systems. ExecOnline has raised $3M led by Kaplan to bring executive education online.  The key theme between these companies is strong teams.   

We invest in the best of people. The other is the clear pattern of sales.  They’re selling to a buyer (hotel GM, CMO, Chief Learning Officer) something that they’re used to buying (PMS, marketing software, corporate training).  We think behavior changes are hard, new budgets are hard and not having a clear decision maker is hard.  So we like when you can sell something that people are used to buying that they desperately need… that’s obviously the best case scenario!  These are just a few select highlights, from our first two classes (14 companies total), we’re overall extremely pleased at the rate at which our companies are succeeding and moving onto becoming big enterprise tech companies.

10.  IT Specialist: Before concluding, are there any additional points you would like to make about Acceleprise’s program, such as upcoming events and/or any other interesting things we should look for from you going forward?  

Collin:  Well, there is one thing we’re doing that’s very, very different.  We’ve decided to “kill the demo day.”  There’s massive investor fatigue industry wide with demo day - nobody comes and those who do come don’t pay attention.  Instead, we’ve replaced it with catered 1 on 1 meetings with investors at the end of the program, so our companies can get direct, 15 minute meetings with people who actually write seed checks to enterprise tech companies.  We think there’s much more value to be had this way than throwing a big event full of hype and hoping something sticks as a result.  Acceleprise is different because of our enterprise tech focus, why not have a different type of concluding event that brings more value to our specific type of investments? 

IT Specialist: Thanks for taking the time to speak with us  Collin – sounds like you’re definitely providing a very much needed service in the enterprise IT startup space.

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