Entrepreneurs
June 18, 2012 posted by Jason

Accelerating Hawaii: AlphaLab Leverages Local Strengths

Note: “Accelerating Hawaii” is a continuing series on the impact, importance, and structure of Hawaii’s startup accelerators and incubators. While some may be backed with private investment, at least two will be built using public funds. With startup accelerators being a relatively new concept, and totally new to Hawaii, I’ve started talking with local stakeholders and successful accelerators throughout the country to share ideas, set expectations, and elevate awareness for Hawaii’s entire startup ecosystem.

This post follows a conversation with Pittsburgh’s Innovation Works (IW), which runs the AlphaLab accelerator: Jim Jen, AlphaLab Director and IW Executive in Residence, and Dave Mawhinney, Director of the Donald H. Jones Center for Entrepreneurship at Carnegie Mellon University and Managing Director of the Open Field Entrepreneurs Fund. (Disclosure: I worked at an IW-funded company from ’99-’01 (FreeMarkets), and have an MBA from Carnegie Mellon University, which works closely with IW.)


“Have you heard the quote from Brad Feld where he recommends that regions put a 20-year commitment into growing their startup ecosystems?”  asked Jim Jen, Director of Pittsburgh’s AlphaLab accelerator.

Thus began my conversation with Jen and Dave Mawhinney, Director of the Donald H. Jones Center for Entrepreneurship at Carnegie Mellon University and Managing Director of the Open Field Entrepreneurs Fund. We shared a good laugh as I recounted how many times, and how recently, people have shared that quote when framing their conversation around building a successful startup ecosystem.

It’s good advice, no matter how many times it’s given. And, it’s important for everyone even marginally involved with Hawaii’s startups and/or entrepreneurs to understand this up front. Whether we have one, two, or twenty accelerators,we should expect it to take years to see a tangible impact.

AlphaLab graduate

Accel Diagnostics, an AlphaLab graduate, developed a solution for the screening and detection of diseases. (Source: Accel Diagnostics)

Here is some of the advice that the AlphaLab team had to offer to Hawaii’s budding accelerator movement…

Commitment

AlphaLab is a component of Innovation Works (IW), which is a part of Pennsylvania’s Ben Franklin Technology Partners (BFTP). Yes, lots of layers, but they’ve been at this for over 25 years, so their experience is incredibly valuable, as is their 3.5-to-1 return on state dollars invested over that time!

IW is focused on Southwestern Pennsylvania, which is essentially the greater Pittsburgh region. They launched in 1999 and have invested over $50M in over 150 startups, creating thousands of new jobs and attracting over $1 billion in follow-on investment to the area. Regardless of your success metric for startup ecosystem creation and support, IW would be at or near the top of the list.

For their accelerated startups, they are also required to provide a commitment: upon graduation, startups must maintain a physical presence in Pennsylvania.

Focus on Commercialization

IW runs eight key initiatives, from a seed fund and a clean energy program to manufacturing and university grants and internships. AlphaLab is their startup accelerator and follows a typical accelerator model:  recurring 20-week program for six startups, $25,000 in funding for 5% equity (a pretty good deal!), free office space, expertise, and access to the wider IW network.  They skew towards software, entertainment technology and Internet-related companies, but also accept startups with a physical product.

And, while their graduation event is the typical demo day, they push startups to focus on more than just their next round of funding. They provide hands-on support from the AlphaLab team, push startups to seek and gather user feedback, help them develop go-to-market strategies, and plan their move toward commercialization. Many other accelerators, especially tech, intently focus on helping the startups secure more funding as a result of their demo. On demo day, there might be some discussion of go-to-market strategy, but there’s usually little more than a slide’s worth.

AlphaLab’s goal, apparently, is to help the startups create a sustainable business. How novel.

Leverage Local Strengths

AlphaLab has the luxury of being within an hour’s drive of over a dozen universities, including Carnegie Mellon (tech, robotics, and biotech powerhouse) and University of Pittsburgh (biotech, medical tech). That doesn’t hurt, and it’s helped them find sharp entrepreneurs, smart mentors and researchers, and an incredible number of ideas. (It’s also similar to Silicon Valley being created as a product of the high tech expertise of, and innovations developed by, Stanford, Berkeley, and other Bay Area universities.)

“What is Hawaii’s competitive advantage?” asked Jen. “We have Carnegie Mellon, so have a huge critical mass of technology expertise. What is Hawaii’s? What can your accelerators leverage to help fill, mentor, and advise your startups?”

Since 2008, 45 companies and over 100 entrepreneurs have gone through AlphaLab's nationally recognized program. (Source: AlphaLab.org)

When I asked about their focus on technology, Jen talked about the many great startups that weren’t 100% tech-focused. With Pittsburgh’s innovative healthcare industry, they’ve accelerated great startups building orthopedic and diagnostic devices.

“You need to be flexible with respect to technology,” Jen continued. “Look at the Brandery accelerator in Cincinnati. They recognized their regional strengths in consumer products, branding, and advertising, then really leveraged that to create and promote their startup community.”

As I’ve mentioned before, the siren call of tech is strong everywhere, including Hawaii. You rarely/never hear of a manufacturing startup getting acquired for a billion dollars, so it’s easy to understand why. But, there are arguably only a few regions in the country that can adequately nurture a viable tech industry.

“We’ve built tight connections to our local universities, and Hawaii or any other region should do the same,” added Mawhinney. “Hawaii also has a lot of federally-funded research in military, alternative fuels and energy, and probably many other areas that the accelerators should take advantage of.”

Advisers vs. Mentors

AlphaLab took a creative approach to finding the right people to help advise their startups: they approached it informally and made sure it was with people whom they already had a working relationship.

“We started with more of an adviser model,” said Jen. “Even more, we chose key people from the professional community that we already knew. Plus, we didn’t limit ourselves to the Pittsburgh area. If we knew of Pittsburgh natives who had VC connections or were themselves great entrepreneurs, we brought them onboard.”

The mentor vs. adviser issues seems to be pervasive across accelerators: Do we connect startups with mentors and let them manage the relationships themselves, or do we assign qualified advisers to work closely with each startup? At AlphaLab, some advisers are even AlphaLab employees, so have a vested interest in the success of the startup. With a mentor model, it’s usually a volunteer gig.

“We don’t have open mentor calls or mentor meetups, but we do have many contacts that we can tap when needed,” continued Jen.  ”That way, we know that the advisers have credibility, and we’ve gotten consistent feedback from the startups that our advisers are very high quality.”

Build Your Own Model, Set Your Own Goals and Expectations

From the beginning, AlphaLab didn’t try to mimic or recreate any other model, partly because few others existed, but mostly because they were focused completely on their region. Their terms are 20 weeks versus the typical 12, and they focus on more than just the product.

“We made our own rules and didn’t follow any model,” Jen said. “I recommend that Hawaii do the same. What are your goals and what are the expectations? Is it money? Exits? Job creation? Focus on creating the talent, skills, and entrepreneurs that you need to reach those goals.”

“At the beginning, we were worried that everything and every startup would fail,” offered Mawhinney. “But, we had to quickly move past that and just get started. However, it’s incredibly important for you to be visible and for you to properly set expectations with the community and the stakeholders.”

“My advice would be to start small, prove it out, and don’t get ahead of yourself,” added Jen. “It’s the same advice that we give to our startups. Start with something that can work, then build from there. I’d also say that you should ‘break the rules’ and do whatever you think is best for the Hawaii landscape. Maybe the accelerators can aim at tourism tech? And, don’t dismiss the lure of Hawaii’s lifestyle and culture and beauty to bring in consultants or others from outside of the state.”

Again, AlphaLab started with a focus on Pittsburgh, then built their model specifically for Pittsburgh. Their advice is to do the same.

Takeaway

This one’s simple:  Build a model for Hawaii, that leverages Hawaii’s resources and community strengths, and that isn’t trying to be something that the region can’t support.

OK, there’s two:  Leverage Hawaii success stories that has left the state, but that still want to help, contribute, and provide mainland connections. If they have a strong tie to Hawaii, then consider them a local resource that can assist the startup community.

 

Please, continue the conversation and add your comments and ideas below. Hopefully we’ll soon start to hear more details on how some of Hawaii’s accelerators are starting to come together…

 

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