Why Nike Gets Startups

Last week, I was in San Francisco for Demo Day for the Nike+ Accelerator powered by TechStars. It was actually the third Nike Demo Day I’d attended in a little over a week, the previous two were in Portland a week earlier – one for Nike executives at the Accelerator and the other at the Tiger Woods Center at Nike’s beautiful world headquarters campus. You could say that I “Just Did It” in a big way.

The founders take a bow at the conclusion of Demo Day

When I had visited the accelerator during its first month back in April, I met with all ten teams and left with the same feeling I usually do when visiting any of our TechStars programs early on, “boy do they have a lot of work to do.” When I showed up in Portland again a couple of weeks ago, I was incredibly pleased at how much progress the companies had made – solidified business models, significant customer traction and confident founders running young companies with big opportunities in front of them.

The more I talked with the founders, the more it became apparent that Nike senior management really understood and embraced the idea of running a corporate accelerator with us and did all they could to make it successful. They eschewed typical corporate myopic behavior and threw all they could at building community around their brand at the startup level. In fact, these ten companies were the first companies ever to be given the API’s to Nike’s fuel technology.

It didn’t stop there though. They brought a steady stream of athletes, designers, digital experts and more through the program on a regular basis. Founders shared with me that key members of Nike’s digital team would just hang out at the accelerator all day sharing knowledge and working closely with the founders. Even Nike CEO Mark Parker got into it and spent time with the teams, how cool is that! Management listened carefully when we explained how important it was for the rising tide of these quantified-self and digital health startups to trump just focusing on what’s best for Nike and they brought all they could to help them succeed.

The results were fantastic (here and here for example). The Demo Days were a home run and just a week later, almost all of the companies are on their way to meeting or eclipsing their fundraising goals. More important however is how prepared they are to begin waging battle in the digital health arena. According to Rich Schmelzer, CEO of GeoPalz, “The smartest thing we have done so far as a business was our decision to apply to the Nike+ Accelerator program, powered by TechStars. Working with Nike during the program was unbelievable. We had at least two years worth of biz dev meetings within 90 days! Where else could you do that?”

I give a lot of credit to Stefan Olander (VP Digital Sport) and Brian Kirkbride (VP Business Development, Digital Sport). They fostered an atmosphere for the program to succeed and the companies to thrive. I’m sure that the success of some of them will directly contribute to Nike and others might not. More important is they delivered a strong message that Nike is open for business to collaborate with startups and they set the tone for even greater success with future programs.

If you’re an entrepreneur with an idea around digital health and the quantified self, you might want to set your sights on the next Nike+ Accelerator powered by TechStars. It’s rocket fuel for your startup. In other words, “Just Do It.” You can start now by following the amazing and tireless Managing Director Dylan Boyd on Twitter here.

Seed Investing Doesn’t Buy You Series A Traction

During my first year at Techstars, I’ve spent a good deal of of time working with founders helping them to prepare for raising their first round of seed capital. I’m sure it’s not lost on anyone reading this that seed investing has been riding a pretty sizable wave over the last couple of years. This wave has provided both positives and negatives for entrepreneurs. On the positive side, there’s more capital targeting seed-stage opportunities and methods to find that capital than I can ever remember in my career. (I’m happy to let the pundits debate the extent to which this has created a “Series A crunch.”)

Seed

However, there’s also a downside to the recent proliferation of angel investors. More and more, I’m observing angel groups acting like VCs as it relates to diligence, terms and valuations. I’ve made dozens of both seed-stage and Series A investments in my career and they’re different animals.

I’ve always look for two things in seed opportunities: 1) a compelling market opportunity and 2) a talented team committed to solving it. That’s it. I never thought I deserved more than that in making an investment at a sub $5 million pre-money valuation. My Series A criteria added one more component, traction. For example, I always look for things like a few significant enterprise contracts or real MRR (for a SaaS business) or evidence of a hyper-engaged customer community.

Unfortunately, I’m seeing more and more angel groups looking for Series A traction at seed-stage pricing. They want to see considerable business momentum but also want pay sub $5 million pre-money valuations. They spend oodles of time doing “due diligence” when what they should be doing is spending time with the founders and determining if they think they’ve got the chops, commitment and experience to make a go at it. At Techstars we always say that we look for six things when evaluating applications: Team, Team, Team, Market, Progress, Idea. If you distill that, it’s the same thing I describe above: team and opportunity.

If you’re relatively new to seed-investing, first let me say thanks. It’s fantastic to see people wanting to support entrepreneurs and startups with their hard-earned money. It’s behavior like this that will foster the next generation of great companies and help keep America on the forefront of global innovation. One suggestion though; keep your expectations in check with regard to what to expect for your seed-stage dollars. From my perspective, it buys you a small team of bright, hardworking entrepreneurs with a vision about how to tackle a significant market opportunity who are willing to work for peanuts for a few years in order to tackle it. It doesn’t buy you more and you shouldn’t settle for less…