Next week will mark the graduation of the sixth group of Microsoft Ventures' local startup accelerator in Herzliya. Three years after Microsoft International chose Israel to launch its first accelerator as a way of improving its connection to the startup scene, the time has come to stop and look back.
70 startups with 400 entrepreneurs have passed through Microsoft's accelerator in Israel, which is managed by director Hanan Lavy. 85% of them have raised money, with an average of $2.5 million per company and a total of $100 million raised. There have also been three exits - 4% of all the companies that graduated the program. KitLocate was sold to Yandex, a major Russian company, and became its R&D center in Israel; Appixia was sold to Israeli company Wix.com Ltd. (Nasdaq: WIX); and Conferplace was sold to Meda Group. Talking to "Globes", Tzahi (Zack) Weisfeld, head of Microsoft Ventures Europe and Global Accelerators Program, says that if you look at the average for the 10 leading corporate accelerators in the US, the averages are much lower: 59% of all the companies raised an average of $1.7 million, with a 2% rate of exits.
"The goal at the beginning was to connect Microsoft to the world's best enterpreneurs. The idea was to generate reciprocal value, in other words to both see how Microsoft could help good entrepreneurs succeed and how Microsoft could learn more intensively about new business models and trends that could help it develop better products for entrepreneurs."
The beginning was in Israel, but in view of the local success, Microsoft decided to expand its accelerator activity to other places around the world: Bangalore and Beijing in Asia; Berlin, London, and Paris in Europe; and Microsoft's home base of Seattle in the US. "Cumulatively," says Weisfeld, "graduates of the program have raised $1 billion and posted 21 exits." Recalling the beginning, he says, "The whole program began as a local initiative of the R&D center in Israel, out of a desire for more direct contact with the local ecosystem. The model that proved itself here was adopted by development centers in India and China, and eventually became a global program with seven accelerators worldwide.
"Had you asked me three years ago where we'd be today, I wouldn't have believed we would succeed within such a short time in becoming the best entrepreneurship program in China, India, and Israel."
"We're in this game for the long term"
Microsoft entered the world of accelerators only three years ago. There is a feeling that it was too little, too late, after other major technology companies had already moved into the startup realm.
Weisfeld: "We lost contact with startups, and by starting the accelerator, we wanted to reconnect Microsoft with the dialogue. It's not completely true that we took up late with startups, however, because even before that, we had a program like BizSpark, which is our lateral program for working with startups, in which 100,000 of startups are taking part. I don't know how many other companies can say that they are involved with so many startups in so many countries around the world.
"As for as the accelerator itself, we started it only three years ago, but the accelerator trend is still relatively new. We're leading there in comparison with a great many other companies in the world in the interaction model with entrepreneurs through the accelerators. It's true that Amazon and Google and many other companies have an interaction model and a way of working with entrepreneurs, but we chose a model that is very hands on, very intense, and creates very substantial results for both the entrepreneurs and Microsoft."
"Globes": What did you want to achieve with this, other than the desire to say that you are helping startups?
Weisfeld: "We wanted to create some kind of connection that went beyond a business measure. We're in this game for the long term. We want entrepreneurs to think about Microsoft both for the business connection and when it comes to technological choices. We're not a philanthropic program, and we want our technologies to be adopted. We don't want to force anyone to use the technology; we want them to realize that it's worth their while."
What motivates the selection of startups for an accelerator - their chances of success later on in raising money and making an exit? Their impact on the market? The entrepreneurs themselves? Diversity of fields within the cohort?
"The selection of startups is almost the same as in the investment process or working with an investment fund. First of all, we look for a balanced team, in which at least one founder is a technology specialist. We look for an idea that is big enough and can produce a significant startup in the world. We also look for a coachable team, and also do a fair amount of behavioral screening of the team, looking for example for the presence of a strong CEO capable of surviving difficult trials.
"In the end, we also look for a team that has a chance to raise money. It's a very general question whether a startup can raise money, and we use our connection with investors to make decisions, and include them in the selection process.
"If the team is right, the idea is right, and we believe they can achieve results and raise money, then they pass the selection, and will probably begin running with us in the next accelerator group."
"Learning something new"
As the startup nation, the accelerator has of course not passed Israel by. Technology accelerators are constantly sprouting up, whether as local initiatives or through global companies and investors. The attractive offer of mentoring, advice, and shelter for a few months tempts many startups to try these adventures. The problem is that some become addicted to it, and go from one accelerator to another, instead of going outside and trying to operate on their own power and in their own place.
"It's true that there is such a thing as accelerator hoppers, but it's important to keep in mind that not all accelerators are the same, and not all of them serve the startup at the same development stages.
"Some accelerators perhaps should be called pre-accelerators or early entrepreneurship programs, and some are at more advanced stages. We, for example, are now at more advanced stages - startups come to us at the stages of raising their A round.
"I don't think it's a bad thing; it depends on the startups themselves. There are some for which it would be better to stop and do something else, but I don't think that's something I'd tell all of them. If they can continue getting support, mentoring, and a place, and they manage to pass the screening for the program, which is sometimes very strict, all power to them."
Published by Globes [online], Israel business news - www.globes-online.com - on July 2, 2015
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