This exciting collaboration between Yahoo! and Entrée Capital looks to develop the next generation of companies and mentors
Israel is no stranger to accelerators. The exact number is up for debate, with some putting the number as low as 70, while others have thrown out figures as high as 207. Here at Geektime we estimate the number to be closer to 90.
Each one brings its own advantages to the table, helping young companies to grow quickly and branch out into the market, ready to do business. Joining this cadre is SigmaLabs, a joint venture that opened its doors in July with the backing of Yahoo! and Entrée Capital.
The traditional model of the accelerator is to offer startups important resources like office space, mentorship, and in some cases funding in exchange for equity in their company. Instead, SigmaLabs has laid out a “Pay it Forward” model of working with startups that it hopes will have an impact not only within their own accelerator, but also on the wider ecosystem.
This starts by not requiring the startups to sign over equity. Companies that are selected to take part in the three-month program founded by Entrée’s Avi Eyal can choose to give back via voluntary contributions of their time, equity, use of assets or other “in kind” ways. As these waves move on from SigmaLabs and reach their IPO or exit, there is a hope that they will also look to contribute a small percentage of their capitalization table to help the following generations that come after them.
While SigmaLabs does not make any sort of initial investment in the startups, choosing to focus on building a great atmosphere and program, they have put it out there that their startups could walk away with a $250,000 convertible note.
Guiding young Jedis in the way of the Force
Managing the campus is Eran Bielski from Entrée alongside Mika Josting, who in turn is under the watchful supervision of the revered Master Yoda. Situated in the Moshe Aviv tower, SigmaLabs is now home to a tight knit group of companies that are part of its first class.
While the group may be varied in their fields — a mix of media and advertising tech, Fintech, and even a project aimed at helping autistic children develop social skills to be better prepared for real world encounters — one of the goals of SigmaLabs is for them to collaborate.
Beyond the requirement that participants must have at least one founder that is technical (ideas are important, but can you build it?), the other house rule is that the office needs to be their primary place of work. Bielski says that this second point plays an important role in creating the community at SigmaLabs. Moreover, the startups can learn from each other, tapping into the rich pool of talent in the room.
“In three months, we saw the best of Israel in terms of UX, design, product, marketing, or just name it. If we had a problem to solve, we could turn to people sitting next to us here.” says Uriel Zecharia, the CEO of Cast+. His company is working on a platform aimed at helping podcasters get discovered and achieve better monetization with targeted advertising in different regions, a problem the industry has been unable to address properly until now.
A key element that all of the startups have pointed to is the essential role that their mentors have played in helping them focus their product development, citing SigmaLabs’ ability to connect them with industry leaders.
“If there’s something that you need, they will make the connection within a week. If we need something, we can just call Eran and reach the right people,” Zecharia tells Geektime.
“If we weren’t part of SigmaLabs, we wouldn’t be where we are now,” says Zecharia, explaining how important their mentorship with the daPulse’s Roy Man was for helping them to focus on building their product for the market. “Coming from a place where you are working on your product and not sure if anybody needs it, to developing a product while you already have a pipeline of customers already waiting for it to be completed,” was great.
Sentidio’s CEO Ariel Bruner cites his company’s connection with their mentor, Yandex Israel’s Omri Moran, in helping them formulate and figure out how to validate their product early on. Bruner’s startup is developing an app for children with autism to learn how to understand social situations better.
“It started as a technology for emotion detection through voice analysis. We came to SigmaLabs thinking that we had figured it out, aiming at call centers, thinking that they would need it, but they weren’t interested,” explains Bruner.
SigmaLabs helped them understand that they were hitting a wall and would need to pivot. Based on their knowledge of other companies working in this field, they could see that they would not be able to make it work with the call center model. During the interview process, they asked them if they would be willing to pivot if based on data, and they agreed. This helped them save time and effort, successfully altering their course within two weeks.
The growth, equity-free accelerator
In addition to having a direct link to the team at Entrée, SigmaLabs members are dialed in to Yahoo’s wider network across the globe, a boon for any young company with aspirations to scale up and out. For Yahoo! this too is a first – they have not been involved in an accelerator before.
With all due credit aside, the SigmaLabs crew is not breaking any new ground when it comes to working with startups outside of the equity model. This trend has been growing in recent years, with at least ten others offering their services equity-free.
What ties them all together is that they are directly associated to very large corporations that have the cash to put themselves out there. Among these are places like Microsoft Ventures, IBM Alpha Zone and Intel’s Ingenuity Partner Program. Then there are accelerators that address certain communities like 8200’s Entrepreneurship and Innovation Support Program or The Hive by Gvahim Entrepreneurs, both of which have their own substantial backing.
In the case of SigmaLabs, Yahoo! is not contributing monetarily but is throwing their weight in with important resources that would be out of reach for an average startup or accelerator. This model has its own advantages, as Bielski is left with a free reign to direct his organization on the ground without outside interference. In this sense, SigmaLabs differentiates itself from the standard definition of a “corporate accelerator.”
While the exact course of Yahoo’s future remains a question for the time being, they are following a well-worn path that can help them discover some really amazing companies, acting as a force multiplier for improving their deal flow.
Looking to the future
In SigmaLabs’s eyes, their new operation here in Tel Aviv is just the start. Bielski tells Geektime that they are already scoping out new locations for their next project. At this point, they are looking to Israel’s North, with its hotbed of talent coming out of the Technion and other centers of innovation.
Eyal offers a wider vision, having said that, “Our plan for the future is to grow to additional locations in Israel (Galilee and the South) and in addition, to offer a graduate program to our alumni in New York and London, thus taking them closer to markets they target. Who knows, maybe even China in a year or two with the right partner.”
As 2015 draws to a close, the teams at SigmaLabs are preparing for their Demo Day on December 30, where they will be able to show off the fruit of their labors during the last quarter.
The accelerator is also on the lookout for the next wave of pre-seed/seed startups to join its burgeoning project. In particular, SigmaLabs are on the prowl for companies working in Fintech, Enterprise SaaS, Marketplaces, and software for IoT.
Companies that think they might have what it takes to be a part of SigmaLabs can apply up until the deadline on December 31.
“We hope that we can create the next generation of startup founders that have a strong social mission whereby they give back to the ecosystems and their communities as their businesses grow,” says Bielski. “We believe since the SigmaLabs startups receive significant value, free of charge, they will do the same in due time by contributing to SigmaLabs and the entire ecosystem thus creating a self-sustainable circle of by Founders, for Founders.”