What this economy needs to get out of its rut is more startups. Adeo Ressi, the founder of VC-rating site TheFunded, wants to do his part to help jump start the economy with fresh ideas and leaders. He is planning to roll out a start-up incubator, TheFunded Founder Institute (the site isn’t live yet), to groom young founders into CEOs. The Institute will play in the same entrepreneurial waters as Y Combinator, TechStars, SeedCamp, and LaunchBox Digital.
Ressi’s new venture is a semester-based startup camp for very, very early-stage entrepreneurs and students who have basic ideas for potential startups but have not yet founded a company. The classes will be limited to 150 students and will be a part-time commitment, allowing professionals the ability to hold their jobs (other incubators require entrepreneurs to relocate and take time off from work to attend programs). The students will be worked through an aggressive training schedule, where they will have access to lawyers, CEOs, and investors throughout a four month period. By the end of the semester, all the students will be required to have an incorporated company with a prototype and potential investors. With access to a wealth of CEOs and investors through theFunded, Ressi plans to provide students with a wide array of contacts in the tech industry.
Ressi’s says that what differentiates his incubator from others is that he won’t take any initial investment stake in the startups that are launched under his program. Instead, he plans to take out “warrants” on start-ups, where there is a mutual agreement that the incubator can choose to invest in the startup at fair market value, as determined by a network of investors within the four month window of the program. Once the startup enters its first funding round, the incubator will be able to exercise the warrant. This differs from Y Combinator, a well-known incubator which has nurtured and produced innovative startups including Reddit, Loopt, Justin.tv, Xobni, Disqus, and Scribd. Y Combinator gives startups a base sum of $5,000 as well as $5,000 per founder in return for a 2 to 10 percent ownership stake in the company. The benefit of this is two-fold; the startup gets money from the get-go and Y Combinator’s investment adds legitimacy to the startup when it looks for investors down the line.
Ressi also says that the Founder Institute’s model will focus on recruiting only early-stage entrepreneurs who have not previously founded a company. “We’re searching for more unusual, unique founders from a variety of industries who can be groomed into successful founders,” he explains. The institute is focusing more on the quality of a potential entrepreneur than on the potential of the initial idea for the startup.
The inaugural class begins in late Spring and Ressi will start soliciting applications online in the near future. At the moment, Ressi is putting together the curriculum of the program (which can be found here, but he warns that the site is not ready and may crash). While the Institute will be based in the VC hub of Silicon Valley and will take place twice a year, all of the curriculum will be available online to the mass public.
The Founder Institute is a novel model somewhere between a crash-course in executive education and a proper incubator. It will focus more on investment in the founder and less on the idea. Y Combinator’s idea-focused model has been proven to be a valuable springboard for startups as well, both in terms of incubating viable startups and finding investors for those ideas. In the current recession, we can use all the new CEOs and startups we can get.
Thanks to Scott Scheper for the tip.
i keep getting this confused with peter thiel fund
Amazing.
Gotta love VC nitwits like this guy. Jobs drying up like the Sahara, unemployment lines down the block, and this idiot wants to start a CEO Camp?
Thanks, TC, for yet another reminder how totally out of touch certain people are with the rest of the world.
Which is probably going to be the “takeaway” for every young CEO foolish enough to attend this misery.
To clarify, TheFunded.com is not a venture capital firm.
Startup companies consume resources intelligently, put people to work in efficient ways, and produce market driven products at lower costs.
Helping smart people start companies should, in fact, help the economy.
Again…great idea, I’d love to see something like that in the frozen tundra we call Minnesota.
Also, I got a big kick out of this guy’s “anonymous” post. Probably too pissed that he got canned for not being smart enough to realize that entrepreneurs CREATE JOBS.
I think he’d prefer to get a hand-out instead of having to work.
Atta-boy Adeo
Excellent approach to a very good idea.
I count Adeo as one of my friends and I can’t wait to see what he does with this
Thanks, Fadi. The main ideas are (1) helping ‘Founders become Entrepreneurs’ and (2) paying fair market value for equity, versus making arbitrary investments with no market validation.
How will you be placing a fair market value on “very, very early stage” startups? Is this network of investors included in the round of financing? I would certainly like to learn more about the valuation process.
Glad to see experienced investors taking an interest in young entrepreneurs. Thanks!
Fair market value will be determined by external investors that complete seed and angel investments in the new companies. In general, valuation in early stage companies is determined in a mutual negotiation between the founders and the lead investor, and the valuation is generally arbitrary.
Founders participating in the ‘Institute’ will be provided with concrete advice on how to pitch investors and introduced to investors throughout the four month program.
Adeo…
If i might.. You have a number of older/seasoned guys/gals who would seriously provide skills to this kind of process. Why not consider them as well as the younger guys. No need to discriminate!!!
peace
This sounds like a great idea, especially given the current financial climate.
The Y Combinator style is great for people straight out of school, little in savings (and cash strapped parents), and who can move cross country (little family responsibility).
I think this might attract more experienced engineers and the like who have been laid off, with savings/severance (but a spouse who’s still working), who need help with the business side of things. Kudos.
I wonder if things will breakdown this way, and if some experience might make for some interesting start-ups.
where do i sign up?
You can request to be kept up-to-date by emailing apply [at] founderinstitute.com.
Love it. Unfortunately for me, I’m not 20 something without family obligations where I can survive for a few months sleeping on a couch and eating 99 cent burritos, so the Y Combinator model really doesn’t work for me. This sounds great.
BTW, the program is designed so that you do not have to quit your day job to get a company off of the ground…
Sign me up!
@Sam and @Robert: Anyone of any age or experience-level can apply and participate in the sessions. Each session will be lead by two seasoned CEOs and one domain expert. The idea is to rigorously structure the founding of a new company through sessions with clear homework, like researching patents, creating a mission statement, or establishing your books and records.
I wish I was put through a more structured process when founding seven companies. For example, I fudged a lot of stuff with TheFunded, and I knew what I was doing! A lot of times, you just get distracted from doing the basics.
Let me know how what help you need!
Any help with the ‘curriculum’ is appreciated:
http://topicki.....com/projects/2
Just sign-up, and then you can items to the curriculum, discuss them, and vote.
I’m ready. Now-do you have this in TX?
I’m ready to sign up. Will you guys please update with developments?
http://www.eeihq.com
Forgot something.
““warrants” on start-ups, where there is a mutual agreement that the incubator can choose to invest in the startup at fair market value, as determined by a network of investors within the four month window of the program.”
What percentage of the valuation are the warrants for?
Who selects the network of investors?
And does the entrepreneur have input into and veto power over the valuation?
This is EXACTLY what I need! I am a seasoned executive but newbie entrepreneur who takes advice like a fish to water. This way, I can keep my day job … as soon as I get one
Thanks techcrunch for another great start-up connection.
Where do I sign up, the access to potential investors is compelling.
No stocks to pump in this economy?
This is exactly what entrepreneurs need, congratulations on this new project. The energy that comes out of these mentorship programs is amazing, and everybody will learn from it whether they end up starting the business or just join another effort they have met in the process. The next step in the process is funding, and there are a lot of issues with the existing VC and Angel model.
Entrepreneur Commons (www.entrepreneurcommons.org) has been promoting an alternative to these models which you may like.
Where do I get signed up?
Hey Adeo- if you need other “mentors” for the new founders, happy to help anyway I can.
Completely…
Useless…
Self-stroking…
Nonesense.
Sure, please email apply [at] founderinstitute.com. Thanks!
Nice idea… Where do we sign up?
Smells like marketing to me
Do you have to be in the US in order to attend? I note that it was implied that you could take the course remotely… I’m in the UK, it sounds like a great scheme and I’d love to be involved if possible!
I would love to do this! so many ideas, just haven’t the slightest clue where to begin.
Sign me up!
In terms of applying, an application form will be set-up at founderinstitute.com. If you would like to be notified when the form is ready, email… apply [at] founderinstitute.com.
————-
@dev: Answers to your questions are below:
“What percentage of the valuation are the warrants for?”
- This story was leaked before everything has been finalized. The Founder Institute would look to secure a small percentage of the companies incorporated in the program through warrants, and these warrants would be priced at a small discount to the first round, possibly a 10% or 15% discount.
“Who selects the network of investors?”
- The founders will be introduced to investors throughout the program, and the founders can identify and speak with any investor that they choose.
“And does the entrepreneur have input into and veto power over the valuation?”
- The founders choose the investors, negotiate the terms, and sign the deal with assistance, but no control from the Founder Institute. Everything is up to the founder and the shareholders. Keep in mind that the Founder Institute will not be a shareholder of any kind pre-funding.
Interesting.
Adeo – good idea and good luck. I like your idea but I think your personality is two notches below a used car salesman. I have seen you make an ass out of yourself bragging about GameTrust at game conferences in the past. It might be Ok to be a cocky bastard if your are Sergey or Larry. However, you are not.
Thank you. Sorry if the promotion of Game Trust came off the wrong way at industry conferences.
Innovative incubator programs such as this are vital to span the gab between investors and entrepreneurs; however, programs such as this are historically location specific, i.e. if you do not or cannot live nearby you cannot participate. Does this new program have any provisions for remote participants? or a relocation program to enable aspiring entrepreneurs to participate?
Yes and no.
The physical location for the Spring semester will be in Silicon Valley. Founders who are accepted and plan on attending sessions will need to be in the Bay Area.
However, all of the materials and information, within reason, will be made available online for anyone anywhere to use. For example, we will try to capture as much of the sessions as budget and format allow.
Should entrepreneurs choose to follow along at home, will there be any opportunity for them to apply for direct mentoring or consideration for the warrant style investing you’ve developed?
Founders that go through the program at home or in different cities will not get the benefit of direct introductions to investors, vendors, and other free services at this point. It’s an interesting point to think further about: how to scale the free services and benefits to those not directly in the program.
So it seems as though you *can’t* actually keep your day job if you are required to live in the Bay area in order to be considered.
Bummer.
This was a nice idea.
Nice that the material is publicly available online.
Adeo.. I love it.. it’s a great way to give back to the community and drive the next generation of entrepreneurs. Reid Hoffman has an article today in the washington post about startups and letting us fuel the economy rather than dumping our taxpayer money into the pork filled stimulus package (pork filled is my editorial)
http://www.wash...947.html?sub=AR
Looking forward to our lunch friday, I’ll be glad to help anyway I can. You and Dave McClure should connect and get some of the young startup2startup entrepreneurs enrolled.
Adeo.. I love it.. it’s a great way to give back to the community and drive the next generation of entrepreneurs. Reid Hoffman has an article today in the washington post about startups and letting us fuel the economy rather than dumping our taxpayer money into the pork filled stimulus package (pork filled is my editorial)
http://www.wash...30;..tml?sub=AR
Looking forward to our lunch friday, I’ll be glad to help anyway I can. You and Dave McClure should connect and get some of the young startup2startup entrepreneurs enrolled.
I think this is a great idea, but, as others have noted, I think this whole idea of using warrants really needs to be given more detail.
The good thing about the Y Combinator model is that by investing in the companies up front, the two interests are aligned much more closely – they have a stake in their companies succeeding.
This model seems to allow them to just pick and choose whichever companies may turn out to do well, while the others are left to whither away. It shifts all of the downside risk to the company founders while preserving the same upside benefit for the camp.
“It shifts all of the downside risk to the company founders while preserving the same upside benefit for the camp.”
(1) Successful founders from incubators often feel that they receive bad investment terms from the incubator (as discussed on TheFunded). Warrants ensure that any purchased equity by the Institute is priced fairly by the market, creating a win-win scenario.
(2) Founders are not encouraged to quit their day job, put their livelihood at risk, or live on reduced incomes by the Founder Institute, unlike other incubators.
(3) The Institute will work to ensure that the majority of companies will receive necessary seed or angel funding at a rate determined by the market for a proper launch before the program is completed.
The Institute is formalized mentorship with structured deliverables to create world-class companies. There is upside in the warrants, but that is not the endgame. The goal is to help create a large number of great companies.
Adeo, will you be taking any initial money for the crash course from the entrepreneurs? Otherwise, what’s the catch
There is no plan to charge founders any initial money (1) to apply or (2) to participate in the program.
With applications, the theory is to use a research company to do diligence on applicants, much like when applying for a job at a major company, taking a loan, or even applying to a university. If the volume of applications becomes unwieldy (>1,000), we *may* charge a small fee ($50-$150) to cover the costs of running the background check. We are working to have sponsors that (1) cover some of the infrastructure costs and (2) provide free services to all of the founders.
It can be very difficult to start a company. We want to make it easier and cheaper, not more expensive.
I love the idea. There are so many people out there with great ideas but no support structure. However, please lose the warrants.
Without the warrants, what is the incentive on his part? There has to be a mutual relationship. Its not always take, take, take.
just take a set amount of stock
Nitwit Stamper:
Didn’t you get into a lot of trouble for ripping off people in Seattle under the guise you were a “bank” when in fact you were nothing but a small-time Ponzi wanna be operation?
Me thinks you did!
Welcome back, small change!
@Jeremy: “just take a set amount of stock”
The ‘Institute’ wants the ability to invest at fair market value to help the companies. The goal is to create a win-win with the founders and the ‘Institute.’
I like that they will be putting the curriculum up for the general public. Nice touch.
*waves hand*
Pick Me! Pick Me!
College Ledger – News That Matters!
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Adeo,
Although I congratulate you on your out of the box thinking, how confident are you that there will be a steady line of investors lined up behind you? I’m sure you already have a few interested parties but I’ve also heard of lots of scorned VCs hurt because of thefunded.
Would an entrepreneur be taking a risk by aligning themselves with you? What is your reaction to a question like that?
Please do not take this comment as a snide remark. Its a question I feel a lot of entrepreneurs might like knowing your answer to.
There is definitely a risk that some investors scorned by TheFunded will not want to consider an investment in companies that are part of the Institute.
However, the best rated investors on TheFunded, who are arguably the best investors to have in a company, appreciate TheFunded. At a recent event to celebrate these top-rated investors, TheFunded.com had a strong turn out. See details on the event and names of some attendees below:
http://www.thef...funds/item/5128
cool! Hope it’ll be downtown Palo Alto somewhere
I love this. I’ve been reading Fred Wilson’s blog and others, realizing that it’s going to be new businesses that will create new jobs.
At the same time, I have a bunch of ideas for new businesses, and absolutely no idea how to start and manage them so they succeed.
Thank you so much for offering this. I’m excited to apply.
Adeo,
This looks really good. From when are you planning to start the process of accepting applications.
Any tentative date.
Also, what is the selection process.
You can email now to apply [at] founderinstitute.com, and we will notify you when formal applications begin. I expect to start taking applications in April, 2009. TechCrunch got this story through a leak WAY before we were ready to announce anything. Talk about breaking news early…
The selection criteria is subject to refinement, but right now includes: (1) not having a formal incorporated entity yet, (2) having a reasonably well articulated idea and passion to start something around it, (3) focusing on a high technology or innovative sector, (4) having some reasonable training or domain expertise, and (5) passing basic employment-style background, fraud, and reference checks.
There are no age or industry preferences. The article mentions “young founders,” but the vision is to accept any founder that wants to go through a structured process, including experienced founders with multiple companies.
“Founders are not encouraged to quit their day job, put their livelihood at risk, or live on reduced incomes by the Founder Institute, unlike other incubators.”
Adeo – Makes sense that founders are not required to “quit their day job” while taking evening classes for 4 months at the Founder Institute, but you’d certainly encourage them to quit once you invest in their ideas, right?
I would expect there to be a mix of full-time and part-time founders in the program. It’s hard to say what the ratio will be in the current economic climate with all of the layoffs that are happening.
Once a company gets off the ground and properly capitalized through revenues or investment, I would expect that the founders would start working full-time. Growing a successful company requires hard work, a full-time commitment, and a passion for the business.
In the early days, many businesses get started with part-time founders until the company gains traction.
Adeo, this is a great concept but this entire thing is potentially a bit misleading.
“Founders are not encouraged to quit their day job, put their livelihood at risk, or live on reduced incomes by the Founder Institute, unlike other incubators.”
I realize that in order to get funding for most ventures, funders tend to require you to live in the Bay area. Sadly, I’d be willing to bet that the demographics for Tech Crunch traffic are *NOT* from the Bay Area.
I’m suggesting that Leena Rao needs to alter the contents of this story to suggest that this is a fantastic Startup Camp so long as you live and have a current job in San Francisco.
Damnit. This blows!
The whole program will be online to follow anywhere in the world, though certain elements of IP and incorporation will be most relevant to companies in the United States.
Is the expectation to do this alone oe can the course be offered to 2 people who want to start a company together? ..richard
Yes. Multiple founders can participate at once, supporting ‘founding teams.’
Can I like ask something to any experienced people in the valley?
Coming from a different background, I have this stereotype of VCs and Angels in the valley as those looking for web2.0 startups that have their business model around just advertisements… Is this plain rubbish or is it true for all of them?
Or is there also others that have a more balanced point of view. I’m saying this as, many startups go into the deadpool as they just rely on advertisements, adsense, and dont really have a business model or unique selling point to which they can establish themselves in the tough market.
Someone please enlighten me.
To support theFunded, we’ve just added http://vc.tEarn.com/ to track the social media score for top venture capital firms. Looks sad.
>>focus on recruiting only early-stage entrepreneurs who have not previously founded a company<<
I don’t understand this requirement unless the venture is completely philanthropic. Entrepreneurship is a skill learned over time. Having been down the road before can only help in the next attempt.
The ‘Institute’ will accept seasoned and new founders alike from any industry. This was a mistake in the original article. There are some clarifications below:
http://www.thef...funds/item/5136
Adeo | two things:
First, will company concept submissions be made public – even if they are not accepted?
And secondly, will company concept submissions that are not accepted become the property of Y Combinator, TheFunded or any other participating entity?
The concern here is conflict of interest / confidentiality.
“First, will company concept submissions be made public – even if they are not accepted?”
The ‘Institute’ will never share or publish application data. TheFunded.com is known for its reputation to protect user anonymity.
“And secondly, will company concept submissions that are not accepted become the property of Y Combinator, TheFunded or any other participating entity?”
No. All of the ideas will be owned by the founder. In fact, the reason that the ‘Institute’ is pursuing warrant-based ownership is so that the ‘Institute’ will not own any equity until the business reaches a certain level of maturity.
Entrepreneurship is always a good thing. If you need help with a Business Plan and Financial Model, check out venturepresentation.com
Thanks
Where can I speak with someone or sign up??
This a great idea , and a win win for all
involved.
The world is not ending , and this is part of the recovery process
Good one Adeo!
I think Adeo’s idea is excellent, and it can be effective in training young entrepreneurs during this downturn so they can emerge to participate in the next “bubble”. We at ExpertCEO (www.expertceo.com) will welcome them as members of our site as their companies become reality.
Adeo,
I read some where that selected ideas/founders get $15,000 as a start-up fund too develop their ideas.
Is this correct? If possible; can you provide details on this.
The ‘Institute’ will work to secure funding for start-ups during the program in excess of $15,000 or as needed. The goal is not to provide a ‘one size fits all’ funding solution.
Adeo,
Does this connect… well, people with tech knowledge and people with business knowledge?
I’m referring to the people coming in.