Over the last few months, Josh and Gordon from Capital Factory have introduced a few startup founders to me to ask me about my experience as a founder that's gone through the Capital Factory Accelerator program. I'm not writing this post because they asked me to, or because I'm sick of talking to founders on Capital Factory's behalf (in fact, I would love to help out more if I can). Rather, I'm writing this blog post to provide written clarity to founders who are making a decision that will materially impact their baby.
But first, some history about my startup, Pristine. It's important to note our history and thus my bias in writing this. So here it goes:
Pristine builds software for Google Glass for remote collaboration in field service, training, and audit environments in life sciences, industrial equipment, and healthcare. As of the time of this writing, we've raised $5.4M, have more than 20 employees, and 30 customers. We are an enterprise SaaS company, with the caveat that we also deploy some unique hardware. The key challenge that the hardware presents is that because of it, we fundamentally change how businesses provide field service to their customers. Unlike most software companies, our customers cannot absorb 400 units in one day; they start with 5, then work their way up to scale.
My cofounder Patrick and I met in high school computer science class. Patrick and I started Pristine on May 15, 2013, a month after I turned 23, and couple of months before Patrick turned 21. Prior to founding the company, I was leading design and development of an electronic medical record (EMR) for hospitals. Patrick was doing freelance technology and data science work.
I started blogging on January 1, 2013 knowing I would start a company in 2013. My reasoning for blogging was simple. I had no money and no credibility. Why would employees work Pristine, why would customers buy from Pristine, and why would investors in Pristine if the cofounders were so young and inexperienced? We used blogging as a foundation to showcase to the world that we knew what we were talking about to raise money and attain our first customers (it worked; I highly recommend blogging). When Google announced Glass in February 2013, I immediately knew what I wanted to do - build software solutions for Glass in healthcare - and recruited Patrick to help me start what would become Pristine. Overtime we would change gears a bit, but we started in healthcare first.
Patrick began coding in May 2013, and I began looking for a beta customer and raising capital. We locked down our first $100,000 at the end of June, and raised another $125,000 by the end of July, bringing our total past $225,000 raised going into August. Meanwhile, I somehow (I can't remember) got introduced to Gordon in June 2013 and met him for coffee. I had no idea what Capital Factory was. He was intrigued by what we were doing and said I should meet Josh. So I came in and met Josh in early July 2013, and he offered us a spot in the Accelerator shortly after the first meeting. Apparently the application process to the Accelerator program has changed since then; I think it's a bit more structured now.
We actually considered not taking the deal for a couple of weeks. At the time, I had some doubts: I really thought the 2% equity-take was significant. I also didn't recognize the value of the Capital Factory workspace and network, or the signal that being in Capital Factory sends to prospective employees. I was really just full of myself and thought I could do it all.
But over the course of a couple of weeks, I spoke with some personal mentors. They made something painfully clear to me: the likelihood of failure at the "your product doesn't even work yet" stage is so high, you should do anything you can to maximize the likelihood of success. If you do fail, the 2% take doesn't matter because it's worth exactly $0, so just do what you can maximize the likelihood of success.
We joined on August 4th, 2013 right when our first hire, Mark, joined the team. Over the next year, we raised $1.1M in seed funding, and then raised $4.3M in our Series A led by S3 Ventures in September 2014. During the Fall of 2013 while working in Capital Factory, we grew to 9 people, all of whom worked out of coworking space. We were the loudest group in the room and we annoyed everyone else in the space; naturally, they all hated us. We moved out of Capital Factory on April 1, 2014 into our own space 1 block away.
Alright, so with my bias out in the public, here are all of the reasons you should join the Capital Factory Accelerator program:
1) Free credits for AWS, Azure, Rackspace, GCP, and more. These credits total more than $100,000 (upgraded to more than $500,000 since I joined). At the seed stage, every dollar is precious. Your mental state should be "holy shit, that's $500,000 for 2% of my company. That's a steal! That means my company is worth $25,000,000!" Obviously the valuation doesn't mean anything, but $500,000 is a lot of money at the early stages. This is reason enough. to join. I cannot conceive of any reason to turn $500,000 down at the seed stage. If you have an offer from Capital Factory right now, you should immediately stop reading this blog post now and accept his offer for this reason alone. I cannot overstate the importance of cash. Cash (equivalents) is/are king.
2) Access to the Capital Factory network. We did not go through the matching program by getting 2 partners to commit $25,000 each, although we tried. What we do is pretty unique among the Capital Factory companies and I think that, coupled with my brazen personality and arrogance, didn't resonate particularly well with the Capital Factory partners. We did however systematically go through the partner and mentor network. The indirect relationships that came from those meetings has generated several hundred thousand dollars of revenue for us, and will likely generate several million in the coming years as we grow. You should be as selfish as conceivably possible and meet with every mentor and partner. Going into each meeting, you should know exactly what you want - money, or a specific connection. Never ask for advice. They will give it regardless. Ask for what you need most: money and access to people who will invest in you or buy your product. The value of the network can be tremendous. Take advantage of it.
3) Work space. I know some people can work from home, but I cannot. Even if you can, that's no reason not work at Capital Factory. The workspace is phenomenal, and it inspires you to work harder. I loved working in Capital Factory. The workspace is a a place you should be proud to bring prospective customers and employees to. It's better than our work space today and we've raised $5.4M! Enjoy it.
4) Validation. Good luck hiring engineers as an early stage tech startup in Austin that's not in Capital Factory or Techstars. If you miraculously find an engineer crazy enough to work for a super-early stage startup, you'll have to convince them not to work for a Capital Factory startup and instead work for you. Good luck. Put Capital Factory on your side. It will help in recruiting.
And now for the downsides:
1) The classes weren't that helpful for me. The only thing that matters at the seed stage is achieving product/market fit. You should do anything you can to get there. You do need to "learn," to get there, though. I would instead recommend that you read like hell. The single best source of information in the tech startup community is the Mattermark daily email. If I could only read one thing per day, I would read the Mattermark daily email. It's absolutely the best source of tech information on the Internet by 10 miles. If you're running a SaaS business, you should also read SaaStr.
2) Capital Factory maximizes the personal value you can extract from your startup in the event of failure; if you fail but went through the Accelerator, you'll have a lot more friends and connections in the Austin startup ecosystem that you can leverage for your own future (e.g. work for a startup that is successful, identify mentors, make friends, etc). Do not discount this. Your odds of success are low; the least you can do for yourself is mitigate downside risk.
3) Parking sucks. Good luck.
4) Coworking sucks because you can't make it your own space, but that's ok. You're early stage. Deal with it. There are worse problems to have.
Recommendation: join Capital Factory. You won't regret it. I think it's hilarious that for a time, I actually thought we would be fine without Capital Factory. In retrospect, I can say with 100% certainty that Pristine would have failed if we didn't join. So stop reading my silly blog and do whatever you can to convince Capital Factory to make you an offer. If you have any questions, you can email me at firstname.lastname@example.org. I'll be glad to help however I can.