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DIGITAL MEDIA FROM THE INSIDE OUT: My focus is digital content -- production, distribution, collaboration, innovation, creativity. Some posts have appeared across the web (HuffPo, Tribeca's Future of Film, The Wrap, MIPblog, etc.). To receive these posts regularly via email, sign up for my newsletter here.

Entries in startups (3)

Wednesday
Oct242012

Accelerators and Incubators and Content: A Deeper Dive

The amazing worldwide upsurge of start-up accelerators and incubators was reflected at last week’s Digital Hollywood conference, which featured three packed sessions exploring the topic.

I moderated a “Think Tank” on incubating digital content that featured Ana Serrano, Founder of ideaBOOST  (which I advise), Richard Wolpert, cofounder of Amplify.LA and Chris Gartin, cofounder of io/LA 

It used to be simple, there were accelerators and there were incubators. (Here's the difference).

But, check out some of the other programs represented at the DH conference and you'll see a wide range of models that are emerging to meet a lot of different needs than the venture backed early stage seed accelerators, as exemplified by Y-Combinator and TechStars. (DH speakers came from Originate, Cross Campus, Tipping Point Partners, Turner's Media Camp, Portland Innovation Experiment (PIE), Mucker Labs, and Idealab New Venture Group.

Along with crowdfunding, the accelerator phenomenon is the most-buzzed-about innovation in the start-up world, inspired by the success of the investor-backed Y-Combinator and TechStars that apply a combination of mentoring, seed investment, and exposure to help launch tech startups.

The contours of this ‘seed capital’ model have been widely analyzedchewed over, contemplated, and copied.

What Accelerators Do Right

If an entrepreneur is willing to give the accelerator equity in their company and devote a few months of intensive work, a host of benefits will come their way, as a recent survey of accelerator graduates suggests. 

Accelerators are good at:

1. Generating and validating an idea and a business model. 

2. Investing and finding more investors. 

3. Providing contacts and opening doors. 

4. Providing mentors, advisors and guidance. 

5. Providing hands-on help or education. 

6. Helping in product development and testing. 

7. Helping with product marketing and user acquisition. 

8. Providing a peer group in a high-pressure environment. 

9. Providing a physical location and support resources. 

10. Negotiating and providing discounts, freebies and perks.

Which Accelerators Will Fail?

The proof, of course, is in the pudding, e.g., whether start-ups are able to attract additional capital, customers, and revenues, and, over time, produce an exit (sale or stock offering) that provides returns to the initial investors. It’s probably too soon to tally the success of most of these young companies, but industry veteran Peter Relan recently predicted in a controversial post that 90% of accelerators will ultimately fail on financial terms, because they will be unable to produce profits equal to investments.

Nonetheless, Relan believes the accelerator model creates genuine value for the industry and the country beyond simple ROI, because they constitute “a new education system, one where relevant real-world experience has begun to trump degrees. The right program can provide the same connections that accompanied acceptance into the right university 15 years ago.”

Beyond VC Expectations

Not all accelerators and incubators are financed by venture investors. There various models – let’s call them start-up factories --- sponsored by cities, universities, economic development authorities, even clusters of angel investors in a region. They often have non-market objectives, for instance, creating jobs in a region or improving the performance of a given industry.

A recent example is the “Made in New York” Media Center, an incubator to be launched soon in Brooklyn by the Independent Feature Project in conjunction with General Assembly and the City of New York. 

Other accelerators are sponsored by a company, for example ad agency Weiden + Kennedy’s sponsorship of the Portland Incubation Experiment (PIE); Turner Broadcasting’s launch of Media Camp); and the Canadian Film Centre’s launch of ideaBOOST – each has its own reason for making the investment.

Turner is looking for tech companies that address business needs within the broadcasting industry, and which can help Turner thrive. Companies incubated within PIE may also have a media focus, but in addition, are intended to support the Portland tech ecosystem. IdeaBOOST seeks to help the Canadian content business, as well as to encourage its practitioners to build sustainable companies using principles derived from the lean start-up movement.

These and other accelerator models will blend program features to meet their own goals beyond the straight-up ROI expectations of venture investors (fast growth, 10-100x return).

VCs Don’t Like Content Companies

The classic seed-accelerator concentrates on technology start-ups, which, if successful, can scale rapidly and deliver a Google-level return on investment. Like a mutual fund, the accelerator spreads investors’ risk across a bundle of investments, and then injects the companies with capital, learning, and networking.

Like certain VCs, there are industry-specific accelerators, for example in health care, biotech, nanotechnology, automotive, and others.

But, until recently, not content. In posts here and here, I suggested that maybe the chasm between content and tech is blurring.

VC’s historically do not much like content companies, as a recent TechCrunch post articulated, despite the fact that people spend a third of their time online consuming content. 

Content companies are tough to “scale” quickly, meaning grow the number of customers, and therefore revenue potential. Certainly not like tech platform superstars like Pinterest, which added 11 million monthly uniques in 9 months.

Furthermore, content companies rarely have huge exits like an acquisition – meaning smaller paydays for investors, and a sale often takes longer than tech businesses.

Finally, the traditional tech investors consider content companies to be lifestyle businesses, and simply are not capable of reaching “$100mm and then $1 billion in revenues – anything less is insufficient.”

Enter IdeaBoost

“I’m reluctant to even use the word ‘accelerator,’” said IdeaBOOST’s Serrano at the Digital Hollywood panel, in part because its model veers from the ‘classic’ accelerator model in several ways: It is financed with funds from the government and two large private companies, not VCs looking for a big payday from participants; IdeaBOOST does not take an equity stake in its companies; and most importantly, its first group of eight companies are all building content.

IdeaBOOST, which official kick-offs its first four-month cohort on November 5th in Toronto, is a hybrid model that borrows from many sources in order to support aspiring content companies.

Kickstarter and IndieGoGo inspired IdeaBOOST to include the public in the development process. But instead of soliciting funds, applicants ask the online public to “boost” their project, and in the process acquire a database of prospective customer email addresses before even being selected. IdeaBOOST applicants drummed up more than 300,000 votes in just a month.

This focus upon audience engagement is a key differentiator for ideaBOOST, borrowed from the lean startup movement’s focus upon customer development. The 8 companies accepted in ideaBOOST will be required to use customer validation processes as they develop their product, business plan, and audience engagement scenarios. Mentors for IdeaBOOST companies include content, business, and tech experts from Canada and the U.S.

Co-working space

Founders of Amplify.LA and io/LA have both tech and entertainment cred, and have recruited talent from across both industries. "Pure" content start-ups are in the minority, says Amplify's Wolpert, but if the company can grow, they consider it. io/LA does feature more involvement by talent, so their hybrid model, just launched this year, will be intriguing to track. 

The two programs have also grafted the seed-accelerator model onto another important trend, the co-working movement. Both groups have facilities which house the companies receiving their investments. In addition, other start-ups and creatives are free to work out of the space, with tiered fees based upon what the companies use. Both have active educational programs featuring thought leaders, experienced entrepreneurs and mentors from their accelerator. Both programs foster synergy between and among the membership, with the result that participants can quickly build teams, stronger companies and better products.

If you’re looking for a great work environment for your start-up in either Santa Monica or Hollywood, check them out. And chances are, there is a similar opportunity in your community. Just check out these examples from around the world.  

Friday
Mar162012

AN ACCELERATOR FOR ENTERTAINMENT?

IndieWire editor Dana Harris's post on the "8 Film Startups You Should Know from SXSW" got me thinking about entertainment start-ups and what we must do to create more and better companies in this industry. 

"Film, to put it mildly, is not a priority for tech people," says Ms. Harris, and the obverse is even truer, namely that studios aren't likely to be the source of tech-enabled innovation to solve problems in the film industry.

Noting that a trade show isn't a great place to concentrate on problem-solving, she boldly suggests an idea that I've been peddling ever since AFI shuttered the Digital Content Lab:

"A startup incubator entirely devoted to problem-solving for the entertainment industry."

Yes, it's just what we need: a year-round community of tech, creative and business innovators who tackle the pain points and create innovation (and disruption) in the entertainment business, broadly defined. 

One way to think about why and whether an Entertainment Industry Accelerator makes sense is to look at some of the start-ups in the space. Are they solving big problems? Is there an audience? Does the business model make sense? Here are Harris' 8 movie-related start-ups: 

  • Tugg offers "crowd sourced exhibition" 
  • JuntoBox Films is a "global collaborative film studio" which plans to invest $2.5m in five films, all embedded within its social site
  • Fandango's Movies With Friends - a FB timeline app that enables you to embed clips from movies you watch and rate.
  • Indiefilmz.com - a VOD site for indie films 
  • Moviepilot.com - you subscribe to upcoming movies and follow them as they roll out. 
  • Milyoni.com - Facebook-based film distribution, including social commentary with friends while watching
  • Filmaster.com - a recommendation engine for movies
  • Veam.co - allows filmmakers to post films and charge consumers directly, all via a custom app.

To those I'd add a few others that I've encountered in recent months: 

  • WatchIt  a platform that aggregates your movie queue for all forms of movie exhibition into a single list, including theatrical, DVD, kiosk, digital download and streaming. 
  • Scene Chat, which adds social commenting to videos on YouTube, Vimeo and more. 
  • NanoCrowd which uses "reaction mapping" to zero in on picking movies (and why). 

Notice that only one uses movie clips (Fandango which is owned by a movie studio). Why? Maybe because dependency upon the rightsholders is not good for a start-up --- thus, illustrating one of the key challenges to any Accelerator in this industry, e.g., resistance from the keepers of the status quo. Believe me, this I know from years of dealing with movie clips and studios while at the AFI.

DEFINING MONUMENT OF THE REMIX ERA

It all rushed back to me as I read Daniel Zelewski's superb profile of mash-up artist extraordinaire Christian Marclay in last week's New Yorker (subscription required) This is the story of "The Clock" -- dubbed "the defining monument of the remix age." I devoured two of the 24 hour montage masterpiece at the LA County Museum -- movie clips featuring clocks keyed to the actual time of day. It's amazing. 

At the time it reminded me of the Apple ad introducing the iPhone ("hello….hello…"). Turns out, Marclay had created a 1995 piece "Telephones" which was one of the first real mash-ups, long before YouTube. Evidently Apple tried to license it. When Marclay refused, Apple ripped it off to create its own ad. 

Marbray did not seek "rights" for any of the clips in this massive montage,but then, he is using a fine-arts distribution model, built on a  VERY small number of authorized copies (Five copies of the computer program had been made for sale to museums for hundreds of thousands of dollars, and a sixth to a hedge fund manager is Connecticut.) Very different than distribution via theaters, TV, or the web. Filmmakers usually have to pay for rights, though there is fair use.  

During the last decade, a slew of start-ups began to sprout up offering the use of movie clips. 

  • Killerclips launched in 2002 with a movie clips search engine When you go there now, you're are greeted with a rather forlorn Eddy Murphy clip and this text: "Sorry fans, the movie companies finally decided to kill all of our clip content although we make nothing -- it's only a labor of love. Why does YouTube get away with it?"
  • AnyClip launched in 2008 to considerable acclaim, at least in Silicon Valley where it was an audience favorite at the TechCrunch 50 event. Alas, the company could not license enough studio clips to realize its dream of a universal movie search engine, and has pivoted its model, though it claims more than 50,000 live clips.  
  • MovieClips.com launched in 2009 with 12,000 two-minute clips from most Hollywood majors (not Disney). It seems to be holding on,  
  • Movie Tagger is a crowd-sourced concept which would, like Wikipedia, allow anyone to add tags down to the single shot of a movie from Michael Naimark and a team at USC. The project has not yet launched.

AN ACCELERATOR FOR ENTERTAINMENT?

It's such an obvious idea, one might ask, why has the accelerator model never been applied to the support and funding of entertainment-industry start-ups?

LA, like many second-tier tech hubs, has seen an explosion in the creating and growth of incubators, accelerators and other instruments designed to help start-up companies race towards launch, viability, funding, and exit. (For a good overview of incubator and accelerator models, and some examples of those here in LA, check out Joey Tamer's blog post. One of the new start-ups, Amplify.LA touts its showbiz connections. Indeed, many of LA's leading tech investors are high net-worth refugees from mainstream entertainment companies. 

The accelerator movement is intended to find winning companies that deliver the kind of profits sought by investors in the angel and VC world, preferably 10 to 20 times investment. Tech companies with business models that can grow quickly and scale across the globe are what accelerators want to fund. Start-ups that require battle with incumbents like the studios are less attractive. Truly disruptive start-ups like Neflix or Tivo, as you may have noticed, launched up north where there's less reverence for the legacy of the studios. 

An instructive discussion on the topic is currently ranging on Q&A site Quora around the question "Can start-ups one day really Kill Hollywood?"  -- triggered by a manifesto from accelerator pioneer Paul Graham of YCombinator calling on start-ups to, in fact, innovate Hollywood out of existence. 

Hollywood is just not about start-ups, even when many of its richest executives invest in them as angels and VCs. Instead we have organizations like this:

  • Movie Labs, an attempt by the studios and MPAA to lure engineers into solving a narrow set of tech problems (they even have a Palo Alto address.
  • USC-based Entertainment Technology Center brings together senior tech executives from both studios and interested technology companies to address industry-wide challenges. ETC played a major role resolving business and tech issues around digital cinema and 3D, and created an master technical standard -- all problems the studios needed to solve.  
  • Across the USC campus, the year-old Annenberg Innovation Lab, headed by Jon Taplin, is an R&D Lab conducting interesting projects, but not yet incubating new start-ups. 

Clearly, there's a gap, an unmet need, a vacuum waiting to be filled with investors and visionaries with a passion for entertainment solutions driven by technology.

The whole accelerator movement is exploding, powered by the relatively low barriers and cost of entry for start-ups building web- and mobile-based products. We're seeing examples every day of accelerator-inspired models that seek to incubate all manner of enterprises, not just return a 20x profit. These include the announcement this week at SXSW of the Public Media Accelerator, an accelerator focusing on women-run mobile businesses, and purpose-focused accelerators for education, government, social entrepreneurs, journalism, and health, to name a few. 

I'm currently working on the development of a new accelerator-inspired Lab in Toronto that will focus entirely upon digital entertainment content -- what we're calling "engaged entertainment." Historically, content hasn't been seen as having a predictably "scaleable" business model, but that's changing, given the blur between content, technology, social, and audience.

In every case, the success of the incubator or accelerator is due to the commitment of a core community of true believers whose interests (and resources) converge to generate a critical mass that gets the program up and running. I have no doubt, based upon my 20 years of running innovation programs at the AFI, that this community will flock to support such a venture. Now we need some deep pockets. Call me if you have ideas on how to make this real. 

Friday
Mar022012

CROWD-FUNDING & PRIZES: INNOVATION IN FUNDING INNOVATION. (Week's best posts)

If you follow my Twitter feed (@nickdemartino), you will have seen a distinct tilt towards news and stories that explore new fundraising models for start-up businesses and creative projects. How do we stimulate innovation? It's a question I am obsessed with, and so with fair warning, I'll be taking a dive into the topic over the coming months. 

But First: Speakers (including me) were announced this week for two upcoming conferences. : Henry Jenkins' Transmedia Hollywood 3 on April 6 at USC in Los Angeles and WyrdCon, June 21-24 in Costa Mesa CA.

CROWDFUNDING, COMPETITIONS & START UP CULTURE

See why serial entrepreneur Jason Calacanis calls AngelList and Kickstarter "the two most important startups in the world." This is a manifesto on disruptive fundraising models, and, notwithstanding the author's posturing, is a really interesting dive into why the "wisdom" of the crowds should justify risk by all, not just a select circle of "investors." 

Just this week, AngelList launched a tool that could lead to the standardization of pitch decks for startups. Why? "Most investors (and journalists) receive hundreds of pitches every month, so finding (as he says) crisp yet complete ways to express your startup’s vision, impact, traction, and so on can be the difference between going on to success or finding yourself in irrelevance."

Of course, the Kickstarter model is itself an innovation -- donors do not get equity like traditional investors, and yet, millions of dollars have been raised for a dizzying array of projects. And, indeed, for-profit businesses may turn to the crowd-funding model. For instance, here's a post that urges start-up businesses to consider crowd-funding their capital needs.

And recently CrowdBackers launched to bring Kickstarter-style crowd sourced financing to the world of early-stage start-ups. 

Meanwhile, with three $M-plus projects in just the past month, Kickstarter is on a roll, entering its growth stage that success brings. More projects need to understand how the modle works. Here's a useful tip sheet on how to launch campaigns in Kickstarter (and smaller crowd funding site IndieGogo)

Even more interesting is this post that analyzes the performance of different Kickstarter "perks" in raising money.

A completely different model for stimulating innovation or novel solutions is the cash-driven competition or prize, examined in some depth in a NY Times piece just this week..

The Knight Foundation has been running its "News Challenge" online for several years, a variation of the competition model for innovation in news and journalism in the digital era.  This year the foundation has restructured, with the first of three cycles launching now through March 17. Even if you are not working on an eligible project, the model for stimulating solutions through competition is fascinating.

Entrepreneurs of all stripes will benefit from the launch of Cofounder.tv, a video-based learning site comprised entirely of talks from investors and founders. The site is a passion project by Rony El-Nashar, a VC at SeedStartup, according to this post at Arabnet. 

Finally: These models argue for the democratization of innovation, but Jon Gertner's piece in the NY Times reminds us that the centralized corporate research model, as epitomized by Bell Labs, produced an astonishing volume and range of innovation during much of the 20th Century, much of it forming the foundation for innovations that we see today.

THE MEDIA-TECH BIZ

The battle of prognosticators over whether cable TV is collapsing or thriving continues with posts that flat-out contradict each other. You decide. My friend Seth Shapiro debunks five theories on the death of cable TV on Media Shift. "Goodbye Cable TV" is Business Insider's story, occasioned by 2.3 million cancelled subscribers since 2010. Which of course is contradicted by Paid Content's post entitled "Cord Cutting Can Wait," triggered by a surge of nearly 350,000 new subs in Q4. You decide!

Meanwhile, the future of cable TV, as I've written, is better use of data. Check out Mark Phillip's app, called "Are You Watching This?" or RUWT, which points to a future that leverages viewing and channel data in service to nice audiences, in this case, sports as a bellweather category that could impact all of TV

All you ever wanted to know about Twitter (perhaps), in this exhaustive profile from Business Week. One of our smarter digerati, Brian Solis, offers his thoughts on the "state of the Twitterverse," c. 2012.

All Things D interviews YouTube chief Salar Kamangar. 

The Guardian offers a very nice overview of "how apps have taken over the world" since Apple created the platform in 2007. 

Henry Blodget deconstructs Apple's financials to see what it would take for Apple to go to $1,000 per share.

"Why Are Harvard Graduates in the Mailroom?" asks Adam Davidson, as he explores the "lottery system" of labor economics, and worries that the whole economy is shifting to this cutthroat model with no Plan B.

Broadcasters sued Aereo, the start-up that brings over-the-air TV to the Internet. It took less than 2 weeks.

CONTENT AND TOOLS

Congrats to Moonbot, the Louisiana based animation startup that won the Oscar for best animated short film, "The Fantastic Flying Books of Mr. Morris Lessmore," a form of which also debuted as an engaging iPad app. Venture Beat interviewed Brandon Oldenburg, a partner (and Oscar winner). I met Brandon at the Dallas Video Fest and have been so impressed with Moonbot's strategy for sustaining creativity in the new digital marketplace.

If you're a Godard freak (me), you won't want to miss these remixes of his classic Alphaville. Thanks to Anne Thompson (@akstanwyck), whose commentary is a lovely lecture in itself. 

ZED.To is an 8-month immersive narrative adventure chronicling the end of the world in Toronto, currently raising money on IndieGoGo.

Transmedia LA members have launched the "Miracle Mile" ARG, which will roll out this spring and summer. The first draft of a storyline has been posted on FB here, though the group is by invitation only. 

Meghan Gargan discusses "what Facebook's Timeline means for Transmedia"

Graphicly is a publishing platform born to support the needs of graphic novels. With the tools and especially analytics it has developed, the company is now expanding to other types of books. Take a look at the value proposition.