The Origins of a Financial Tech Accelerator

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Recently I got a chance to meet with Greg Neufeld of Valuestream Labs to discuss the Financial Tech accelerator he manages, as well as his thoughts on the accelerator landscape.

Enter Greg Neufeld….

The concept of ValueStream Labs was seeded when we began to see the need to take advantage of the trends surrounding web enabled technology and the unbundling of the financial terminal model. With the explosion of data and content through the web itself as a delivery mechanism, it all really came to our attention when we saw a company called Estimize, which ended up being our 1st portfolio company.

Greg Neufeld

On Wall Street, analysts’ incentives aren’t to be accurate but to rather be nice. So this platform was launched to collect and aggregate estimates from anyone, while applying a reliability algorithm to get to a more accurate and realistic expectation of the market. One way to describe it would be that Estimize democratizes investment estimates.

Our goal at ValueStream Labs is to be an interconnected platform of connected applications so you can leverage the power of services like Estimize in charting platforms and have better more comprehensive data.

ValueStream’s Mission:

“ValueStream is a network of interconnected financial applications that are forming the new financial web, and VSL is the corporate development and financing arm of that network.” What’s important to us is that our companies plug into one another well. It’s also incredibly important to us that we have a great entrepreneurial and financial community surround our program and members. We’ve found that community building is not easy to accomplish without a group of entrepreneurs taking charge. You can set up government initiatives all you want but if you don’t have entrepreneurs at the front, that ecosystem is going to fail. And I think there is something to be said about people that have skin in that game and have done it before and care about people’s success, versus a government initiative that doesn’t. Bureaucracy is intentional, but people in government form many of these initiatives for reasons that are less pure and sustainable than the motivations of entrepreneurs looking to be involved in a startup community and build it up.

ValueStream

We want to make sure these services and technologies are able to integrate into each other as well as different institutions. For us, this will be our defensibility – “a la carte” products where you know that this is a product that’s been vetted by VSL and our community, and that it’s got a certain amount of cohesiveness with other institutions and products. We believe when looking at something like the Bloomberg Terminal, which has 33k functions for 330k users, that each function represents a certain amount of demand for financial information, and thus, the potential for a company to be built around that need.

Compared to other startup accelerators, I’d say that we’re focused more on the customer development piece than the investing piece of it. The investing piece is still a big part of it, but our approach is different. We like to find companies that have a bit of runway and a bit of cash so they’ve already sold their mission to someone else – which is a way to diligence it- and we get to see how they’re interfacing with the customer base. This allows us to see who’s ripe for the investment and what the right price is to invest at.

Unlike many other accelerators, our program doesn’t work on a class structure. We have a rolling admissions process because we are also dealing with later stage companies that we wouldn’t want to batch together with other startups that have very different and unique needs. Once we identify companies we really like and fit our criteria, they’re admitted into our structured program which lasts 4 months. Throughout this program we spend the time diligencing the product, getting into leads, and helping them reach new customers and evangelists for their product that have domain experience. This way they can get the right distribution by having these evangelists facilitate access.

As far as our entrepreneur and mentor network, we have approximately 5k people that have agreed to donate their time and experience to the companies involved in our program, so we can scale the model without going by way of a class structure. We’re confident that as we choral the community around these businesses, they will actually get to know them and what they are all about on a deeper and more holistic level. This will allow them to get a better understanding for the companies they’ll potentially invest capital into at later stages. This also allows these angel investors to show their value so they can access later stage deals that are post product and post revenue – giving them access to series A and series B rounds as opposed to just pre-seed and seed rounds.

Getting Involved In Startup Accelerators

I cut my teeth in tech entrepreneurship and trading almost in tandem. I had been crossing over both sides of the table and actually had a bit of an identity crisis at one point when I was debating if I wanted to be a tech entrepreneur or a trader. I ended up going down both paths and had some early success with both sides. I was even able to build a hedge fund right as I was finishing school and ran that for several years.

At Babson they had this incubator called E-tower. The incubator was supported by a strong community that really wanted to start their own businesses and not wait until they got out of school. During this brainstorming session a close friend of mine was wondering why we were all brainstorming on these flipchart pages that were taped to the walls. And it was really something to think about – we have chalkboards and whiteboards, but nothing more suitable. So he sought out to build and develop it a solution himself. After a bit of a journey he finally came up with and created what’s now known as “Idea Paint.”

So I saw the power of an entrepreneur community and how it can, through group think, help build a pretty cool business concept in a couple of hours and that young entrepreneurs can stand up and be something. It was also really empowering to see that people would take young innovative people seriously. It proved to me that with good ideas, it was largely a matter of cost and infrastructure.

Opinion on the Accelerator Landscape

Accelerators that don’t have resources like TechStars or Y Combinator and started later, really need to focus on something specific. Not just specific to the founders involved but also to the community they’re trying to bring together and leverage. For example, Y Combinator was successful because it was early and in the right place. Paul Graham used to run a program in Boston, not just California, but shut it down quite early once he realized he needed to focus on the market that really needed these programs. So if you’re saying “let’s do an accelerator that’s focused on B2B companies,” it’s still too broad. At VSL, we’ve created a program that’s best aligned to my experience, my partners’ experience, and has the most advantage to being in NYC than anything else. All the customers are here, and we’re smack in the middle between Silicon alley and the financial institutions. So bridging that gap both geographically and digitally is the only way to do it. We’re seeing the fruits of our labor pay off because we’re able to attract “triple-threat advisors”:  1) they are accredited investors so they can put their money where their mouth is 2) they know the “good old boys network” that still dominates most of Financial Services 3) they have the domain experience to actually understand what the hell these entrepreneurs are talking about. So the advisor can be the customer can be the investor. Finance is one of the rare breeds where this 3-tiered approach works really well.

Big thanks to Greg for sharing his thoughts! Be sure to check out ValueStream and follow Greg on twitter.

P.S If you’re considering joining an accelerator program, check out Accelerate for insight from over 150 accelerator graduates.

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