The movement to allow everyday items to connect to the Internet has gained momentum, as toothbrushes, bathroom scales and trash cans (to name a few) are available with sensors and online access. And now, this dominantly consumer-based field may see a new line up of enterprise-focused — and potentially government-focused — startups through a new program by the Alchemist Accelerator.
As a San Francisco-based tech accelerator for startups that provide enterprise-level solutions, Alchemist was recently supercharged with funding from Cisco Systems to launch its first six-month accelerator program to support Internet of everything startups. The program draws upon a portion of $150 million — funding that Cisco allocated in April — for growth outside traditional markets.
Openings for 13 startup teams have been offered, and an application deadline has been set for May 17 with the Internet of Everything Accelerator program to start on Aug. 21.
Alchemist’s Managing Director Ravi Belani spoke with Government Technology to outline why the program was created and what it intends to accomplish during its inaugural debut.
Government Technology: How did the idea for an Internet of everything accelerator come about?
Ravi Belani: What happened here was a combination of a few things. One was that Cisco had a top-down initiative to really focus on the Internet of Things more broadly. We think it's going to dwarf what's happened so far even within the current Internet [offerings] in terms of the potential sensors, analytics and securities to create a whole connected world. So for Cisco, this is a very big theme, just looking at the ecosystem from their big behemoth perspective [of experience and expertise].
At Alchemist, we focus on where the entrepreneurs are excited. So fundamentally, for us, we're dealing with the top talent, and really the top technical talent and what they're interested in. We've funded five Internet of Things [IoT] companies independently — previous to what is happening at Cisco — and whenever that happens we start to coalesce together resources to help our entrepreneurs out, especially when they're in certain verticals, in terms of both customers and mentors. And so we were seeing [the Internet of Things demand] from the bottom up. The entrepreneurs were getting genuinely excited about IoT as a space. And we've had this happen a couple times where the best minds start to coalesce around a certain space. That, for us, is a signal a market is about to tip.
A lot of big corporations will have a lot of agendas of what they want to do, but in terms of making the market tip, in terms of timing, it really for us happens when you have an individual who has a personal motivation or story around why they want to start a company that drives them to build the next great thing ... We were seeing this convergence, where a lot of the top technical talent was creating incredibly bold and creative things around IoT.
GT: Cisco is putting $150 million toward accelerators for tech startups, but how much of this is going to the Alchemist Accelerator?
Belani: What I can say is that they've given an upfront investment. They've also made a commitment on putting money into a second fund for next year. So they have plenty of capital to deploy against Alchemist and it's relatively limitless as long as the quality of the companies coming through remains high. I'm not legally allowed to say the total commitment amount, but what I can tell you is that they've already committed to the next IoT accelerator [for next year].
GT: How will you be accelerating the 13 companies with the funding?
Belani: We classically focus on four things: customers — facilitating early proof of market customer validation points for the company; fundraising facilitated access to investor resources; mentorship, which is access to key coaches who are domain experts within the specific fields of the companies; and community, having a peer leadership community that helps build a trusted network for the companies to meet with each other.
In addition to those, we will also be focusing on supply chain issues that will be unique to IoT companies, and where Cisco brings a lot of leverage to really be able to facilitate development partnerships with large companies that startups rarely get access to because of their size. So the general idea of the accelerator is to give startups, which are basically two to four people when they join Alchemist, the leverage and the strength to strike significant [B2B] customers — often wary to get in bed with such early stage startups, suppliers and partners across different directions.
GT: What qualifications must these startups possess to make them competitive enough to be selected?
Belani: The first thing is the team. So before we even look at the market — or anything else — we're looking at the team and we're looking for distinction within the technical cofounders. A distinctive technical cofounder is hugely important to us. That distinction can be marked by something that is unnaturally amazing that was done professionally by that team or a team that shows a lot promise even though they're extremely young. We've admitted Stanford undergrads, U.C. Berkeley undergrads and also Stanford and Berkeley faculty that have not done a lot in their specific industries — basically being academics but highly distinctive as academics.
Secondly we're looking for the ability to execute. The ideal team is two technical cofounders with the ability to execute. And while you don't have to have industry expert experience, if you do, it does give you an unfair advantage — and that's a good thing. We're looking for teams great talents will want to join.
GT: At the end of the six-month program, what milestones are startups expected to achieve?
Belani: It's a good question. What we're really trying to drive is validation around product market metrics in advance of receiving funding. What's very different about enterprise companies, or companies that sell to institutions, is the premium that's placed by venture investors to validate the need for a product. So what we really try to focus on is customer development and sales. It's different from a consumer accelerator [where startup's business model depends primarily upon consumers for revenue over other companies], and it's different in that you're trying to show that a product has engagement metrics and is moving up and to the right in terms of adoption. But on the enterprise side, it's not as important as validating the product's need. This can be done even before the product is even built if you have customers [other businesses] that are partners who can validate the fact with product area represents a real need for them and that they are willing to commit either their time or capital in advance of even having the product built.
So what we are really trying to do over the six months is get the companies to savvy sellers, to understand sales and customer development that venture capitalists will respect.