This Startup Program Is Harder To Get Into Than Harvard And Helped Raise Billions
What cofounder structures, locations and entrepreneurial traits can best help today’s startups accelerate their way to success?
I just had the great privilege of interviewing the cofounder of AngelPad, Thomas Korte on the DealMakers Podcast. He brought a ton of value to listeners with his insights on disruptive technology, how to split company ownership, and the important factors that separate the big successes from the rest in the startup race (listen to the full episode here).
Everything is Going to be Disrupted
Thomas Korte is one of the founders at one of the consistently top ranked startup accelerators. They’re always up there with names like 500 Startups, Y Combinator, and TechStars. To date AngelPad companies have raised around $1.4 billion, with Thomas’ own venture capital fund having raised close to $80 million itself.
Rather than focusing on a particular vertical or two, AngelPad is much more horizontal in the industries that it funds and accelerates startups in. As Thomas says, “everything is going to be disrupted. There are still so many roles and industries ripe for massive change with new technology.”
This guest on the show certainly knows just how fast things can change. He started out at Google when there were maybe just 100 employees there. He was in the product management team in 2002, just around the time Adwords was about to launch. He remembers visiting Germany when the the search giant only had around a 25% market share. Then visiting six months later to find 50% of searches were happening through Google.
Of course, similar disruption happened with Adwords in the advertising industry, Gmail for email, and Maps in the world of GPS units.
Korte started investing back in those Google days. Mostly writing checks to entrepreneurs who had left Google to start their own companies with their own products.
Then AngelPad was born in 2010, as he realized that he really enjoyed “more working with founders than just writing a check, figuring out at the earliest stages of a company, what is there to be done.” As well as figuring out that for most angels, it is all just catch up work. They are meeting with founders and are soaking up time just to find out what happened in the recent past versus being instrumental in helping them be successful in advance and extract the big business opportunities out of their startup ideas.
Husband & Wife Cofounding Teams
One of the less obvious ways that Silicon Valley is changing and the dynamics of startups is being disrupted is more husband and wife cofounding teams. Thomas cofounded his business with his wife Carine Magescas.
“When it works it’s magical.” Though it isn’t for everyone. It can put a lot of pressure on relationships and can be very consuming. To make it work better Thomas says it helps to know your cofounder in a professional capacity before launching (not just a personal one), to know how to carve time out where you don’t just talk about business, and to have the right legal agreements in place to assure investors that things will work out, even if the relationship doesn’t survive.
Founder Vesting & The Cliffs
When it comes to startup fundraising and profitable exits, one of the other areas that can really affect entrepreneurs is how their companies are structured. Specifically, how many people hold shares and their ownership percentages.
Thomas says he has seen all types of splits. There are commonly 33% splits when there are three cofounders. Or sometimes one founder may have a much small percentage. This can get tough when someone leaves early and they continue to own a piece of the company, and keep getting paid without doing any more work. It can also raise more questions for investors.
If he were to start a company today, Thomas Korte says he would “ask all cofounders to have a six-year vesting schedule as founders and at least a two year cliff.”
What Angel Investors Need to Know
Having a substantial amount of experience in angel investing, Thomas says there are a couple things that pre-seed investors really need to know when they get started.
The first is that the “exit horizon is very long.” For a company to mature, go through several further fundraising rounds and get to an exit, it can take years. It may only be 12 to 18 months to the next fundraising round. Though you had better anticipate being in for 10 years.
The second is that the “failure rate is fairly high.” At the pre-seed investment level you want to make a relatively large number of bets. Then follow on selectively in companies. “it’s really a Darwinian process, it’s incredibly hard to see who the future winners are because there’s nothing to go with. There’s no data. There’s really nothing you can make an evaluation on apart from do you think the founders are capable.”
12x Harder to get into than Harvard
The AngelPad accelerator program is famously 12 times harder to get into than Harvard. At least by the numbers. They receive around 4,000 applications per ‘cohort’. End up interviewing around 200. Then accept maybe 12 of those. So, the acceptance rate is well below 1%.
The program runs in the Bay Area and New York, with 30% to 40% of founders coming from international locations. Though with its unique approach to acceleration, they invest around $120,000 in startups on day one, for around 7% in common shares. Over time they now invest up to $1.5 million per company accepted.
Most recently, the annual seed accelerator rankings were published which featured AngelPad at the top with Y Combinator.
The Immigrant Spirit
Across all the unicorns, $500 million plus companies and those that have been acqui-hired by Twitter, Thomas has seen some common patterns among those that really succeed.
- Investing the time to learn about the fundraising process
- Having that immigrant spirit of being willing to move and go for it
- Those who are opinionated, but are willing to adapt according to the data
- Ability to keep making decisions and moving forward
At lot has been disrupted by technology over the past ten years. That certainly isn’t over. Though founders and investors are changing and are finding more success patterns. Tune into the full episode of this DealMakers Podcast to hear all the other details, including what’s unique about AngelPad, how to apply and where to meet Thomas (listen to the full episode here).
This article originally appeared in Forbes.
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