30 Jul Build Your Start up with Creative Destruction Lab
This past year I’ve had exposure to various technology incubators and ˙accelerators. One of the most impactful has been the Creative Destruction Lab. Here’s why.
Of the many Creative Destruction Labs (or CDL) operating across Canada, the edition in Calgary is highest on my radar. CDL stands apart from the many other accelerators in Calgary because of its culture of accountability and its close involvement with academia, investors and mentors. Through its execution formula, CDL aims to help create the next generation of world-changing, massive businesses able to take on global markets.
Companies that graduated from the Lab’s first five cohorts between 2012 and 2017 have generated more than $2.5 billion (CAD) in aggregate equity value.
CDL-Rockies has produced its first cohort of start ups and early-stage businesses and has opened up its application window for the next round of participants. I’ve been involved with several companies that have been successfully through the program, and encourage all entrepreneurs to consider whether such a program could be of value to them.
Why does it work?
The CDL program has a set of features that in my view make it stand out amongst the rest.
The program incorporates mentorship from some of Calgary’s most successful business professionals—corporate executives, entrepreneurs, and investors. The value of counselling time with these leaders is very high, and a quality hour with them is potentially priceless. As a consultant, I can assure you that getting on their calendars is next to impossible, yet they commit themselves to CDL.
I’ve never given thought to the value of science and technical advice to a start up. I had incorrectly assumed that start ups had already cracked their science problems and needed more assistance with commercial issues. However, as start ups pivot or alter direction, fresh science and technology problems continue to surface. CDL includes access to leading scientists, researchers, and academic specialists who provide their expertise to help work through thorny unanticipated challenges. Without a CDL, I’m not sure how a start up could identify, in a reasonable time frame, the expert in a technical domain, much less book a meeting with them.
CDL brings together a number of investors who are keen to fund promising start ups. The variety of investors is important—some investors like very early stage companies, others like novel science, and others seek cash flow. Some are more interested in building the Calgary and Alberta business community, and others just seek liquidity and an exit strategy. In any event, their successful track records mean that they understand the myriad ways to solve funding issues and create novel commercial models. The investors are clearly trading some of their time for the opportunity to identify and potentially participate in funding promising new ventures. Many millions are committed during a CDL program.
The range of start ups and the need for speed really promotes a light-touch and agile methodology. Founders meet with the mentors and investors, walk through their businesses and challenges, and agree a set of stretch goals to be accomplished in a fixed time. The goals range from solving specific technical problems, to hiring key resources, to making pitches to potential customers. CDL then holds periodic summits that pull together the full cohort of start ups, investors and mentors to check progress, which is partially conducted in plenary.
This transparency is key to helping the mentorship group form a consensus point of view about the viability of the business ideas and the quality of the founder teams. During the plenary, investors and mentors signal their support for individual startups by agreeing to continue to work with them for another six-eight weeks.
The process is pretty Darwinian. Start ups that receive no on-going interest or commitment from any of the investors and mentors do not continue in the program.
The association that CDL has with the University of Calgary brings its own benefits, notably access and participation of the cohort of students interested in entrepreneurship. Some of the MBA students, for example, donate their time to carry out various kinds of studies for the start ups, such as market sizing, financial analysis, and business modelling.
A Case Study
One of the companies that went start-to-finish through CDL is Vizworx, a company that I met at Nucleus, the co-working space and incubator that Cenovus sponsors. At a Nucleus demo event, Jeff Lafrenz, the CEO, showed off a clever product that his team was developing in the area of augmented reality. The product provided a way to visualise engineering data at a human scale, and dramatically improved the quality of design by helping designers identify interface and engineering issues virtually, before construction.
The technology is very cool, and given the investments by the big tech companies such as Microsoft and Facebook in augmented reality, demand is strong already and getting stronger for AR solutions.
It was clear that CDL represented an opportunity for Vizworx to really move their product forward. Participation meant access to a network of smart investors, exposure to potential customers like Calgary’s oil companies, and mentorship on product and growth strategies.
Vizworx entered CDL as an eight person company, with ambitions to take the data visualization product global, but at the very same time, had a huge upswing in demand for bespoke data visualization solutions. Almost immediately, the problem became how to scale up the custom work while balancing the development of the AR product. Custom solutions were a highly attractive business in its own right, and generated positive cash flow, a key metric for investors.
I helped Jeff and team with one of their business challenges, namely to quantify the potential markets for the AR solution. Using publicly available data, my team attempted to quantify targets comprised of industries and countries, along a number of metrics—spend levels, growth rates, and competitive setting. This was the kind of challenging goal that CDL drives start ups to accomplish.
A year on, the company had quadrupled in size to 34 staff and needed to find a bigger home to house all that growth.
Making the Most of CDL
As an observer to CDL, and advisor to some of the participants, I have a few tips to founders who are interested in this kind of accelerator program.
Take The Application Process Seriously
The acceptance rate isn’t high, just 15%—last time, 170 companies applied, 70 were interviewed, 35 went through a technical review, and just 25 were admitted to the program. Only 14 graduated. The application forms place strong emphasis on your ultimate customer, why they will purchase your product or service, your competitive differentiation, and your “secret sauce”. Have solid answers. Prepare for the interviews and demos.
Test your pitch.
By now a couple of hundred people in Calgary have had some experience with CDL, including its organizers, participating companies, observers and advisors. The level of commitment to making CDL a success has been very high, and I’m confident that any of those with experience would be willing to review your application.
Get a meeting with the CDL organising team.
They’re only too happy to meet and brief you about the program, and your time investment signals your serious intent. They might even provide some coaching on your pitch and areas of emphasis. After all, they are committed to making the program a success.
Hit your goals.
One of the standing measures of success for the program is how diligent the participants are in agreeing and achieving stretch goals. It was clear from the discussions in the plenary session that hitting the goals was highly correlated with success. Founders who met their goals were seen as more motivated, more coachable and more committed.
Be prepared for the feedback.
The mentors and investors do not hold back with their advice. Some counsel is likely to be conflicting, confronting and hard to take, but that’s the point with potentially billions at stake. There’s little rationale in getting access to all the mentorship and then ignoring the advice they offer. Act on it, or have very solid business reasons why not.
Go full time on your venture.
The investors and mentors will wonder why they should invest in you if you won’t invest in yourself or in your innovation. You may be able to get into CDL working part time on it, but you likely won’t make it completely through. Be prepared to commit full time to your dream.
CDL is more than just meetings with mentors. The program organizes networking events and demo days, hosts open houses, brings together CEOs for round tables, and provides space for collisions. It takes work to prepare and engage in these events, but they are absolutely worth it for the opportunity to build your business.
In my view, every start up should apply to CDL. The opportunity to access this kind of help for free is quite simply beyond compare.