Due diligence on a Dallas B2B Tech Accelerator

I flew to Dallas last week for a quick pitch (3 minutes to talk and 2 minutes for Q&A) at Tech Wildcatters, a B2B startup accelerator. Reportedly, there were 300 applications, and we were one of 25 companies invited to pitch. So, they do not fly you in. Theopportunity is arguably worth the travel expense.

Once there, I understood just how competitive this process was. One guy sighed, “If we don’t get in here, I think I’ll have to give up on my dreams and get a steady job again.” I couldalso tell who was going to be disappointed – the team without a technologist, for instance. And, it is so obvious, from just a momentary encounter, the 3 minute pitch starts to seem like an appropriate amount of time. And to the audience of investors, it definitely is. They do not stick around to chat – why waste time talking to a crowd of startups that includes at least 10 that you have already estimated to fail.

So, we got in. We had 5 days to sign a term sheet. This was it:TW 5 Term Sheet – YourSigma 5.12.19 PM

It is not binding, because Tech Wildcatters has to do due diligence and we have to become a Deleware C corp. While it is not binding, the understanding is that our decision (Chris and mine) is final. So, I had 5 days to do my own due diligence of this program. 37 companies over 5 “classes” (and there are 2 classes a year). This program was started in 2010. At first glance it looks like about 15 have folded. The rest have graduated the program into investments of $200k or more, that’s a rate of about 60%. I can really only find email addresses for the founders (or guess them) at companies that still have websites. And most of them are eager or willing to talk about the experience.

The consensus among them is that Dallas is definitely fertile ground for a B2B business, that companies in Dallas have money to spend on new enterprise applications, that you can build close, lasting, relationships with mentors, that investors come from all over the globe on pitch day, and that you get as much out of the program as you put into it.

One bit of advice from Drew Schiller at Validic.com was especially meaninful. It’s about his experience in the program and not about our decision to participate.

If you’re trying to raise money coming out of the program, build relationships with the mentors. At this stage, investors put their money in people, not companies.

Use this time to to get customer feedback and letters of intent. Don’t build during TW. We had a major pivot 5 weeks into the program. All I did for development was create 4 screenshots and put them in a slide deck. Ryan got customers to sign letters of intent to use the product. That was enough for us to fill most of our convertible note coming out after pitch day (almost all from investors we had relationships with). As I’m sure Ryan will tell you,start with sales. A couple of companies focused on building a more robust product, and they were great companies, but they didn’t raise anything because they had no personal relationships and the mentors didn’t have a feel for their trajectory.

Get there early, stay late. There is very little structure to the TW program. You’ll be shocked by how much people play foosball. Every company that came in late and played ping pong/foosball is out of business now. They’re good friends of mine and I love them, but they were focused on the wrong things. We were always there by8 a.m.and didn’t leave until6 p.m.every day, including most weekends. Put in the time.

Take the time to understand critical feedback from mentors. Likewise, critically analyze positive feedback from mentors. Mentor feedback is an indicator, but no one mentor will have the answers. You should trust customers above all else. Not just one customer, because that could be an outlier. Customers.

If a mentor gives you really, really negative feedback, go back to them to understand why they were so negative. You only get 20 minutes for the initial meeting. It’s not enough time to really understand your business or the mentors’ feedback. We did this and one person who was initially highly critical of our idea eventually became a huge advocate for us.

Chris and I will have to be in Dallas by February 24th. And, many of my posts in the coming months will probably have to do with our experience there.