If Silicon Valley has a myth, it’s of a young, scrappy team of entrepreneurs who come up with an idea and furiously build a product during late-night hack sessions until they raise millions of dollars in venture capital, grow virally, and sell the company for a billion dollars.
Sure, this happens, but not that often, and it’s certainly not easy. Three-out-of four startups fail to return their investors’ money, and 30 percent to 40 percent go under completely.
George Deeb thinks he can improve those numbers.
Deeb is the founder of Ensemble, a “startup excubator” based in Chicago that provides young teams with support to build thriving businesses.
“Entrepreneurs can be so focused on building product that they haven’t had the foresight to think through proof-of-concept, and this is often more important than the product,” Deeb said in an interview. “There are more pieces to the puzzle that you can’t get out of a 12 week incubator program. We are the opposite of an incubator. We can work with companies for multiple years, and maybe double or triple the odds of success.”
Ensemble is formed by a consortium of “digital experts” — consultants, designers, developers, social media and search engine marketers, public relations people, and financiers. Startups will often pay for these services separately. Ensemble brings them together in a “one-stop shop” to help entrepreneurs execute their vision.
Normally, all these services together would cost tens of thousands of dollars a month. In exchange for equity, Ensemble provides them at a discount.
Well-known accelerator programs like Y Combinator and Tech Stars take a 6 percent to 7 percent equity stake in the companies they accept. The programs last for about three months, and participants receive mentorship, advice, and access to a strong network of successful entrepreneurs and venture capitalists. The culminating event is a demo day where the startups pitch to a room of VCs in order to raise money.
This model has been replicated scores of times around the world. Startup incubators are cropping up in international business hubs and in small U.S. towns, in verticals ranging from digital health to Bitcoin.
But just because they are popular doesn’t mean they are effective.
“The startup scene is booming, and it is getting harder to get the attention of incubators/accelerators because they are getting bombarded,” Deeb said. “But it was never clear whether or not that model was the best one. Our argument is that a model which cherry-picks 10 companies out of 100 or 1,000 is flawed because you can only help a few for a short time. Our model is different. We think all good ideas and entrepreneurs are worth supporting.”
Ensemble is based in Chicago, where Deeb said the Tech Stars program can only accept a tiny fraction of its applicants. Deeb is an entrepreneur himself. He has sold two companies — iExplore and Media Recall — and then founded Red Rocket VC, a consulting and venture capital firm. He saw hundreds of startups struggling to find their way and wanted to figure out a way to help in a more sustainable, wide-reaching way.
He said marketing agencies, incubators, accelerators, coworking spaces, startup universities, and venture capital firms satisfy specific startup needs, and the goal with Ensemble is to satisfy all of them or least more of them. Five agencies in the Chicago-area partnered up with Ensemble so all their services could be offered in a more comprehensive way.
But the services don’t come cheap, with our without giving up equity. Six months of the entire bundle costs $176,000, $105,600 if you give 6.8 percent equity. The justification for the price is that it will pay off in the long term.
This seems like a big catch to me. The goal of Ensemble is to help startups earn money and attract venture capital attention. But if startups are raking in enough dough or have raised enough funding that they can shell out $100,000 for six months of services, perhaps they don’t need Ensemble.
Deeb’s vision of inclusivity for all “good ideas” actually means inclusivity for those who can afford it.
For those who can’t, I guess you’ll have to rely on the old methods of Red Bull, hard work, and a little luck.