9Mile Labs: First Demo Day and Research on Accelerator Effectiveness

9Mile Labs, the new Seattle area startup accelerator for business-to-business companies, delivered nine new companies to potential investors Tuesday.

Begun earlier this year on the premise that the high rejection rates of other startup accelerators such as Techstars indicated a need for more accelerators, 9Mile Labs set out “to build a world-class entrepreneurial community in the Pacific Northwest” with “an emphasis on community… one of the things that this area has in spades,” says 9Mile Labs partner Tom Casey.

Indeed, each of the CEOs presenting their businesses to a crowd of about 200 supporters and potential investors at the Bell Harbor Conference Center on the Seattle waterfront praised the mentors they were connected with through the accelerator during the last five months. That network of dozens of mentors, along with work space at the SURF Incubator and a $20,000 investment, are the main benefits the startups receive in exchange for giving 4 to 8 percent equity stakes to 9Mile Labs.

Veteran Seattle-area venture capitalist Enrique Godreau III, venture partner at 9Mile Labs, says that the willingness of experienced technology leaders to nurture entrepreneurs in this way contributes to the strength of the local innovation economy, evidenced most recently by a Ewing Marion Kauffman Foundation report (PDF) ranking the top U.S. metropolitan areas by high-tech startup density. In 1990, Seattle ranked 12th. In 2010, the latest year examined in the report, Seattle ranked 5th—the biggest jump in ranking of any large city measured.

“We are very focused on helping to build a sustainable regional ecosystem that will continue to secure Seattle’s leading role as a startup hub,” he says.

Godreau also notes that technology startup accelerators—built on a hybrid venture investment and education model—are a “fairly new exercise,” noting that Y Combinator in Silicon Valley began only in 2005.

“There’s been remarkably little evidenced-based research to understand exactly why and how it is that startups benefit from these types of programs,” Godreau says.

9Mile is taking steps to change that. Godreau says entrepreneur, investor and University of Washington affiliate faculty member Skip Walter has led a team of researchers in conducting personality tests, interviews, and surveys of the participating entrepreneurs and mentors. They intend to continue tracking the companies for three years to try to better understand best practices in startup accelerators.

(Walter has filmed hundreds of hours of footage over the course of the program as part of the research. This has had the ancillary benefit of giving the startups a “rewind button,” allowing them to go back months later and review why they made a particular decision, Casey says.)

The 9Mile companies were deliberately silent on their funding status and goals, Godreau says, reflecting the changing landscape for startup companies thanks to new regulations under the JOBS Act. Beginning Sept. 23, for the first time in 80 years, companies can engage in general funding solicitations—essentially publicizing that they are raising capital—but doing so requires the disclosure of more information about investors to the SEC to ensure it’s only taking money from so-called accredited investors. Godreau says 9Mile decided to err on the side of caution, and avoid inadvertently engaging in a general solicitation that could have implications for funding scenarios going forward.

He says, however, that several of the companies are fully subscribed for their forthcoming capital needs, or well on their way to being so.

Based on their six-minute presentations, each of the nine companies has a seemingly compelling business opportunity. Here are a few that stood out for me:

—Millennials raised on Facebook and Twitter aren’t going to wait around for a 25-year service pin, the sort of seniority based merit recognition that has been typical at many companies. MeritShare makes a platform for giving praise that is updated for the modern work force. CEO Kevin Nakao says the company’s service, at $2.75 per user, per month, costs less than providing employees with coffee, and the reduction of voluntary turnover associated with robust recognition programs more than pays for it. Using MeritShare, companies can enable their employees to give each other recognition instead of praise coming from the top down. Recognition can be tracked through a dashboard and weekly e-mails, and compared to a national recognition index drawn from the 50 companies using the service today; and it can be pushed out to social media for additional ego-stroking and recruiting benefits.

—As someone with family members in the medical profession, I am very familiar with the frustrations and inefficiencies inherent in moving patients through a clinic each day. It’s at least as bad for the doctors and nurses as it is for the patients. CadenceMD CEO Bonnie Cech says it’s bad for healthcare companies’ bottom lines, too, with inefficiencies such as appointments scheduled too long or too short for a patient’s problem, incorrect staffing and equipment in exam rooms, and other small and hard-to-track time-wasters adding up through the day costing a typical doctor $50,000 a year in higher staffing costs and missed revenue opportunities. Multiply that across a 500-doctor healthcare enterprise and the company’s software suite for tracking and managing visits, optimizing staff schedules, and letting physicians request resources without leaving an exam room could represent major cost savings. The company is also positioned in what Cech says is a fast-growing segment of the healthcare industry, with IT spending by physicians groups expected to see compound annual growth of 24 percent over the next four years.

—You’ve heard about the Internet of Things, the idea that stuff that’s not connected to the Internet now—septic tanks, for example—will be soon. But outfitting a septic tank with the appropriate hardware and wireless service to get online and let you know when it’s about to get ugly and expensive is no easy matter. The hoop-jumping at embedded-systems makers, mobile carriers, the FCC, and on and on can take a year and a half and cost a lot, says Ombitron CEO H. Paul Hammann. His company aims to simplify and streamline the process, cutting time-to-market down to two months, by providing pre-certified hardware, cellular data service packages, and software to integrate it all. Hammann says the company makes a healthy margin on each segment of the business, and has already partnered with Verizon and Sprint to resell their cellular services.

—Kyle Schei’s presentation featured video of his company’s CTO breaking a table in half to make a point, but that was not the most impressive detail of his pitch about Comr.se, a social commerce startup. The service works like this: An apparel designer with a loyal social media following posts a picture of his new line on Facebook. Before Comr.se, you’d have to click the link, leaving the sticky social media world behind and going through the usual checkout rigmarole on the designer’s site. Or you remember the design when you’re out shopping in the real world, denying the designer the high-margin, direct purchase transaction online. With Comr.se, the post on Facebook becomes the shopping cart. Schei calls it a “transactional image” that enables sellers to extend “shopping carts everywhere throughout the Web.” You can select the size, enter shipping information, and make payment, all without leaving the Facebook party, or the Pinterest, Twitter, or Tumblr party. The company is getting pretty sophisticated on the back end, working with PARC to build a big data application that matches consumers with products based on transaction history, clickstream data, and their social graph. Comr.se, with 11 employees, looks like a direct competitor to Portland-based Chirpify, and based on my interactions with both companies (I visited Chirpify early this year) I can tell that smart, talented people who enjoy drinking beer are attracted to this opportunity. It will be interesting to follow these two companies, which both appear to be on the fast track.

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2 responses to “9Mile Labs: First Demo Day and Research on Accelerator Effectiveness”

  1. CadenceMD says:

    Thanks for highlighting CadenceMD. We were in great company in the 9Mile Labs program.

  2. Kevin Nakao says:

    Thanks for coming out, supporting the program, and providing this coverage. Team MeritShare.