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Changing the game: How Flux is combating accelerator fatigue

Some of the Flux 2017 cohort

With so many accelerators and incubators in the New Zealand market right now, entrepreneurs would be forgiven for being overwhelmed by choice. But an Icehouse initiative called Flux has just completed its first cohort, and wants to change the game when it comes to the traditional accelerator model. We talk with accelerator manager Clinton Geissler about how it's shaking up the usual formula. 

Flux all begun last year when Mark MacLeod-Smith, Flux’s director and the former programme director of Lightning Lab Auckland, saw an opportunity for a new model of accelerator.

Geissler, who came on board as co-founder and operating partner, says the pair were observing the flaws in the design of the usual accelerator model, where founders would come in and have to be polished and pitch ready within three months.

“We didn’t think they were being made business-ready, based off feedback from investors, previous Lightning Labs and the alumni of accelerators – the percentage of teams that got funded at demo day and had gone on to do things was dropping over time,” Geissler says.

“We had in house investment funds like Tuhua alongside investment groups including Ice Angels, ArcAngels and connections with tonnes of portfolio companies – we had the resources, so it was seeing an opportunity to do something with it.”

The pair pooled together their investor connections and launched Flux. The model works as follows: once a year, Flux invests between $20,000 to $100,000 into six to eight early-stage technology companies and works with them over a six-month period out of The Icehouse from February to August.

In July, it holds a Demo Day where each start-up has the opportunity to pitch to 400 or more of New Zealand’s most active investors to raise further funding.

There are various events and workshops that occur throughout the Flux programme, but the the team also tries to stay out the way where possible, Giessler says.

“Talking to founders who’d been through previous programmes, a lot of the feedback was that they had to spend a lot of time working on things and meeting people that didn’t create value in their business,” he says. “We didn’t want to make it a founder university, we wanted them to do things that create value and not be distracted.”

According to Geissler, two factors stand out as setting Flux apart from other accelerators: Its flexible timelines and its mentor network.

In terms of flexibility, he says founders are under no pressure on when to raise capital.

“We make a commitment to founders to do what’s best for them, raising money within two months like the Social Club, or eight months later like Jude did, while others chose to raise money at demo day.”

With mentors, he says the ideal people they draw in around the Flux participants are people who have built their own companies, but this goes both ways.

The small cohort of companies they take on have to be of a high calibre so the mentors don’t get fatigue either, he says – they want them eager to come back on board each time.

 “If we’re raising money from private investors every year, we want to make sure that over time the model is sustainable. We want them to get excited about investing in early stage companies. They do that by returning money to them over time and working with teams that are of an investable quality and quantity,” he says.

Out of the teams who were part of the first cohort, 100 percent of them have closed their rounds successfully, while two of the companies set records for the amount of money raised out of an accelerator programme.

One of the teams was The Social Club, which was already generating meaningful revenue but entered Flux to help it create a product and raise capital.

It recently hit its investment target of $1 million one week ago. Co-founder Justin Clark said himself and co-founder and CEO Georgia McGillivray had heard mixed reviews on incubator programmes in the past, so they were a little apprehensive about going into Flux.

He says while it definitely was a gruelling six months, the programme was really valuable.

"The biggest testament to the programme is the state in which all of the companies left,” he says. “Over a relatively short period, it was impressive seeing all the companies in there either achieve strong growth or make significant inroads towards achieving product or market fit. All seem to be successfully raising the funding they need to make the next leap, too - which is a hugely important process for any young technology company.”

When the programme eventually wraps up, the goal is that the board of investors and mentors will stay with the company beyond Flux, which Geissler says is more valuable than what the programme offers.

“If that relationship works out, that can continue for years and that creates far more value than we can do in a six-month programme. We joke about them getting a better set of parents than us,” he says.

Flux’s launch also comes at an opportune time, considering New Zealand’s tech behemoths like Xero and Vend are now maturing, leaving space for the next generation of ‘drop outs’ to start their own ventures.

Geissler says there seems to be a trend developing where people who have had skin in the game are now inspired to go on to create their own start-ups.

“It’s like as the tech industry matures, people who’ve been involved in high growth company and had some equity in it go through that and learn those skills and what it feels like to be in a high growth venture, and are emboldened to go do their own thing,” he says.

“We’re pretty excited about that, we think it’s an awesome opportunity for New Zealand.”

Tech alumni who have been a part of Flux include former Xero employee Ben Lynch who now heads up Jude, a tech start-up that wants to redesign the banking experience and allow anyone to have the services of a private banker.

Meanwhile, even the mentors are being inspired to be a part of programme.

David Inggs, the former CTO of Plexure, was a Flux mentor this year to the Social Club and 1Centre and was inspired to create his own start-up with business partner Richard Stinear called Rocos, which makes it easy for developers to design, test and manage autonomous robot swarms in the Cloud. Rocos is the first confirmed participant in the 2018 accelerator.

It’s hoped that this will lead to more tech companies like Vend and Xero emerging out of New Zealand and showcasing themselves on the global stage.

“We want to work with high-growth companies and that’s why we put our resources behind them,” Geissler says. We want to create more of these ventures from New Zealand [like Xero and Vend] and we assume that these companies will be global in nature, even if they don’t start out as that.”

Applications for the next cohort close 7 December. 

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