Startup Wise Guys : A Failure

Our Take

Our prediction is that Startup Wise Guys (SWG), an Estonian startup accelerator, will fail. It will probably fail by the end of 2013.

Analyzing the Numbers

We're data-driven, so let's first look at this from a strictly numbers perspective. One good way to measure is to benchmark against others. Let's look at Techstars, which is considered one of the top accelerators, for comparison. It's a good comparison to make, because it just so happens that a founder of SWG also oversaw the merger of another accelerator he oversees, with Techstars.

Techstars conveniently posts detailed statistics on their success rate. Looking at the Boston Winter 2012 group of companies (so that's about a year ago), we see the following:

• Total Companies: 13
• Funded: 10 (77%)
• Failed: 0 (0%)

Now let's look at the same cohort from SWG. They don't post statistics in such an easy format, but we've managed to figure some of it out on our own:

• Total Companies: 8
• Funded: 1 (13%)
• Failed: 2 (25%)

The only funded company was Vitalfields (formerly WeatherMe) for 250k EUR, compared with total funding of over $12 million for the same cohort of companies at Techstars, who started at around the same time. Of the SWG companies still alive, most of them are not past the beta stage and ready to take on paying customers, including Monolith, Epiclist (formerly Faver), and Pondera (formerly Wellbeing). Of the 8 companies in their portfolio, we only think Vitalfields has a strong chance of surival. WappZapp might do OK if manufacturers don't just build the same functionality into set-top boxes. Like a Local Guide will probably survive, but it's also not a million-dollar business.

Reading the Tea Leaves

We think Startup Wise Guys is facing a cash crunch, and the founders know it. Initial funding for SWG was 78k EUR from the Estonian Development Fund.

We were quite surprised to read about the lean startup workshop they offered in January. What surprised us is that they invited startups who weren't part of their incubator to join them, for this free event. An optimist would say that SWG was just being nice, but we're not optimists. Read their post carefully, and you'll notice this key text: "The weekend will be entirely free, including transportation to Lahemaa. All the details will be taken care of by Startup Wise Guys and EAS!" (emphasis ours).

We think that SWG got paid by Enterprise Estonia (EAS) to host the workshop. But since the money was coming from that source, it couldn't be limited to just SWG companies, so they had to open it up to a few other companies in order to make it more legitimate. So why would SWG host such an event? Our theory is they are running short of cash.

Maybe the founders know this too. One of the key members, Elise Sass, left SWG to move to Microsoft:

I just started working as CEE Startup Lead @ MIcrosoft. lnkd.in/gTMtPu #in
— Elise S (@elisesass) January 10, 2013

Now why would one of the main people behind SWG leave right as the latest batch of companies just started? What does she know that we don't?

Lacking a Long-Term Strategy

Does Startup Wise Guys have what it takes to survive? We don't think so. If you view the LinkedIn profiles of the team that runs SWG, there are few people on the team who have actually run successful startup companies. The mentor list is similar -- few people who really stand out as having experience in startup companies that were successful (compare it to the Techstars Boston mentor list). The departure of one of the founders is an ominous sign as well.

So what are we left with? An organization with few success stories, short on cash, lack of talent, and with management departing. They're going to fail.