We believe deeply in the work that we do. And we’re proud of it! At the same time, we believe deeply in the value of militant transparency. As a team, we’ve experienced a number of failures and false starts over the past few years. And to keep us humble and to ensure that we always learn from them, we enumerate them here.
Using the Unreasonable Marketplace in our selection process was unfair.
The Unreasonable Marketplace is the crowdfunding platform we used from 2010-2012 to select our entrepreneurs. It served as the final stage of our vetting process. And while it was an elegant solution to making the Institute affordable to our entrepreneurs, to serving as our financial engine, and to selecting strong entrepreneurs, it proved to be unfair to applicants from different countries. We detail the story in this blog post. Our failure here was not attempting the Marketplace, it was that recognizing it was unfair and failing to act sooner. It’s learning from this mistake that has led us to stop using the Marketplace as vehicle for selection in 2013. Instead, the Marketplace is now available to raise funds they need to pay for the Institute after they have been selected. It has remained effective and 100% of our ventures to date have raised the costs of attending the Unreasonable Institute on our Marketplace.
Our focus on pitching to get funding did not work.
A big part of the Unreasonable Institute is giving our entrepreneurs access to funding. In our first two years, we thought that meant training our entrepreneurs to pitch incredibly well and then putting them in front of a room of investors.
We were wrong. In the first two years of the Unreasonable Institute, we took all of our entrepreneurs to San Francisco, the densest concentration of impact investors in the world, for a pitch day. Some notable funders showed up, but zero dollars were invested in our entrepreneurs as a consequence of these two days.
Why? We’ve learned since that pitching is a very small part of raising capital. The pitch is what you do to get an investor interested to meet with you. But that’s where they really want to get to know you as an entrepreneur and to get to know your business. We spent so much time preparing our entrepreneurs to pitch in our first two years, and very little time helping to build real businesses and to make the most from the one-on-one conversations with investors that might eventually lead to capital. We also didn’t properly “pre-dispose” the investors in the room. In other words, they came in relatively cold without knowing what the entrepreneurs were doing already. They didn’t know which entrepreneurs they should really pay attention to and which ones weren’t as relevant to them. And we didn’t set the investors up for success by giving them the chance to “syndicate” with other investors.
All these learnings, along with some inspiration from Startup Weekend, ReWork, and Unreasonable Mentor Tom Chi (of Google X), helped us to build the current version of Investor Days. In it, our entrepreneurs only pitch for 2 minutes each, specifically mentioning the challenges they are facing and what they need help with.
Then each entrepreneur hosts a “breakout session.” Investors, who have been provided with materials and summaries of the entrepreneurs before hand, attend the 45-minute sessions of the entrepreneurs they are interested in in groups of 3-7. As a team, we ask them to parachute into the role of “board members” for the entrepreneurs they are meeting with for the duration of the breakout session. In those 45 minutes, the entrepreneur explains the business, fields some questions, and articulates the key challenges they are facing, whether those are related to getting funding (including how to structure term sheets, how to spend the money, etc.) or operations (including how to scale, who to hire, etc.). The openness of the entrepreneurs and the invitation to solve challenges together brings entrepreneurs and investors to the same side of the table as teammates. And the results were extraordinary. 21 of 22 entrepreneurs left Investor Days with an average of 8 investors following up with them. In the month that followed our 2012 Investor Days, 11 ventures already secured firm commitments. Unreasonable Angel Elizabeth Kraus wrote this blog post about why she felt this year’s Investor Days was a success.
Still, we realize that we need to do even more. While 74% of our ventures have raised funding, 50% of them continue to seek funding (most often for additional rounds). So in 2014, we are building an internal team whose only job is to help our ventures get funding. The job of this team is to help entrepreneurs figure out the amount and type of capital they want to raise, put together a list of ideal prospects, get their financials in tip-top shape, assemble term sheets, understand how to build relationships with the right funders, build syndicates of funders, and ultimately secure the capital they need.
We haven’t provided strong support to entrepreneurs after they leave the Institute.
Each year, the entrepreneurs come together and feel like a family at the Unreasonable Institute. And while the strong relationships that entrepreneurs form with each other, with mentors and funders, and the team, sustain organically through the years, some of our alumni have told us they are disappointed we haven’t done more to support them after leaving Unreasonable Institute or to keep the sense of community as strong as it once was. In truth, over the past four years, we’ve been relatively unintentional about supporting our entrepreneurs into the long-term, even though one of the most frequent questions we get is “What happens after your entrepreneurs leave the Institute?”
This is a big priority for us in 2014. Along with Renee Freedman (creator of the TED Fellows coaching program), we have launched a coaching network, enabling each of our alumni to work with an executive coach once per week for free! We plan to build a network of service providers who can work with entrepreneurs for long after the Institute. We plan to hire a new teammate so that we can focus more time on getting our entrepreneurs investment-ready and connecting them actively to funding opportunities after they leave the Institute. We are exploring running vertical-specific programs (like Unreasonable Energy, Unreasonable Artisan, or Unreasonable Food) for clusters of our alumni. And we are even exploring running multiple funding events per year that our alumni would be eligible to come to! We’ve got a lot of work to do, but we believe we need to invest in on-going support to truly deliver on our mission.
We haven’t always treated our own team as well as we treat people outside the team.
There’s an old saying that the cobbler’s son has no shoes. While our first value at the Unreasonable Institute is to treat everyone we meet like they are the Messiah in the room, we have often failed to treat our own team with the same intentionality and respect. We love our team and spend most of our free time hanging out with each other. But for our first three years of operation, we didn’t make sure that members of our team had health insurance, clear vacation policies, and sometimes even the basic resources they needed to do their jobs incredibly well. We hadn’t on-boarded nearly as well as we can.
In the past year, we have made this a huge priority. We’ve read books like Delivering Happiness by Tony Hsieh (on building a world-class team culture), we’ve learned from experts on building teams like Unreasonable Mentor Jerry Colonna, and we’ve dedicating board meetings to learning how to best support our own team. We now have health insurance and vacation policies. We have a clear, replicable on-boarding process. We have one-on-ones with each other each week. But we still have more to do (like establishing KPIs and getting each member of our team a coach) to deliver the support that each dedicated, hard-working member of our team deserves.
We didn’t help our entrepreneurs deal with “Mentor Whiplash.”
Accelerator programs that bring in mentors suffer from a common affliction. TechStars calls it “Mentor Whiplash” (a term that we very much agree with). It means that an entrepreneur frequently gets completely contradictory advice from the highly-opinionated, though very intelligent, mentors that come through. Our own entrepreneurs have reported struggling with mentor whiplash since year one of the Institute and we have never intentionally helped them to navigate contradictory feedback.
We recognize that Mentor Whiplash will always exist and that some of it is good for an entrepreneur to be reminded that “there are no maps” (as Unreasonable Mentor Pascal Finette says). But we believe there are a few things that we can do to mitigate its effect.
(1) We have developed a better process for entrepreneurs and mentors to “date” before committing to working together. We work to understand our entrepreneurs’ needs before the Institute and then scan our existing network of mentors for those who might have the expertise our entrepreneurs need. We check in with both the entrepreneur and the mentor to ask if they would be interested in connecting. If they say yes, we connect them so they can have an introductory call. We then follow up with both to get feedback on how it went. If both the entrepreneur and the mentor, enjoyed connecting, we take steps to help them deepen the relationship. By the time entrepreneurs get to the Institute, they have flagged a few mentors who they already have a bit of a relationship with, which they can explore in greater depth. This stretches out the amount of time that entrepreneurs have to get to know mentors, which allows them to “test out” their advice.
(2) We are helping our entrepreneurs build “Mentor Teams.” Getting different mentors together in the same room or on the same phone call to hash out differences of opinion can help a lot with Mentor Whiplash. It also helps mentors to be part of a team – they take the commitment of mentorship more seriously, they can focus on what they are best at (meaning if their expertise is in marketing, they don’t also have to feel pressured to advise the entrepreneur on their financials if there’s another mentor on the team who can do that), and they crave relationships with other Unreasonable Mentors as well. Everybody wins!
(3) We are training our entrepreneurs on how to better engage with Mentors. When we first started the Institute, we assumed that you could just put a Mentor and an entrepreneur together and magic would happen. Not so, we’ve learned. Entrepreneurs need to show up prepared for conversations with mentors, follow up, and keep them engaged. We’ve detailed our approach in this blog post.
(4) We plan to train Mentors on how to better engage with entrepreneurs. Unreasonable Mentor Cheryl Heller wrote this post wondering out loud about the need to better train mentors. We agree this is something we need to do.
10 of our ventures have closed down.
Of the 82 organizations that have come through the Unreasonable Institute so far, 10 have failed. The reasons these ventures have failed are varied, but are mostly due to co-founder struggles and running out of money. While we don’t consider the entrepreneurs who have moved on from their ventures failures by any means at all (in fact, some of them have gone on to greater heights), we want to recognize that some of the ventures that come through the Unreasonable Institute don’t survive. We spend most of our time and most of our marketing talking about all the our active ventures have raised, for example. But at the same time we know that this isn’t everyone’s story. We honor our entrepreneurs who had the courage to move on from their ventures. In every situation we know of, we stand by them and support their decision, believing they did the right thing. We’ll continue to support them as they move forward into other adventures because we believe in them. We know the work they do will be a manifestation of them and their beliefs.
We haven’t become self-sustaining yet.
We search for ventures that are capable of sustaining themselves through revenue, whether they are non-profit or for-profit. But currently, only 25% of our annual budget is covered by our own revenue (which we earn through charging ventures that come to the Institute). The other 75% of our annual budget comes from foundations like Halloran Philanthropies and from individual donors like some of our Mentors. We don’t believe this is a failure, as of yet, but we haven’t given finding our own path to business model enough attention. This is something we are making a serious priority in 2014.
We don’t always live our values.
What is most precious to us is our values. We use them to hire, fire, evaluate internal performance, select our entrepreneurs and select our mentors. The first day of the Unreasonable Institute is always devoted to sharing our values with our entrepreneurs.
Our biggest failures, from where we stand, come from when we fail to live our values. We have had moments when we were scared to be truthful, when we forgot to celebrate someone on our team, and when we didn’t support each other. We’ve learned that values are about posture, not position. We’ve learned that we will invariably fail to live our values, but that so long as we are willing to learn from those mistakes and endeavor as best we can to improve, we have to forgive ourselves. This is, in our opinion, our greatest challenge.