AccelerateMSP has lingered in the shadows for over two years since their Ohio precursor JumpStart failed at introducing a public-private venture development organization (VDO) in Minnesota.
After a year long CEO seach, the wife of an original AccelerateMSP board member was chosen to be the leadership face. The plan of directly investing into startups was scrapped in favor of a $750k annual budget for a “roll-up-your-sleeves approach to mentoring seed-stage companies.”
Jeff Pesek (JP): Thank you for taking the time to talk.
Pam York (PY): Thank you for the interest.
JP: Let’s start with the basics – what is the legal business entity name, type and where are the corporate articles located?
PY: AccelerateMSP is really more of a working title, it doesn’t have an official final name. We’re not incorporated yet, the University of Minnesota is currently acting as the fiscal agent. It’s definitely going to be a non-profit, but part of what I’m aiming to figure out is where does this thing live?
JP: Who are the legally registered owners, board members, or directors?
The fiduciary responsibility currently lies with the University of Minnesota. Current advisors to AccelerateMSP are: Joy Lindsay (Startec), Tom Kieffer (Virteva), Jon Stavig (University of Minnesota), Brad Lehrman (Soffer Charbonnet), Ernest Grumbles (Adams Grumbles), Steve Mercil (RAIN Source Capital), Cecile Bedor (City of St. Paul), and Ellen Muller (City of St. Paul).
JP: When were you chosen to be the CEO?
PY: In October.
JP: You are married to Jay Schrankler from the University of Minnesota’s Tech Transfer office who was a board member of Accelerate MSP up until around the time you were hired. At what point might that be considered a conflict of interest?
PY: I don’t think there is any conflict there, he’s no longer on the board. Once I threw my hat into the ring, he left the board. He had no influence on my appointment as the CEO.
JP: Has there been any funding received to date; if so, what type (public/private) and what amount?
PY: Yes, we have received $150k which has come from a variety of resources. A $75k grant was received from the Ford Foundation – which necessitated a 1:1 match. Other funding has come from the McKnight Foundation, GreaterMSP, the Knight Foundation the University of Minnesota, the City of St. Paul and the City of Minneapolis.
JP: Has any money been spent to date? If so, on what?
PY: Part of it has been spent on paying my salary of $120k annually and we have no other expenses at this point. My appointment right now is based on contract and first the six months term that would be $60k.
JP: I read that the annual budget stated (public/private) is $750k. Where do you see this sourced from?
PY: That’s the challenge that I’m pursuing is to determine where the budget financing would come from. I foresee some from corporate companies, some from foundations and some from public money through economic development initiatives. It depends on the value we can add and who is interested in putting money into that.
JP: In addition to your own salary, what would this funding be applied towards?
PY: The vast majority of it would go towards other salaries to support services. Some towards sponsorship of events, other maybe to creating a regional portal communication tool.
JP: Who would be making the decisions about where the funding would be applied?
PY: It would be the board making these decisions.
JP: Why do you feel the need to use the money that public pays in taxes to support AccelerateMSP?
PY: In an ideal world, we wouldn’t have to. The way I see it is that the state is already spending money on economic development initiatives, much of which is directed towards large corporations. We can have a debate about whether that money should go into these things, but since it already is, I’m suggesting let’s redirect some of it into entrepreneurial initiatives.
JP: Is that a debate you’d be interested in having at a future date?
PY: I don’t know that I’m prepared to do that, it’s not something I’ve studied or spent time thinking about very much.
JP: Can you describe what AccelerateMSP’s value proposition is to the entrepreneurial community?
PY: I would say the number one thing is helping people build their businesses. To be clear, we’re looking at technology based companies that require capital to get off the ground, grow and scale. I want to focus on where there are not resources being applied.
Even for experienced people building companies, there’s a lot of challenges to navigate. Figuring it out is hard and its best done in teams of people who really understand the field. We want to add value in the early stages.
JP: Why the decision to be a non profit entity vs. a for profit entity?
PY: It’s a good question, I think my view would be that if the environment were ripe for that in a for profit to make sense, it would already be happening. Why aren’t there any for-profit accelerators here?
JP: Could you expand on that?
PY: I do consider this to be an accelerator of sorts. My job is to be a student of the environment and determine what gaps need to be filled, I’m still in that process and as I talk to a lot of people, we have some for profit initiatives but why not our own version of what we see elsewhere. What are the reasons for that, I wonder?
JP: Why do you think that is?
PY: I think there’s an interest for it, but pulling the people together who are interested in that has not yet happened. We have everything that’s needed, let’s just make that happen.
JP: What evidence is there to indicate that AccelerateMSP is needed and/or wanted by Minnesota’s technology entrepreneurs?
PY: That’s what I hear from people…
JP: People as in entrepreneurs?
Yes, entrepreneurs that I talk to.
JP: Any entrepreneurs individually or groups that you’ve talked to?
PY: I don’t know that they would want me to say who they are. To be clear, I have not interviewed numerous entrepreneurs, I am to some degree going off the opinions those who are working with entrepreneurs on a regular basis, those on the advisory board.
They say AccelerateMSP is desired, that entrepreneurs do need it. However if the entrepreneurs do not want or need AccelerateMSP then it will not be successful.
JP: So if the board feels strongly that AccelerateMSP is needed, why would they not be financially supporting it themselves as opposed to going through foundations and city/state to use taxpayer money?
PY: I think that there will be a time when that happens, we’re just in the very beginnings. There will be that opportunity for them.
JP: Wouldn’t the beginning stages be the greatest opportunity for them to directly show their support by backing what they consider necessary?
PY: It’s been in the formative stages and that opportunity is coming. If they don’t want to put their own money in that would be a sign.
JP: A sign of what?
PY: A sign that they are not supporting it…different people would have different reasons for why they would put their own money into it…
JP: Or why they don’t?
PY: Yes, or why they don’t.
JP: Recent data shows that Minnesota’s tech funding grew 26% YoY 2012-2013. Yet it was noted that “Part of the organization’s mission will be to determine if there is a lack of funding or just a perception that there is not enough funding.”
Besides the fact that any “determination” — regardless of who makes it — is still a matter of perception, what is yours?
PY: My impression is that it’s a mixed story. I’ve heard the expression that ‘good companies get funded’ and I think that’s probably true. A lot companies get financed by people who are under the radar screen, so it’s hard to say. Where I think there’s a gap is at the earliest stages of tech companies, those that necessitate significant capital for proof-of-concept.
If you look at the angel investors here, it doesn’t seem like many of them are investing in the seed stage. And again, when it does, it’s often times unknown.
JP: How do you define seed stage?
PY: Pre-revenue, early formation.
JP: In your opinion, what would qualify as “enough” seed stage funding?
PY: I don’t know if I can answer that, or that there is such an answer. Part of what we’re looking to do is determine for every company that is getting funded, how many are not? If we could help them make that shift and become fundable, how many would there be to finance? I don’t know the answer to that, but perhaps those are the ones we could help.
JP: Why not let the open market of private investors determine what’s fundable or not, that is to say, invest when it fits their risk-reward profile and where makes sense to them?
PY: There aren’t many investors here who operate in the seed stage, which is the hypothesis I have and the premise we’re operating on. Now if that turns out to be false, then it it’s false.
JP: How would you determine if that were true or false? What’s many by your judgement?
PY: It’s a matter of really digging in and understanding what the pipeline is and I think ultimately it is a market judgement.
JP: So on one hand you’re suggesting that there’s further judgement to be made by AccelerateMSP, on the other you’re saying it’s the markets to make. Can you help me better understand this logic?
PY: I really want to understand…my sense is there’s a huge opportunity here and we want to better know how capital is being deployed by working with those who are investing.
JP: What kind of opportunities and for who?
PY: I think for the Twin Cities region and beyond.
JP: A region is a very general concept that encompasses a lot of different people and aspects, could you be more specific about who within the region?
It’s on many levels and as an environment and ecosystem overall. To me, that seems like a great thing for the community, to transform this into a place that’s more appealing to everybody. Creating a mindset where people feel empowered to chart their own course is a big part of it, one where they can make money as entrepreneur and/or investors, but even beyond that.
JP: You have said “This kind of thing has to be created and owned by people who understand what’s really needed.”
My question based on that is: who would you suggest better understands what’s really needed more than the entrepreneurs and investors themselves?
PY: What do you mean?
JP: Who are the “people that understand what’s really needed?”
PY: A lot of what’s happening here is a grassroots effort going on and a degree of vectoring going on. If we want to do that, then we can allow that to happen serendipitously or we can intentionally vector it.
JP: What is vectoring?
PY: Vectoring means we’re here and we want to go to here (motions hands low to high). It’s about the culture and the environment. So who is there best suited to do that? Well entrepreneurs are best designed to build their own companies, but who is designed to vector a community?
JP: If you’re asking me, that would be entrepreneurs engaged in “vectoring” as you term it…
PY: Well I am an entrepreneur, that’s my background, I don’t know how much you know about it.
JP: Very little…are there any other current entrepreneurs involved in the formation of AccelerateMSP?
PY: Tom Kieffer.
JP: I’m informed that you were recently asked to meet with the Governor’s team on “access to capital.” Did this meeting occur?
PY: It did occur.
JP: Were any entrepreneurs present?
PY: Aside from myself, no.
JP: Why not?
PY: I don’t think that’s something that we should discuss right now.
JP: OK. That concludes my questions, thank you for the time. Is there anything else that you would like to add?
PY: It’s important to note that there is a group of people who have brought it to this point and those are the people on the board. What needs to happen now is the board needs to be constituted and comprised of the next set of people to move this forward, that’s what’s on my mind.