Is there a startup accelerator bubble or is the startup accelerator model simply a nascent and fast-growing industry?

As a Tow-Knight Entrepreneurial Journalism Fellow at the CUNY Graduate School of Journalism, I am one of 16 lucky new media entrepreneurs who have access to world class mentors, financial opportunities, industry leaders, venture capitalists and like-minded thinkers. It is difficult to classify the program as a seed accelerator (because no seed funding is provided from the get-go), an incubator (because of the aforementioned relationships and opportunities that go beyond free office space), or an intrapreneurship for in-house academic experiment (because we have no obligations to continue our relationship with the university after the program ends).

What I had not considered before embarking on this adventure was that a major benefit of having the Tow-Knight Center housed at CUNY is that all intellectual property that my colleagues and I create is our own. We don’t have to fork over any percentage of future revenues that we may derive from our forthcoming ventures to the institution or our advisers. I consider us lucky and rare to have this combination of resources without the potential of buyer’s remorse if a project grew but some equity was already distributed.

This morning, I read an interesting INC article that provides an insider’s look into TechStars, the popular and fast-growing startup accelerator. While TechStars and YCombinator are generally considered the Harvard and Princeton equivalents of the accelerator world, I wonder whether the rest of the pack, essentially startups themselves, has equal value. While I enjoyed the INC piece, I was disappointed to learn that some TechStars applicants are accepted because of their relationships with the organization’s leaders, despite having severely underdeveloped or non-existent products. But on the other hand, I recognize that this is the way the world works. In private business, democracy has a very limited role. And merit may have even less. In the startup world, a frequently heard maxim is that venture capitalists invest in personalities and founders, not companies.

With seed accelerators proliferating all over the world, one wonders if the talent pool at each individual accelerator will become severely diluted. Though it is impossible to gain data about the success of companies grown from seed accelerators that have not yet had the opportunity to flourish or flop, one can surmise that more startup accelerators will mean fewer success stories from each specific program. When YCombinator had less competition, it meant that they got their pick of the litter. Nowadays, founders may not want to schlep to Silicon Valley if they are confident that they can still make it in their home cities or countries.

Jed Christiansen, a London-based American who works at Google, keeps track of seed accelerators through a spreadsheet on his personal blog. He defines seed accelerators as follows:

The following are required to be a “seed accelerator”

  1. Open application process; anyone with an idea can apply
  2. Accelerator invests in companies, typically in exchange for equity, at pre-seed or seed stage
  3. Cohorts or ‘classes’ of startups; not an on-demand resource
  4. Programme of support for the cohorts, including events and company mentoring
  5. Focus on teams, and not individual mentoring

Examples of what isn’t a seed accelerator:

  1. Programme where the startup pays for mentoring
  2. Incubator where the startup pays (discounted) rent in return for equity and/or discounted business services
  3. Programme where applications are restricted to certain groups (like students from a particular university)

Because of the rapid growth of seed accelerators, now would be an ideal time for someone (an academic, perhaps, hint, hint) to create a more comprehensive database that keeps track of the success to failure ratio at each of these accelerators. I can already guess that firms that are only given $20K in seed funding in exchange for 7% of their company won’t have the same advantages that firms who are given $100k for an equal stake. In this sense, it will also be important for entrepreneurs to report back on any seed accelerators that are disorganized, don’t deliver on what they promise, or steal intellectual property — all issues that I foresee arising in the near future.

At the end of the day, one must think about Facebook, YouTube, Google, and countless other uber-scalable companies that weren’t working within any set of rules at a seed accelerator when they launched. Investors flocked to them when their products had true growth potential and superb execution.

While some people wonder, what comes first —  the chicken or the egg —  I wonder what comes first — the seed or the flower that creates its own seeds to spread.

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Startups that are trying to create marketplaces that monetize video content. But how will they get people to the market?

I have been researching startups that offer opportunities for original video content creators to monetize their work, oftentimes by creating marketplaces and platforms. Here are some of the more interesting companies I have discovered. (Please add others in the comments section.)

Note: I am not writing about companies that work in music monetization or companies that are video advertising solutions.

1. PlaceVine (Acquired by social video syndicator Alphabird in 2011)

About: “PlaceVine is a service that bring passionate content producers together with marketers and their agencies to create socially engaging branded video experiences. Today, the basic Placevine service enables producers to showcase their concepts and content for brands, and enables marketers to provide talented producers with brand integration opportunities.”

2. Koldcast.tv

About: “KoldCast TV, a division of KoldCast Entertainment Media, LLC, is an international television network which distributes programming to entertainment consumers around the world via the KoldCast TV Network site, found at www.koldcast.tv, via set-top boxes, connected/smart TV’s and mobile devices, and via unique relationships with broadcast and cable TV networks and other television distribution venues around the world. Our programming is largely created by independent television producers and filmmakers from the United States and countries across the globe. The phenomenal growth of independent programming allows KoldCast to be highly-selective in its programming choices. Unlike online video distribution sites like YouTube and those that have followed them, KoldCast specializes exclusively in professionally-produced programming. Our programming slate does not combine user-created videos of cats and dogs playing the piano or riding a lawn mower.”

3. Blur Group

About: “Blur Group has built and operates the world’s largest Creative Services Exchange™. With 14,075 creatives and exchange staff, a unique business model and advanced technology, it radically alters the marketing services space. CMOs, marketing directors, VPs, creative heads and innovation leaders buy the best, most cost-effective creative services from expert providers around the world. The biggest global brands, the coolest startups and all points in between choose this transparent approach for the most cost-effective, real time and relevant design services, marketing campaigns, content programs, original artwork and innovation partnerships.”

4. Talenthouse

About: “Talenthouse provides life-changing opportunities for the creative community. It’s a place to participate in projects with leading artists and brands, gain recognition and virally grow your audience. Talenthouse embraces artists at every level of their career, as well as all supporters of the arts. Attracted by the potential for discovering, collaborating with and mentoring emerging talent, many global brands and acclaimed industry icons are involved with Talenthouse by hosting Creative Invites. Brands choose Talenthouse to engage in a dialogue with their audience in a targeted, relevant and credible context. Talenthouse currently focuses on film, fashion, music, art / design, and photography.”

5. Videolla.com

About: “You simply upload your video to Videolla and set price for it or insert ads into the video. Its simple and free. You will not need any coding skills. Just register, upload your videos and pick if you want to sell them or place ads.”

6. Bozza (South African)

About: “Most individuals in Africa engage with digital communication, information and entertainment through their mobile phones. Content drives the uptake of technology; yet despite the global increase and focus on the value of content, there continues to be a lack of locally generated, contextually relevant content for the African market. Focused on local made-for-mobile content, the Bozza application offers artists, filmmakers and entrepreneurs a mobile platform through which to distribute their content. By doing so these SMMEs earn revenue and users get free access to relevant, premium content (music, written word and videos) that entertains, educates, informs or all of the above.”

7. Poptent

About: “Poptent is a vibrant community of filmmakers (and actors, comedians, grips, animators and more!) who are connecting to each other and to companies that want to pay them for their talents. Through our passions for advertising and commercials, we are exploring a new way of creating branded messages for the Internet age. Poptent members can show off their work, build a portfolio, collaborate with other creators, leverage our deep set of features, and best of all make money doing what they love. Poptent brands are seeking new ways to reach their consumers and create new audiences. They are finding exciting possibilities that save them both money and time while staying just ahead of the curve of competition. They are, in a word, trendsetters.”

The US Senate passed the JOBS Act: How this legislation can improve the quality of American journalism

I recently blogged about the many benefits that I hope will come to America with the passage of the JOBS Act. Now that the US Senate has passed the JOBS Act, the bill has gone back to the House of Representatives for final approval before President Obama signs it into law. Despite my skepticism about the ability of Congress to pass any legislation in this toxic and partisan political climate, I am pleasantly surprised that it looks like the JOBS Act should go through with bipartisan support.

My general thesis is that if the “people” can now invest in new ventures, then they will be more apt to use products and services that cater to small groups/communities, and more likely to shun products, services, and information that comes from large corporations that are geared for the masses. Of course, it may take a couple of years to see these effects, but I am hopeful that fragmentation can create diversity in spheres of life where Americans now have too few choices.

While other commentators have focused on the overall benefits and drawbacks for investors, businesses, regulators, and consumers, I will list potential ways that the new crowdfunding legislation can influence and disrupt journalism. My theories on winners and losers from the JOBS Act:

1. Communities can rally around creating publications that they control, rather than leaving sub-par newspapers in the hands of publishers motivated by the bottom line rather than creating high quality community content. Watch out Patch and legacy publishers! The potential to revive local journalism in places that are currently without local news sources is the most promising development that I see. But legacy media organizations should be on guard, because disruption born out of frustration may be just around the corner.

2. Niche publications will be able to get off the ground more easily. If a fragmented community of  1,000 people — I’m thinking an online community for this example — who were spread throughout America, wanted to hire one person to work to create content, they could hypothetically each donate $30 to a venture that could create a niche publication with a professional or semi-professional journalist/curator at the helm.

3. Television networks and cable channels should be scared because YouTube is already slicing up the market. Enthusiasts of various types of content that don’t achieve the critical masses needed for channels that cater to advertisers may now have their opportunity to band together to create more desirable programming…and make it profitable.

4. Television news should be a prime target for entrepreneurs at the local and national levels, as it has remained virtually unchanged for such a long time. I foresee new formats developing, and I believe the crowd will control how they develop.

5. Crowdfunded radio stations may destroy the traditional for-profit ones. Watch out ClearChannel. Look out for an indy radio explosion…most likely based on the Internet.

6. Lone bloggers and journalists with strong personal brands — or with the ability to build strong personal brands — will now be able to have investors rally behind them. This may create a major revolution for sole proprietors, ending the struggles that freelancers face in terms of tax burdens. Another advantage is that talented people may now be more willing to go off on their own rather than remain with corporations that underutilize talented journalists’ skills and abilities.

SXSW – Successful Journalism Startups: Global Lessons

Takeaways from Pekka Pekkala’s sustainable journalism business models talk:

Visit http://www.submojour.net/ for more info. This is a database of for-profit news sites that make money.

Top findings from case studies of profitable journalism startups:

1. This is not a new thing: The average age of money-making web sites is 6+ years (worldwide).

2. Advertising rules: 75%of people interviewed said they make more than 75% of their revenues from advertising. Most journalists sell the ads themselves. They sell weekly or monthly ads rather than CPM-based ads. Avoid Google AdSense.

3. Make money as a consultant. You can earn 3x as much money as you do as a journalist. But make sure you are an expert.

4. Host events.

5. Syndication.

6. Be frugal. WordPress is by far the most popular publishing platform — but learn basic tech skills.

7. Be entrepreneurial: Think about the money from day one.

8. People don’t pay for content…but they are happy to support a cause: This is true in the US, but perhaps not in other countries.

9. Find your niche. Based on geography, taste, interest, or point of view…

10. Pay your contributors: Free citizen journalism is the exception, not the norm. 1 out of 10 contributors stay more than a couple of months, and those people hardly ever write again. You invest so much time and money in training people.

11. It’s about community: It’s not about you. The people who create content have to be a part of the community. (The Patch.com turnover rate was so high that new editors were not able to form relationships with the people they covered.)

Part 1: The law that could save sustainable journalism will be destroyed unless the US Senate acts now!

I recently argued that upstarts like Matter that have made successful pitches on Kickstarter are not the solution to solve journalism’s long-term problems. Why? Because crowdfunding, in its current form, does not permit ordinary people to make investments. Rather, crowdfunders make donations, or in some cases loans. The outcomes are variable and generally unsustainable.

When David Cohn started the crowdsourced journalism non-profit Spot.us four years ago, it worked on a similar premise to Kiva, whereby donors received part or all of their money back if and when a crowd-funded story sold to a legacy media outlet. Cohn prevented any one person from influencing which stories were funded by limiting each donor to funding 20% of the total amount raised for each pitch. Of course this system is potentially flawed in that one donor can spread his/her money out to friends etc, but at least Cohn tried to implement a system of checks and balances.

We’re on the brink of a revolution that could lead to saving sustainable journalism and create many jobs

We may be on the brink of a journalism revolution. Currently, only accredited investors are able to invest in newly formed companies, which prevents Kickstarter, Spot.us, and any other crowdfunding site from raising capital for startup companies and entrepreneurial journalism ventures.

Forbes reports:

Under current federal and state securities laws, startups are prohibited from selling stock or other securities via crowdfunding sites or social networking sites. Such laws include:

  • A prohibition against “general solicitation” – which means that a company may not offer or sell securities unless there is a substantive, pre-existing relationship between the company (or a person acting on its behalf) and the prospective investor (see “Can I Raise Money For My Startup Via Twitter?” );
  • Disclosure and state law compliance requirements if the investors are not “accredited investors” — which usually makes the offering of securities too costly and onerous for a startup (see “Ask the Attorney – Securities Laws”);
  • A requirement that any intermediaries (including websites) must be registered with the SEC and applicable state securities commissions as a “broker-dealer” in order to legally accept any transaction-based compensation in connection with the sale of securities (see “Ask the Attorney – Beware of Finders”); and
  • A requirement that any company that has 500 or more shareholders and total assets exceeding $10 million must register with the SEC and file periodic reports.

These laws were designed with good intentions: Nobody wants to see Mom and Pop lose their hard-earned money to a snake oil salesman. But in today’s crowdfunded world, they no longer make sense. When tech-savvy Americans realized this, they sought action.

In the United States Congress, Rep. Patrick McHenry (R-NC) (who made some excellent contributions to 2010 Census oversight, which I know from my time spent running MyTwoCensus.com), introduced crowdfunding legislation that was one of the most popular bipartisan initiatives in recent history, garnering support from Democrats all the way up to President Obama himself. McHenry’s bill, the Entrepreneur Access to Capital Act,  H.R. 2930 (full version here), passed 407 to 17.

This makes total sense. Republicans generally don’t believe that the government should be able to tell people how to spend their money. After all, anyone can gamble or booze away all of their savings, can’t they? And Democrats don’t see why accredited investors who are members of the “top 1%” should be the only folks permitted to invest in startups, thus preventing the upward mobility of the masses.

Specifically, the highlights of H.R. 2930 are as follows:

– Create a crowdfunding exemption from SEC regulations for firms raising up to $2 million, with individual investments limited to $10,000 or 10 percent of an investor’s annual income.

– Excludes crowdfunding investors from counting as shareholders for purposes of calculating the 499-shareholder cap under 12(g) of the Securities Exchange Act

– Preempt state law and exempts the ban on general solicitation for the new crowdfunding exemption.

Now, as always seems to be the case as of late with the American government, just when we’re on the brink of something great, the millionaire’s club also known as the United States Senate has failed to move forward with this legislation, thus preventing it from making its way to President Obama’s desk to become a law.

Despite Senate Republican Scott Brown of Massachusetts championing similar legislation to the resolution that the House of Representatives passed, lobbying groups like the NASAA (North American Securities Administrators Association, “the oldest international organization devoted to investor protection”) have wielded their influence over the 100 people who control the fates of the other 300+ million.

What needs to happen now is simple: An online campaign of the magnitude of the SOPA/PIPA protest variety must be enacted to create swift and effective action to boost America’s economy by causing the US Senate to pass comprehensive crowdfunding legislation. Sites like crowdfundinglaw.com and startupexemption.com have already been set up to explain this law and advocate its passage. And using a Wefunder.com petition, more than $6 million has already been pledged to support investment in new ventures if this legislation is passed.

But will Google, Craigslist, Wikipedia, and all of the other organizations that led the charge against SOPA and PIPA step in to assist with this one?

As someone who is not interested in the “rewards” that Kickstarter campaigns promise their donors, but rather direct return on investment in monetary form, I and other like-minded people would be happy to invest in startups despite our lack of accredited investor status. I don’t gamble in casinos, but I’d be happy to gamble on good ideas and innovation.

Coming soon: Direct effects of crowdfunding legislation on new journalism business models…