It’s easy to get caught up in the glamour of big venture capital rounds. To the average onlooker, the simple equation for VC rounds is that the bigger the dollar value, the bigger the potential.
Entrepreneurs themselves – the ones that are looking to change the world with their next big idea – can be forgiven for getting their heads in the clouds too, thinking venture backing is the only way to the top.
A new accelerator in Ottawa, however, is looking for founders with their feet on the ground.
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Twelve-7 Ventures has opened applications for its first accelerator cohort, seeking established companies committed to long-term bootstrapping with the hope of hitting annual revenues of $12 million in seven years.
The new accelerator is the vision of three local executives steeped in the management consultant business. CEO Andy Bayandor, a graduate of the Telfer School of Management, got his start out of university at Ottawa-based Interis Consulting. That’s where he met Denis Godcharles and Richard Mercier, the co-chairs of Twelve-7 Ventures.
Gap between bootstrap and VC
After Interis was acquired by BDO in 2013, all three men started delving into the startup scene, either as advisers or CEOs themselves. Through their regular conversations with other entrepreneurs in recent years, the founding team started to hear some familiar problems.
For example, entrepreneurs who wanted to grow a business at their own pace were having trouble accessing working capital from banks, while the traditional VC model of grow-at-all-costs took control away from founders too early in the journey.
“There is a gap there for entrepreneurs who want to grow their business and keep control,” Mercier says.
In an attempt to address that gap, Twelve-7 Ventures is currently raising a fund of roughly $1.5 million to provide its participating companies with the working capital they need to steadily grow the business. At the same time, Twelve-7’s team will run the companies’ entire back office operations, letting the founders focus on executing their individual strategies.
Tightening the bootstraps
Bayandor says this approach, which aims to help bootstrappers grow at their own pace, will ultimately yield a better product than the hit-or-miss VC approach.
“I think the bootstrapping segment’s getting a little bit neglected,” Bayandor says.
“Everyone’s on this hunt for this unicorn, running around town pitching. We want to work with these guys who want to really build a sustainable solid company.”
Twelve-7’s philosophy attempts to separate the company’s pitch deck from its founders. While the accelerator’s application will include a breakdown of the business, that’s just to get in the door. Godcharles says the in-person conversations will help the team decide whether the founders are more interested in the “glamour” of startup life – flashy, Dragon’s Den-style pitches and large VC rounds – or, as he puts it, “doing it the hard way.”
The Twelve-7 team isn’t suggesting startups should avoid VC at all costs. Some capital-intensive businesses, for example, might find merit in raising a sizeable round.
Godcharles cites the recent success of Montreal-based Lightspeed POS as an example of the merits of waiting to raise. Though Lightspeed raised hundreds of millions in venture capital before its IPO earlier this year, CEO Dax Dasilva told BetaKit it deliberately went seven years without collecting a single VC cheque. That helped the company to shape its identity and mission before getting outside input and funds from investors, he said.
Godcharles agrees with Dasilva, adding that a company that already has a solid foundation of annual revenues will have more leverage if and when it finally does seek a major venture capital deal.
Four companies will be selected for Twelve-7’s inaugural cohort. Applications are open now at twelve7ventures.ca, with programming set to start in early 2020.