Vancouver startup incubator Bootup Labs is taking heat for abruptly downsizing its portfolio of fledgling companies looking for a bit of financing and mentoring after an apparent snafu in fundraising on their part.
The multiple-sided story has been circulating on Hacker News since last night and covered here and there, but we thought we’d recount what’s happening because there are important lessons to be learned here.
Let’s start with the take of young entrepreneur Jamie Martin, who kicked off things with the announcement that the startup he had co-founded, Statusly, had been cut from Bootup Labs’ Startup Accelerator.
Make sure you read the blog post before continuing.
The gist of his side of the story: he and his co-founder Steven Rogers applied to a good number of seed funds and incubators all over North America and ended up choosing Bootup Labs in Vancouver, relocating to Canada (and everything that comes with it) with practically no money and sleeping on the floor of an apartment while working on Statusly for 2 months.
Then, Bootup Labs co-founder Danny Robinson tells the pair that the incubator was unable to secure as much money as they had originally anticipated. As a result, they had to “reduce their portfolio” of 7 startups to 3, giving Martin and Rogers 3-4 business days to get a job – which proved impossible, ultimately forcing the duo to return to the USA and put up their startup’s assets for sale on Flippa.
It’s important to note that Martin acknowledges that there were good sides to the experience as well, and that he shouldn’t have claimed that Bootup Labs was running out of money (which he did in the original title of his blog post). On the flip side, he was never given a decent explanation of what went wrong, exactly.
Bootup Labs responded to the fuzz that originated from Martin’s blog post, first in comments on his blog and on Hacker News, and ultimately by publishing a blog post. In this post, the incubator announced that it has raised funding from local VC firm Growthworks and Canadian entrepreneur and investor Boris Wertz, and that the latter would be joining the board.
On to the “unfortunate part” of the announcement. Bootup Labs says they had informed its ’2010 cohort’ upon arrival that fund closing would be delayed due to some new Canadian venture regulations, and that one investor backed out unexpectedly when the capital call was made. Robinson writes that the delay was “outside of our control, unintentional, and communicated immediately”. He goes on to say:
“We used every last cent of our personal money to bridge Bootup and close the funding. We supplied a great deal of support and value to the 7 companies over the first 2 months of our 2010 cohort, and we received nothing in return for the 4 companies that were cut. We still count all the companies that we’ve worked with in any capacity as friends of Bootup, and wish them all the best.
Bootup is back on solid ground and ready to continue it’s role as a leading North American Seed Accelerator.”
Personally, the final part of the blog post vexes me, after thinking about both sides of the table in this story. Nobody said being an entrepreneur was going to be easy, but what kind of message is Bootup Labs sending to the 4 startups that were cut in question? That you have to roll with the punches but fortunately Bootup would be alright, thank you very much?
If I were Bootup Labs, I would be going out of my way to amend things with the 4 startups that were abruptly cut. I’d do more than what is strictly necessary, and not for publicity reasons, if only to make my own mission statement ring true for future startups and partners. That would help to avoid getting commentary like that by Ian Bell, founder of another startup that was cut out of the program, who writes:
Note for the record that AppSocial, of which I am founder, was never a Bootup Labs company. While it is true that we had signed a Term Sheet with Bootup it became quite clear to us that Bootup did not have the capital required to fulfill the promised $150K in that Term Sheet. When Bootup floated a significantly lower offer, we withdrew from their offices in early March.
Unfortunately, Boris Mann had announced to the world that we had joined Bootup in January, without consulting us and obtaining our consent. This was premature. In practise it is preferable to wait until all deal documentation is executed prior to such an announcement. And I think we now know why.
It is regrettable that I am compelled to address this issue in a public forum. It sucks for everyone involved and I certainly hope that Danny and Boris, and all of the entrepreneurs affected by this, have learned from the experience.
Again, if I were Bootup Labs, I’d apologize a million times, explain in the greatest detail possible what went wrong when, where and how, and what measures I’m going to take to avoid such a situation ever to happen again in the future. (To be fair, the other Bootup Labs founder, Boris Mann, appears to be more apologetic about the whole thing.)
I sure as hell wouldn’t be boasting about the fact that my own company at least got “back on solid ground” and is “continuing to lead” anything.
Update: Robinson responds in comments:
You’re right. We deserve to be lambasted. If you were actually in my shoes, you would have already apologized, in person, many times, and done everything possible to make it right. Which is exactly what we did, and explains why we have not done so in public prior to now. We feel terrible about what happened are are truly sorry. We’re still working to make it right and will always be there for these companies.