A central tenet of the Lean Startup is “pivot, persevere, or perish.” On June 1st, after five years of perseverance and pivoting, my partners and I wound down Launch413. With six months now past, it feels right to share what we’ve learned.

For those unfamiliar with it, Launch413 was a Post Accelerator that helped startup CEOs scale for sustained success by providing coaches with deep domain expertise. Our team consisted of angel investors, Fortune 500 executives, and exited CEOs from dozens of sectors. We developed a truly innovative model that we believe has tremendous potential. But after five years, we ran out of time. The purpose of this post is to open-source what we learned in the hopes that others can take the good bits and create something even better!

The Model

We provided each startup:

• Board of Advisors that acted like a board of directors, holding the entrepreneurs to account. The board assisted entrepreneurs in developing strategic focus and then setting meaningful and ambitious goals.
• Subject Matter Experts that were called in to help with targeted issues the entrepreneur and their board identified as key priorities.
• A Venture Champion that met with the entrepreneurs weekly to help them stay on track with their plan, grow as leaders, and help recruit & coordinate support from other mentors.

Every month Mentors earned “points” for each role they played. We committed to work with the startups for years.

In return, startups agreed to provide us 5% of their growth in sales revenue until they’d paid us a total of $500k.  We distributed those funds to the mentors based on how many points they earned.

What Went Right

• Results: Quotes from our entrepreneurs:
  • “We would not have survived COVID without Launch413.”
  • “You are the reason we were able to raise our funding rounds before we ran out of runway.”
  • “We knew marketing and sales were major weaknesses for us, but had no cost-effective way to address it. Your team taught us how to do it, and then helped us recruit the talent to take over once we were ready to scale.”
  • “The community of mentors and fellow entrepreneurs were constantly supportive, making introductions and providing advice I could not have accessed on my own.”
• Incentive Alignment: The model aligned everyone’s incentives to help the entrepreneurs build profitable, scalable businesses. No fights over valuation. No arguments over when to have an exit. No concerns about bringing in another mentor to help. And because we were at least threatening to pay the mentors, it created a much stronger level of commitment from them and from the entrepreneurs.
• Focus: I’ve yet to meet the entrepreneur who failed because they were lazy. All the failures I know, including my own, came from working very hard, but on the wrong things. And so you run out of time. We provided our entrepreneurs and mentors simple tools to help identify what to focus on and ensure we stayed focused! Our top tools were Village Capital’s Viral Pathway (here is our adaptation of it) and our own Management Dashboard (template, training video).
• Coordination: Our system of Venture Champions and light central support allowed our team of dozens of mentors, many of whom have never met in person because of COVID, to coordinate wonderfully to get our entrepreneurs the right help at the right time. There were lots of opportunities for us to do this even better and at a larger scale, but I know of no other organization that has done as well without also having a budget of tens of millions of dollars. 
• Network: The community of mentors and entrepreneurs formed was the best many of us have ever been a part of in terms of quality, collaboration, commitment, and just-plain-nice-people! 

What Went Wrong

Lack of Dealflow

For all five years of our life, lack of dealflow was our biggest risk. We looked at a lot of sources and conducted over 100 customer discovery interviews with angel group leaders, accelerators, VCs, and all manner of other groups. Accelerators, Angels, and VCs liked the idea of us helping their portfolio companies in a 100% success-based, non-dilutive way. However, we were not solving a hair-on-fire problem for them, so they never became robust sources of dealflow.

We realized that almost all entrepreneurs insist on getting $ along with their advice. As we only provided advice (and didn’t really believe that the $$ should come first), that was killing our ability to secure dealflow. We looked into starting our own fund, but limited partners look for two things above all else when investing in fund managers: #1 the managers have done it before and #2 they have fantastic dealflow. Our team didn’t have either.

Economics Didn’t Work

When we first started Launch413, we estimated how much mentor labor would be required to help each company based on our past experience mentoring at nonprofit startup entrepreneurship organizations. Unfortunately, our experience proved to be different.. When we took into account the labor involved in our model, and that the amount we could make from startups was capped at $500k, and that we didn’t have access to robust sources of kick-ass startups… our mentors would be lucky to make the equivalent of $100/hr. That isn’t fair-market value, let-alone a risk-adjusted premium for getting paid “maybe possibly someday.” We were off by a factor of 10. 

If it had been a factor of 2, we could have made it work. But a factor of 10 requires radical changes. The one thing that could most help would be to switch to an equity-based model as that might give enough upside to really help the math. But then we’d look like a venture fund that doesn’t write checks… so pretty hard to compete with VCs that do write checks.

And to be transparent: I ran out of time because I had to pay the bills! If I was independently wealthy, I could have worked purely on spec for the bright potential future of Launch413’s model. But I’m not, so it was time to find a reliable source of income. 

Gratitude

In the six months since Launch413 closed, our community continues to help each other, our entrepreneurs continue to grow, and we all find ourselves better off for the journey. 

I am filled with gratitude for what Launch413 created. It was a bold, beautiful idea absolutely worth trying. I am proud as hell of the impact we had on our entrepreneurs. I am humbled by the kindness and capabilities of the mentor community we built. I am enriched by the learning and connections we have all made together on this adventure.

I have special gratitude for:

• Rick Plaut, my co-founder who’s calm presence and worldly wisdom was by my side for every rip and rise of the rollercoaster ride.
• Jim Stanczak, who invested his incredible mind into every one of our experiments to make Launch413 scalable.  
• Our board of advisors: Ali Usman, Randy Krotowski, and Eddie Binder.
• And the entrepreneurs and mentors that make up our community.