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The natural conclusion of running a cohort of five is you need 60 to 80% of your graduates getting into the angel and venture markets out of the program. And we’ve been able to hold that number. So, I think 60% of our graduates have raised more than a quarter million — I’m sorry, 60% have raised more than 1,000,000, 80% have raised more than a quarter million. And it’s been a critical advantage for us as a portfolio design.
Jay Clouse 0:24
The startup investment landscape is changing, and world class companies are being built outside of Silicon Valley. We find them, talk with them, and discuss the upside of investing in them. Welcome to Upside.
Jay Clouse 0:52
Hello, hello, hello, and welcome to the Upside Podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co-host, Mr. Buzz-Head himself, Eric Hornung.
Eric Hornung 1:04
Jay, we can start with the buzz-head, but we all know what this is stemming from. This is stemming from my desire to try out some blonde hair. What do you think?
Jay Clouse 1:13
I think both are horrible ideas.
Eric Hornung 1:15
I’m now more scared to do it because someone told me — well, you told me a story, someone else told me a story about hair not growing back. So I don’t want to buzz my head anymore, but that was going to be my scapegoat for, if I hated dyeing my hair blonde, I would just buzz it, and then it would grow back. It turns out it doesn’t always grow back.
Jay Clouse 1:34
Everyone with short hair aspires to have long hair. People have short hair, people buzz their head because it doesn’t look good when it grows out. Otherwise, we’d grow it out. I don’t know why you want to go the other direction.
Eric Hornung 1:46
I just — sometimes you just want to try different things, man. You know, grass is always greener on the other side.
Jay Clouse 1:50
Why not grow a beard?
Eric Hornung 1:51
I’ve had a beard, I get too much of a neck beard. It gets kind of gross.
Jay Clouse 1:55
You can solve for that. No one with a good beard has a neck beard.
Eric Hornung 1:59
Also, friend of the podcast Colleen is not a fan of the beard.
Jay Clouse 2:02
Is she a fan of buzzed hair or blonde hair?
Eric Hornung 2:06
Um…the jury is out.
Jay Clouse 2:07
Because that’s a much longer road back if it doesn’t go well.
Eric Hornung 2:12
I think I could grow my hair out, you know, relatively quickly, assuming it comes back, which is the thing I’m scared about now.
Jay Clouse 2:20
Are you having a quarter life crisis?
Eric Hornung 2:22
I don’t think I’m having a quarter life crisis. But I think that’s what someone who is having a quarter life crisis might say.
Jay Clouse 2:27
I’ve been getting a lot of emails from listeners of the show asking me if you’re okay. They say, it sounds like you’re having a quarter life crisis.
Eric Hornung 2:35
Oh man, well, you know, the nice thing about having a quarter life crisis is it’s an easy multiple on four on your age, and you figure out how long you live to, which at this point is like 112. Yeah? So that seems fine. That’s a lot of years.
Jay Clouse 2:48
Well, Eric, I thought you were a better idea generator than this. We’ll move on. We’ll move into today’s guests, the cofounder of gener8tor accelerator, Joe Kirgues. gener8tor is a turnkey platform for the creative economy that connects startups, entrepreneurs, artists, investors, universities, and corporations. The gener8tor platform includes pre-accelerators, accelerators, corporate programming, conferences, and fellowships focused on entrepreneurs, artists, and musicians. Eric, we’ve been connected with gener8tor from the very beginning of this podcast when I met Sibi by chance here in Columbus, and he started feeding us some of our early guests on the pod, from Kaleidoscope and Swannies and parkX to geno palate.
Eric Hornung 3:28
They have been a huge supporter, and it’s going to be great to talk to Joe. But I have another idea for you, Jay, if you’re worried about my idea generation, what do you think, tattoo sleeve, one arm?
Jay Clouse 3:39
Nope. Another bad idea. gener8tor is founded in 2011. Based in Milwaukee, Wisconsin, Joe co-founded the gener8tor program, where he manages the company’s efforts along with his business partner, Troy Vossler. And they have a lot of programs now; it’s not just an accelerator program, although their accelerator program is where they got their start, cohorts of five, a different approach than most accelerators. I’m excited to learn more about their suite of programs and get beyond just the companies that we’ve interviewed from the accelerator.
Eric Hornung 4:10
Yeah, I think that this is a really fascinating company that’s expanding. I think they are really focused on community, so I’m just really excited to hear about the history of gener8tor and kind of what they’re looking at in the future.
Jay Clouse 4:21
If you guys have any thoughts on this interview as we go through, as always, you can tweet at us at upsidefm or email us email@example.com.
Jay Clouse 4:31
Eric, how many people have you assisted in hiring?
Eric Hornung 4:34
I used to do some interviews back in the day hiring for a business fraternity. And now I do some interviews hiring for my full time job. So I’d say I probably had a part in hiring or bringing on at least 100 people.
Jay Clouse 4:48
How many of those people did you do the work of actually finding to bring in to interview?
Eric Hornung 4:52
It’s way too much work, Jay, I don’t — I don’t do that. That’s too much.
Jay Clouse 4:55
It’s a lot of work to find high quality talent to come in and interview. And our friends at Integrity Power Search help you do just that. They are the number one full stack, high growth, startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups, and CEOs to build amazing teams for the world’s most disrupting companies. Erickson’s 2012 Integrity Power Search has executed over 600 searches, and they’re on track to do more than 200 in 2019 alone. That means high quality candidates in front of you that you can interview without having to source them yourself.
Eric Hornung 5:26
600 sounds like way more than 100.
Jay Clouse 5:28
Way more than 100, and think about all the hours saved not finding those candidates yourself. So if you guys are interested in working with Integrity Power Search, you can go to upside.fm/integrity to learn more about their team and how they can help you with your hiring.
Jay Clouse 5:49
Joe, welcome to the show.
Joe Kirgues 5:51
Hey, thanks for having me.
Eric Hornung 5:52
We like to start on Upside with a background of the guests. So can you tell us about the history of Joe?
Joe Kirgues 5:58
Sure. Born raised in Milwaukee, went to school at Marquette University and law school at Wisconsin Law School, and transferred to being a federal law clerk and worked for two years in the Eastern District of Wisconsin. So I got to see sort of the inner workings of the FBI and the DEA and the federal judiciary, and then went to a law firm, and was tasked with determining how communities invest into themselves, especially with regard to venture capital, and came out with this sort of disappointing finding for myself — and generally bleak assessment — that we were not investing into our communities in the way that other, more successful cities were doing, and that we were in a bit of a liquidity trap where big companies weren’t buying little companies, and there was not a focus on investing into our next generation. And you can imagine, you know, 20 communities, 5 of them are incredibly passionate about investing into themselves and their best and brightest, five of which are not, you know, which do you foresee a bright future for? And unfortunately, I found our community to be in that bottom tier. So, what could we do to begin changing that dynamic was sort of the writ large question that emerged, and I got a leave of absence from the firm and started working with my co-founder, Troy Vossler, and we got to work on trying to, from the ground up, get a community to invest into its best and brightest with this love letter we call gener8tor that — it began, you know, in Milwaukee and Madison, but has since grown to well over a dozen cities. And that sort of hopefully catches you up from, you know, where we started from and how it is I find myself working in startups in arts and music, which we’ll talk more about, but that was the original genesis.
Eric Hornung 7:40
So genera8tor’s known for having small cohorts, is that by design or necessity?
Joe Kirgues 7:46
Both, yeah. The model, you know, that’s one of the original pieces that was in the most discussed, and, I think, one of the most critical decisions we made: what would be the size of the cohort, you know, as a cohort of five or six companies — and almost always five — that’s the smallest in the industry, to our knowledge, in the startup space. Would we be able to be a viable fund? You know, we’re a for-profit fund, can you build a model on a portfolio theory basis with cohorts that small? And, on the flip side of it, in a dynamic like Milwaukee, or any sort of markets ten through one hundred in size, where you don’t have as vibrant of an angel and venture community, and you need to make sure that you’re graduating a sufficient number of companies into the angel and venture markets, the bet was could we, by offering very concierge service and dedicating all of our resources, you know, in this concentrated period of time to a very small number of startups, at least relatively small, would we be able to get a viable portfolio in the angel market? And so, the natural conclusion of running a cohort of five is, you need 60 to 80% of your graduates getting into the angel and venture markets out of the program. And we’ve been able to hold that number. So I think 60% of our graduates have raised more than a quarter million — I’m sorry, 60% have raised more than 1,000,000; 80% have raised more than a quarter million. And it’s been a critical advantage for us as a portfolio design. More important, as a product, it’s enabled us to build relationships with founders that I could never have imagined. And we’ve been running cohorts of, you know, a cohort of ten sounds huge to us. And just the one-on-one attention we’re able to give each company and, more importantly, the relationships we’re able to build, and how that informs where we’re, you know, the contacts that we can use to our advantage to help them and to understand their problems, and to focus our resources on their opportunity. I’m so glad we did it, but I’m glad you asked that question first, because it is such a critical design feature of the company in terms of how it is that we build our relationships with our founders, our customers, and how it is that we’re able to build a viable program in these communities that aren’t typically hotbeds for venture capital.
Jay Clouse 9:56
Do you remember roughly how many applicants you had for that first class that you accepted five out of?
Joe Kirgues 10:01
Vividly. We had about 86.
Jay Clouse 10:03
Eighty-six. And now I think I saw on your Wikipedia, you guys are doing something like close to 700 applicants in a cohort.
Joe Kirgues 10:09
Yeah, we had, in the last Madison program, we had 1,050. You know, it’s interesting, we talk about this a lot, there was a lot to be gained by having that small applicant pool that, I think, we were too busy trying to survive the month to appreciate. But what we saw was we were taking earlier stage companies with really bright people, and that invited more of what we call category design into the model, where people who were coming in, they weren’t in motion, they hadn’t built a business model, they hadn’t faced that same pressure to build a relatively lightweight product that gets the revenue quickly. And we had more ability to design, you know, focus on the business model and design products that were as exciting at scale as they were at, you know, the first ten customers. And it was an incredibly exciting time when we had that program. And we had, I think, the first one of the first companies that came through, Understory, now is one of our most valuable and one of our most exciting. They were named as one of most innovative companies in the world recently. And it was a lot of fun working with that design concept stage. But it’s also completely different working with a pool of 1,050 applicants where, inevitably, when we choose one out of the top 200, or whatever the acceptance rate is now, we end up probably a little further along. So both had their ups and downs, but it has changed the program dramatically as we’ve grown from that original applicant pool to, you know, an applicant pool 10 to 15 times that size.
Eric Hornung 11:29
What’s the difference between company number five that gets into gener8tor and company number six that just misses the cut?
Joe Kirgues 11:35
It’s brutal. I mean, one of the most valuable companies was because we did at one point take a cohort of six, and they were the sixth company in. So, we think about that a lot is, what were the other six companies when we only took cohorts of five? Everyone, when we do our final interviews of 10 or 15 companies, we want to invest in all of them. And frankly, it’s a reflection of where we think we are in our angel and venture capacity, and not where it is that we think that they deserve the investment, that dictates who those top five are. And we’re oftentimes trying to filter for, obviously, where it is we think we can have the best success but also where we can make the most impact. And when we’re looking at a five or a six, it’s oftentimes, is this a company, we think, given our network and our expertise, that we’re the best fit for? Because they’re probably, at that stage, going to receive investment from someone. And are we the people who are going to be the best partners for them to build their business? But it’s so subjective and much more art than science when you’re trying to figure that, you know, a company of that quality, the top .4% of your applicant pool, it’s all pretty good. It’s a lot, a lot of subjectivity.
Eric Hornung 12:40
How often is there a clear number one?
Joe Kirgues 12:44
Maybe a third of the time, half the time. There’s definitely cases where you get a company that you’re just, you know that this is a great company, and they’re growing leaps and bounds, and the angel and venture markets just didn’t appreciate them the way that they should have. Other programs, you know, they’re — who you’d rank potentially is number one could change by the week.
Jay Clouse 13:02
I want to step back just a little bit quickly here. You guys have had something like 75 graduates of the program now. Something you said originally, in your first response, was that you were a law clerk in that you we’re with a law firm tasked with determining how these communities invest in themselves, and you figured out that, well, Milwaukee isn’t, let’s do something about that. Why was that even something that the law firm was doing or worried about and something that you were staffed on?
Joe Kirgues 13:27
The law firm my clients who were interested in were doing angel investing. And so, they were trying to figure out, what would be the most appropriate way to do that. And there’s some due diligence going on on a potential investment on a fund. And, if you think about it, and this is, I think, writ large across these markets, the private equity markets in the Midwest are dominant. So if you look at where, you know, imagine you have a glass, and you can turn it sideways, and the water could move one way or another, the liquid can move, you know, more or less concentrated on either side. We’ve tipped our glass in the Midwest into private equity. And so there’s, within the law firms in the service industry, a disproportionate waiting of resources to where the assets under management reside. And right now, the assets under management reside in buying and selling companies largely in manufacturing or whatever industry the PE firm is targeting — in the West largely manufacturing but also healthcare. And there’s almost none in the venture capital side of that glass. The effect is that the most effective job-creation capital is being invested elsewhere. And I think that the service industries are aware that there’s this capability to build resources in the venture asset class, but they can’t find anyone to manage that asset class as a client. And so that was, I think, what was going on writ large, and we see that across across the upper Midwest. It’s a pretty dominant theme.
Jay Clouse 14:44
And what was the moment for you and your partner, Troy, to say, all right, not only have we identified this problem, but we’re going to say it’s on us that we’re going to take a step and actually do something about it, as opposed to go to someone else who maybe had more experience in the venture space?
Joe Kirgues 14:59
We met, it was at a Starbucks in the Capitol Square in 2012. And we were talking about our shared belief that if we were to invest from the ground up in our best and brightest, and then properly merchandise them, and market them to a marketplace, a robust marketplace of investors, we could build both a successful fund and create a highly leveraged mechanism for importing capital and our community. That’s much more, well, I don’t say well articulated, but it’s a little bit more deliberate than I think just the sort of, hey, we’re sitting in a coffee shop talking about what could be done. But we had a sense of, pretty well, you know, well expressed sense of, if we get to work with these individual, talented entrepreneurs and focus on their success pretty quickly, I think we’ll see that this is an incredibly efficient mechanism for investing into the community.
Jay Clouse 15:47
Could you talk now then, you know, we talked about kind of the inception of gener8tor and you guys were doing these really small cohorts. Now fast forwarding to 2019, what is the breadth of what is under the gener8tor umbrella?
Joe Kirgues 16:01
Yeah, so our mission is, we want to be the best partner for a community to invest into its best and brightest. A shorthand for that is locals investing in locals. The mechanism we’ve built to support that mission is a store with four products. Our first product is our venture fund; that’s what runs the equity accelerators, the gener8tor accelerators. So we have, we operate cohorts of five gener8tor accelerators, in Madison, Milwaukee, and Minneapolis. We’ve also recently partnered with the Brandery in Cincinnati, and we operate that program as well. And we partnered with Allianz Securian to run an accelerator focused on insurtech in Minneapolis as well. And so that’s five accelerators, each have a cohort of five. So we’ll be investing in 25 companies in 2019. And we anticipate expanding our footprint in 2020. That accelerator program has invested in, I think it’s actually 91 companies now because we’re graduating cohorts, you know, I think we graduated to in the last two months. The graduates have raised well over 250 million, I think it’s over 300 million to follow on capital, created over 3,000 jobs. And we’ve been ranked nationally by a group out of MIT and Rice University who essentially administer a data colonoscopy to all the accelerators, and we came out in the top 15. And notably, we’ve been in the top 15 in the last four years. Everyone else in the top 15 is, this year, is in San Francisco, Los Angeles, New York. And we’re the only one that operates outside of a big metro. So we’re the everywhere America accelerator, which we’re really proud of. But it speaks to the other three products. If we had to describe the dynamic in the accelerator industry, the well functioning ecosystems…the accelerators are like a function of the airport. Imagine you’ve got an airport, and that’s the venture ecosystem. And people can come in and out and get where they need to go. The accelerator’s a function of that, air traffic control or a gate or an airline or something, something that adds to the quality of the airport and is critical to the airport’s success but not the airport. Now look at a market without a venture ecosystem; we have no airport. There aren’t that width of resources available to the community to make sure that you can get out where you need to go. So we’ve tried to create that airport like function for our startups within the cohort, within the program. So then, we need first to formalize our relationships with corporations. So we created a group called Project North, we have over 40 corporations, over a quarter of them are in the fortune 500. And we work with them in innovation and venture capital technology and M&A. Where we’ve seen these corporations creating departments like those that are new to the corporate entity, much like human resources and marketing was new 40 years ago, but there’s no, in this case, for the innovation and technology executives, there isn’t nearly that same width of best practice or that same kind of formal set of procedures that you can kind of buy the booklet and start implementing to make sure that you’re able to create new products or to onboard skills that weren’t otherwise in the organization in technology. And so, we’ve been working on that for about four years now with Project North, and the members get a quarterly dinner where they present to each other, and we bring in outside experts Originally, we had a quarterly dinner featuring venture studios. We take them on trips. So we’re going to LA this week, where we’re visiting all the different venture firms in that community, and hearing from thought leaders in the technology and venture space for corporations. And then, we rent out stadiums and do conferences. So, we just did one in insurance and healthcare. We had crowds of 600 to 1,000 people at each. And what’s interesting about those conferences is, we have every corporation get a luxury box suite. They then get a list of the 200-300 startups that apply from their industry. It’s free for startups to apply, it’s free for them to come if they’re selected. And then we arranged speed dating for those corporations with their favorite 15. And the idea is, again, going to our mission of locals investing in locals, we want to make sure that our startups have the best access, and then not only our startups, but the community startups have the best access to potential partners, potential customers, to the width of resources that they might need in order to scale and grow. And so that, that’s our Project North, our second product. Our third product is our gBETA program, which is a pre-accelerator where we work with partners such as universities, civic organizations, like the Indiana Economic Development Corporation, and corporate partners like Boston Scientific and Capitol Records, to better identify and support emerging entrepreneurs in a community and give them the same resources that the gener8tor accelerator would offer, but in this case, we’re offering it without taking any equity. And we’re typically starting with founders who are even pre-entity; we’re starting with founders who have yet to form an LLC or a C Corp. And we’re helping them take their first steps in entrepreneurship. And we’re measured to our sponsors on the quality and quantity of the outcomes. So can we support, you know, 10 to 15 startups in that market per year? And can we make sure that a third of them are graduating to the angel or accelerator or venture markets? And to date, we’re, I think, up to 15 programs, we’re graduating well over 100 startups this year. In the history of the program in the last three years, we’ve graduated well over 100 startups, they’ve raised over 40 million to follow on capital, and created over 600 jobs. Notably, over 50% of those startups have met our financing metrics. So, we promised our sponsors a third, we have reached 50%. For every dollar of sponsorship that the gBETA program has taken in, the graduates of the program have raised about 10 to $12. So, it’s a highly, going back to our mission, it’s a highly leveraged way for our program to get a community to invest into itself. And what we’re proud of is that many of the startups that emerged from gBETA were formed because of gBETA or because of gBETA’s involvement in helping encourage them to pursue entrepreneurship. So we’re really proud of the gBETA program. It’s all over the place. So we run a program in Youngstown, Ohio, focused on additive manufacturing and Youngstown based startups at YBI, all the way to, we run one in Los Angeles at Capitol Records tower with Capitol Records and Universal Music Group focused on music tech. And it’s been a lot of fun learning about just how incredibly capable communities’ best and brightest is. You know, I like to say genius is distributed everywhere but capital isn’t. And so being able to get on the front lines of solving that problem, at least at a regional scale, has been a real privilege. And we anticipate the gBETA program growing. So we’re adding about a program every two months right now, and we’re hoping to continue that pace for the next year. Our final program, we promise our communities we want to be their best partner to invest into their best and brightest. And to date, we’ve been serving predominantly entrepreneurs in startups. A lot of them are in tech, but some of them med-device, and life sciences, and even small businesses. We run a program around social impact. But there are a lot of people who are in a community that are best and brightest that fall outside of that vertical. And what could our program do by taking advantage of its core assets of community, mentorship, network experience, social proof, convening power, etc., that would be different from what our peers were doing, that would better enable us to fulfill our mission of being that best partner for a community? And we took a look at that map of our core assets and where it was was that our industry was providing its resources and realized that none of the ranked accelerators, to our knowledge, had built a program for musicians and artists. So we built a pilot program in Milwaukee, one, fellowship.art, for artists, and another, Backline Milwaukee, with Radio Milwaukee, which is a kind of independent radio station in the community that’s as much as station as it is a community nerve center, and built the music program, Backline, which targets emerging musicians in a community. And in both Fellowship.art and Backline, we granted artists, through fellowships — we didn’t take any security interest — a fellowship to go through a program that we would give to our startups. Obviously, there’s differences between musicians, resources, and startup founders. But there’s commonalities as well; for example, you don’t need to be a 24 year-old tech founder to benefit from mentorship or a 25 year-old engineer to benefit from network and experience and concierge support. So we built that into the Backline, Fellowship.art our programs, and it was some of the best work of our career. We’re enormously proud of both of those efforts. And again, to us they they are a difference of kind from anything in our industry that’s crossed over. And suddenly, we’re first in our category, which we were hoping to do for some time. We approached Universal Music Group on that, on the Capitol Records development team, and said, hey, have you guys taken an interest in music tech with us? Would you take an interest in music with us and consider expanding that program? And by luck, our partner at TechTown in Detroit, through our gBETA effort, he was the son of a Funk Brother — if you’re a Motown fan, his dad was an arranger who arranged “Papa Was a Rolling Stone” and “My Cherie Amour,” and a whole host of you know, “I Heard It Through the Grapevine,” etc. And together, they approached, they were on the board of the Motown Museum, they approached the Motown Museum, which is run by Esther Gordy’s granddaughter, Robin. And they decided that they were interested in partnering with us as well. So we worked with Capitol Records, which fortuitously owns the Motown Records brand. And with Motown Museum and the Esther Gordy Family Foundation and TechTown, and we built Motown Accelerator, which is a program for musicians in Detroit to go through a version of our accelerator but affiliated with and working with the Hitsville team. So, we’re excited that we’ve now expanded into that program, and all in all, when you ask, you know, what is the gener8or umbrella, it’s really two products: an accelerator that we skin like Grey Goose skins spaghetti, and a corporate program that we work with technology executives primarily through events. But in all, it’s taken on kind of a, like I said, a store four products, and it’s been a lot of fun to build, and I can tell you, none of us suffer from free time in the company, so it’s been almost as much a vocation as it’s been a job.
Jay Clouse 25:42
There’s a lot of paths we could go down here, and I would like to go down all of them, but we have some constraints, so we can’t. I’m interested in this music accelerator because it is the first of its kind. You mentioned that you don’t take an equity position in these artists. So what is the, you know, what is the goal? What is the hope those programs?
Joe Kirgues 26:01
Yeah, we believe that communities, there’s, it really depends on the stakeholder and what it is that they need from it, right? I think the most well aligned one is the community and the musicians. Communities are competing for talent and competing for the claim that they’re the best that, they’re investing into their own best and brightest. And one of the lighthouse resources in the community is their creative culture, their arts and music. And so, for the musicians in the community, by convening and coalescing the resources in that community to support them, it’s inevitably a better effort than if we never tried. The effect for the musicians is they go through a program. To give a vivid example, you know, during the first month, you’ll be working with musicians and producers who are in your industry. So if you’re an EDM artist, or a hip hop artist, or what have you, we’ll be able to connect you with the producers and the resources, the best position to help you create art or music without regard to whether you knew them through your local social network or not. In the next phase, we help with the planning of their next two or three years. And so, we’re connecting them with everything from financial planners to health and wellness resources to basically budget planning to help them figure out what success would look like relative to the creation of music and its promotion, and touring, and etc. And then, in the final month, we’re working with them on network in the nationally. So we’ll take them to me with placement agencies in New York and with the big record labels in Los Angeles, with venue managers and touring and any resources that they need, so that they are networked in the big cities, you know, in the three months of our program more than they might have been in two or three years of trying it on their own and likely, you know, forcing themselves to leave our community in the process. So at the end of it, what we want is for them, much like we do with the startups, to experience the growth of two or three years through the efforts of two or three months. For the community, by creating this network of the 30 or 40 best musicians in the community, we believe we’re giving that community the best chance at retaining them and also of making themselves a creative city or a music city or what have you, where the effect of the culture on talent attraction and retention is more than worth the cost of running a program like ours. So it’s, I think, beyond all that, there’s an element of you do well by doing right. By helping these people, I think we’re giving ourselves the best chance at just justifying, you know, worth the chance that we’ve gotten. But I can tell you, the more we look at it, the more I feel like we’re just scratching the surface of what communities need to do to support creatives.
Eric Hornung 28:31
Does this come from more of a personal or logical, like, underpinning? Are you a musician or an artist, in addition to being a law clerk, or you just have an interest in it? Or is it just a purely logical play in that cities need these kinds of people, and you guys have a great product that transcends?
Joe Kirgues 28:50
You know, my joke, I once tried drawing, and my wife saw it and told me to stop drawing. And she’s usually pretty supportive. So I’m, like, the least artistic person you’ll know. The capability we have is that we believe we’re really good at running accelerators. Like, when we approach, you know, again, the width of the product, we work in everything from medical technology with Boston Scientific to music with Capitol Records to insurance with Allianz. That’s a pretty wide spectrum of resources, right? What we tell our partners is, we’re never going to know your industry as well as you do. There’s no way that we could sell you on coming to us as a vendor to help you better understand medical device or music or insurance technology. But what we do know is how to run an accelerator. And we’ve put a lot of time and attention into that model. And we love to build an accelerator that takes advantage of your domain experience and partners with you and your entity to help do that. And so, it came from a belief that there was this dormant capacity to use the same thing that worked in building that convening power and medical technology, but to use it in music. So it’s weird, it’s sort of the same candy in a different wrapper, but the product works. And so that’s the domain experience we’ve been trying to build, and it’s been great.
Jay Clouse 30:03
You guys, obviously, you know, are super intentional about where you spend your resources and your time. How do you guys weigh the decision of building out more programs around the airport in one city versus, okay, time to go to another city and start another community accelerator and be a new communities partner?
Joe Kirgues 30:20
I mean, it’s, like, one third deliberate and proactive, two thirds reactionary and inbound. So there definitely are programs that we want to build and that we pursue, and that we feel like are critical for our program to be the best that it can be. And I’d put Motown in that category. I’d also put an insurance program in that category. The others are, we do get a fair amount of inbound, where people are interested in seeing what this could do in their community. And I personally have four kids, and my joke is when you reach Delta diamond, Delta pays for your divorce. So I, you know, I want to be home with my wife and family and try to invest as much time as I can in the things that personally enrich my life. But on the flip side, we, I think, feel this obligation that, if there are communities that want to join with this effort, that we want to make the program available, there is an absolute economy of scale to the effort. So, if we’re working with angel groups in Lincoln and in Minneapolis and in Detroit and Los Angeles, there are people who want to invest in startups that aren’t maybe a good fit for Lincoln’s angel group but could be a great fit for Minnesota’s. You know, if you’re building a med-device object, or medical device technology in Nebraska, Minneapolis and Chicago’s angel markets are great fit for you. You know, If you’re building a software technology in Detroit, you know, the Madison and Chicago angel networks are probably a great fit for you. So being able to have boots on the ground in those cities that are able to build relationships across those skews and size checks, that we can better syndicate deals across our network, there is, to our company, and advantage of that scale. On the two measures that we run our company on, we’re trying our best at OKRs, if you’re familiar with that model. You know, the two things we really measure gener8tor on are the quality and the quantity. And so, are we able to, as we’re scaling, manage our performance metrics with the net promoter score from the founders, the leverage of our programs, you know, for the funds, the profitability in the stock on stock gains, etc.? So we try to be as deliberate as we can on the quality. And obviously, that’s a top of mind as a potential trade off that we would risk having if we expanded too quickly. But so far, you know, as we’ve grown from a team of two to a team of well over 30, I think we’ve been able to hold that, that metric, but it’s been, you know, a 90 hour a week effort for a lot of people on the team. So it’s, it’s not a light push.
Eric Hornung 32:34
So that talks a little bit about geographic expansion. But what about the accelerator expansion from like a verticals perspective? Where does this end? Can there be generator accelerators for politicians? Those are important to community. Or for venture capitalists, kind of in the spearhead model? Or other things? Like, is this going to stay in business and the arts? Or is this going to expand to other areas of community?
Joe Kirgues 32:56
I can tell you, we have no plans for politician accelerator, but you never — I don’t want to jinx it. We don’t, you know, we’re trying to limit our, going to that previous question, we’re really focused on making sure we can manage the quality and the quantity of the expansion. And so, I don’t think we can do a new product, any, you know, any faster than every 30 months, in terms of, you know, if we were to do something that it’s not going to be this year, next year. We do, as a startup, want to take advantage of opportunities as we see it. So, you know, I think you went, you did a pretty good job of finding the pretty extreme end of the spectrum, when you outlined where, how far it could go. But we’re opportunistic, and if we see an opportunity to keep building, we would definitely do it. And I would guess we’d be pursuing, you know, more industry verticals. You know, we’d be obviously interested, we run an on-ramp manufacturing and healthcare, I think those are just industries that we’d be interested in pursuing more. In terms of the artisanal space, I think we’ve got enough just building infrastructure in our current product set for quite some time. But if you had told me two years ago that we’d be building, you know, music programs, across multiple states, I would have told you, there’s an equal chance I’d be left for dead and I’m out. So, it’s been surprising to us how the mission’s kind of taken form. And it’s been exciting, but it makes it hard to answer your question about where does it put us in two or three years.
Eric Hornung 34:12
When you look at expansion, does it look more like a partnership model, like you guys have with — I say Allianz, but apparently it’s Allianz, I was wrong on that one. Or the Brandery? Or is it more of a, we’re going to do more proprietary stuff? Like we’re going to go to Wichita and start a gener8tor program there? Is it more partnership? Is it more proprietary?
Joe Kirgues 34:33
We try to be as facilitative as possible and not consumptive. And we’ve had great success. I mean, we’re a seven year old company, so you know, ask us in year 20. But to date, we’ve had incredible success partnering with as many organizations as we can to build the products. It’s a good question where, you know, what route it takes in the long run. But whenever we come into a community, at this stage of the company, it’s always because of a partnership. So you know, if we were to expand with the Fund first, I think that’d be the closest form to what you’re describing, and that hasn’t been an element of our expansion since we tried Minneapolis, probably four years ago, or five years ago. So to date, we’ve been building this program on partnerships and anticipate that continuing.
Jay Clouse 35:12
They’re probably some listeners who are in different cities across the country who are thinking, man, my city could really use this. When you think about partnerships, what are the the stage-gates or the key ingredients that you look for to take seriously when that inbound happens?
Joe Kirgues 35:27
Capability, interest, and resources. So is this someone who’s capable of partnering with us? Are they interested in partnering with us? And do we have the resources to make sure we could partner together? If I had to say, the one I choose first would be interest. If somebody wants to work with us, we can usually build that foundation to figure out who would be the groups that could supply the capability or the resources. But if there’s not an interest in working with us, it’s, you know, a hard Delta flight back and forth. Those are the three filters we use in determining if someone’s kind of, like you said, stage-gating through our funnel. And it takes anywhere from like a month to, we had one that took four years. So you never know. And again, we didn’t, when we started out, I don’t think Troy and I ever imagined it…I mean, I’m sure we imagined it going outside in Milwaukee and Madison, but I don’t think we ever would have put it written into the month by month plan. And we’re sort of taking it as it comes. I was talking with our team as recently as this morning. You know, when we do an all team retreat, they’re flying in from all over the country, and we’re flying around likewise, to come out and engage with them. So we don’t know where or how far it goes, but, over a dozen cities in, it’s been an incredible adventure. But yeah, if anyone’s interested, please reach out. And we’re, if nothing else, happy to talk about what’s worked for us and what parts of our model are potentially worthwhile, as they’re looking at doing it on their own as well.
Eric Hornung 36:42
To close this interview, I’d like to bring it back to where we started, which is you sitting in Wisconsin talking about Milwaukee and your clients as a law clerk and saying, okay, what’s this community like? Since then you guys have created gener8tor, this is one of your oldest cities. What has been the impact of gener8tor on Milwaukee? Let’s look at one ecosystem kind of as a case study.
Jay Clouse 37:06
And you got to take your humility out of it.
Joe Kirgues 37:09
Well, I’ll do two. I’ll do Madison, which is where we ended up investing the most, and that, I think, is its own discussion. But in Madison at one point, the tallest building in the city, the top eight floors were full of our alumni. So you go to the top floor and it was Understory, you go to the next floor down, two floors were EatStreet, you go to Abodo, you go to Datica, you go to Akitabox and Grocerykey and keep going down, Exit Datus, and others. It was cool personally to walk into a building and go floor by floor by floor by floor by floor by floor, etc. and see the jobs that were there that hadn’t been there before. And in Milwaukee, we had a company, Bright Cellars, that moved from Boston to Milwaukee and went from three employees to, I think, fifty in the last two years, and Steve Case from Revolution just lead their A. And to feel like, you know, but for us getting involved, you know, the company wouldn’t be here. And the founders have always been incredibly gracious about our role in their companys’ progress. So to feel like you’re meeting people that you’re, you know, desire to have an impact on your community directly affected their ability to come to work in the morning and have a job that hopefully they like and pays well, that has been enormously gratifying. The way I describe it, when you know it’s going well, is, a lot of times, we go to our offices, our startups’ offices and ask to meet with the founder — and we know them as this 24 year old with a trash can dream — and someone said, well, do you have an appointment? And it’s like, do I have an appointment? You know, are you kidding me? Who are you…we were with these guys when it was a trash can dream, just let us take, you know, bring them out. So to see them have their own teams and people who apparently need to set up appointments for them is just a fun day. And I love talking with all the employees about, well, where were you before you worked here? And thinking about, well, then someone had to take that job or the job down, and seeing this sort of velocity in job creation when you get a community to engage itself has been something that, I think, has really inspired us. I would say, in our last premiere night, we went on stage and talked about, the Brookings Institute came out with the report in the Midwest, the upper Midwest, that there are, I think 47% of the LP commitments, of the investor commitments, and venture funds on the coast comes from institutions in the Midwest, and only 12% of that capital goes to Midwestern firms. And so, we’re about four times more excited to invest in another community than we are into our own. And you’re looking at tens of billions of dollars of cash that we’ve exported to invest in other cities. And I think we feel great that, you know, in many years, we’re 20 or 30% of the Wisconsin venture capital activity comes from gener8tor graduates. And I think that we’ve, you know, been able to, just in one market, move the needle, you know, in a statistically significant way, and we’re the smallest investor I think we’re really proud of. But to see the scope of the challenge ahead of us, as much as we’re doing, you know, we would need to be doing three, four or five times that annually. I think we’re sort of challenged and motivated to go from 20 or 30% to, how do we double or triple that number? And so, I think we’re really proud, and, you know, the funds are top quartile performers. We’re sending the right market signal, but we’re very focused on, okay, well, now, it’s cool to go from 120 to 150 million a year. Why don’t we get that to two or three or 400 a year per state? What does an ecosystem that completely goes on offense, what does that look like? I think that’s really top of mind for us, as we want to go from being 12 to “X” place in the next five or ten years. You know, I think getting that wind at our back and, more importantly, getting that window to our entrepreneurs’ back is is critical.
Jay Clouse 40:43
Joe, this has been awesome. Thank you so much for taking the time.
Joe Kirgues 40:45
Thank you, guys. I’m honored you had me on.
Jay Clouse 40:47
Yeah. If people want to learn more about gener8tor or if they want to reach out and say, hey, come to our community, where should they go?
Joe Kirgues 40:54
gener8tor.com. Otherwise, I’m Joe@gener8tor.com. And I’m JKirgues on Twitter, if somebody just wants to send me a direct message. But just reach out to us. I try to personally respond to every email. And, you know, if not, send me another one, and tell me that I missed the mail mark. But we always want to meet everyone we can.
Eric Hornung 41:15
All right, Jay, we just spoke with Joe from gener8tor. What were you’re hot takes? Hot takes on a company that’s been around the podcast since its inception?
Jay Clouse 41:25
It’s an interesting growth story, right? They go into different communities, and they kind of expand the programs around that, and they kind of just follow what the community is asking for at the time, which makes some sense, you know. But we started the interview, and Joe was talking…this is a different model, we have five companies as opposed to twenty companies in a cohort. But at the same time, they’re also doing multiple cohorts. So in some ways, you know, they have a very similar model, it’s just dispersed. I mean, I love it. I love the different communities that they’re going into, and I love the small class in each community go deeper as each of them support the community story. It strikes me as, you know, it will continue to be logistically challenging across all of these communities. But, there are some models that we’ve seen do really well in that way, from TechStars to…well, mostly TechStars. So it can be done. But especially, here’s the hottest take: the music thing is really interesting to me. Conceptually, very much into it; as a civically engaged, you know, community member, very into it; as a capitalist, interested to understand how it may contribute to the larger financial picture. But yeah, there’s the hot takes.
Eric Hornung 42:40
I get it. I get it from a community development point. I guess there’s two reasons that they really are focusing on the music and the arts. The one is the community side of things. One of the coolest things about Columbus, where you live, and Cincinnati, where I live, is that you’re kind of surrounded by this art scene, by this music scene. I go outside, there’s murals painted on every wall. You have a collection of friends who are artists and designers and artistic people, and that makes your quality of life better as an entrepreneur in that city. So I think if you can accelerate more people to be doing that in your local community, that’s probably better for attracting talent to the companies that are starting in those cities. So it’s kind of a long play. Second, and I think you’re already seeing some of this play out, they have this dedication to music, to art, and now they have this music accelerator for music tech going on in Detroit with Warner Records. So, it kind of lays the foundation for these industry specific verticals that they have with insurtech. And I guess the Brandery is brand-tech, is that what you’d call that? I don’t know, just branded companies, companies supporting branded companies. I don’t know. The Brandery probably has a really good definition for what they do. And I’m completely butchering it. But, it’s in the CPG space. Now you have music tech in Detroit, with Warner Records and the Motown kind of vibe. So, it plays into this whole, like, these verticals that they can expand into.
Jay Clouse 44:11
You asked a really good question about company five that gets into a cohort versus company six. And that type of thing in this model would keep me up a little bit, I think, you know, because if the five companies they’re picking are doing so well across the portfolio, and they’re narrowing down from an applicant pool of over 600, close to 700 to a top five, it seems like it’d be easy to rationalize your way into doing, well, let’s just double the cohort size, let’s do ten in each community. And I wonder if that wouldn’t work, why it wouldn’t work? I wonder if that might be more worthwhile trying to get to work than doing more and more programs? I don’t know. This is what’s so fascinating to me about gener8tor, everything they’re doing is working, it seems. And so, instead of adding things around it, what if they just went deeper on some of the things that were working? Or is that precisely why gener8tor works so well, is because they’re not taking that approach which seems like the straightforward, logical, next step?
Eric Hornung 45:08
Well, I think, he said in his model, you need 60 to 80% of the companies to go on and raise a follow round, right? So that means three to four of the companies of the five have to go on and raise. There was a follow-up question that I had to that five-six question that we didn’t get to, which is the difference between being company four and five, because when you’re in a cohort of five, you’re inherently competing against the other ones, especially if you’re raising angel money from around the community. No one’s going to invest in all five gener8tor companies every single year, or every single program. So, that fifth company, while it might have been better than the sixth company, could actually be at a detriment for being in gener8tor versus the sixth company which just wasn’t in it. So it’s not getting compared against gener8tor companies.
Jay Clouse 45:55
That’s interesting. I don’t know. But at this point, you know, 75 plus graduates, they’ve raised over 200 million and follow on. gener8tor as an organization has 30 employees, they’re in all these communities, they’re kind of following the community’s interest in them. I wonder at what point, if any, you would see diminishing returns or diminishing results to gener8tor going into more and more communities? You know, how many communities can they be in? Can they support and still have this level of success? And, if there is no cap, you know, how quickly can they do it? Because I would imagine that there are dozens, hundreds of cities around the country that would want to have something like this in their community, if it could work.
Eric Hornung 46:33
I think the city based model is less scalable than the industry and vertical based model, to be honest. I think if you had a gener8tor in every city, it would be diluted to be in it, or it would be the crème de la crème of, oh, you got into gener8tor. And there’s no middle ground there. Or the brand gets diluted if it’s the crème de la crème in one city and it’s just a mediocre accelerator in another. Whereas, if they stick together verticles, they can own insurtech, these are the best five companies across the nation in insurtech, these are the best five companies in music tech that are emerging. These are the best five companies in CPG, area tech, advertising. These are the best five companies in whatever they launch next. So ,I think, that is a stronger play for the brand in the long term than expanding city by city by city, and hoping to be the number one accelerator in every city you go to.
Jay Clouse 47:29
That’s true, we didn’t get a direct breakdown either for the Milwaukee program, or the Minneapolis program, or the Madison program. How many of the companies that make the top five were originally from those communities versus applied and joined the accelerator program in that community? I can tell you that I really just enjoyed Joe’s perspective and the way that he thinks about building community. He seems like the right type of guy to be spearheading this effort. Interesting origin story, you know, it sounds like somebody that you wouldn’t necessarily would guess would get into startups or economic development, even entrepreneurship in some ways. You know, he started in law and just saw this opportunity, jumped in full force, and now leads a team of 30. It’s, it’s really impressive.
Eric Hornung 48:15
And I think you can tell the kind of person he is. I like the gBETA program, for example, like, that program isn’t equity, they’re not getting equity out of that. They’re just really fostering entrepreneurship across these different cities. And I think that goes more towards your idea of city by city expansion. I think the gBETA program is really that kind of tentacle into other cities. And that’s going to be a much more scalable, expandable program to getting entrepreneurs started in entrepreneurship versus, hey, here’s the five best companies in this city.
Jay Clouse 48:50
Well, looking forward to see how gener8tor continues to grow and expand in different communities that I’m sure we’ll continue to talk to here on the podcast. If you guys have thoughts on this episode, you can tweet it us @upsidefm, or email us firstname.lastname@example.org. And as Joe said, if this struck your fancy and you want to bring gener8tor to your community, reach out to Joe, reach out to gener8tor and see if you can be the driver of that change where you are.
Debrief begins: 41:15
Joe Kirgues is a co-founder of gener8tor.
One of the top companies in its field, gener8tor offers accelerator programs whose missions are to promote local investors and companies investing in their own communities’ startups and entrepreneurs. Operating in Milwaukee, Madison, and Minneapolis, gener8tor is known for its unique cohort of five model within its accelerator programs that, since its beginnings in 2012, have seen 75 graduates.
To date, gener8tor has developed nearly a dozen different accelerator programs whose disciplines range from tech and med-device to music and art. The company continues to grow and has expanded to several different cities around the country. Graduates of gener8tor include EatStreat, Swannies, docalytics, Datica, Bright Cellars, and SpeechMED to name a few.
- Ad: Improved methods to sourcing talent and finding new possible colleagues (4:31)
- Where the idea of gener8tor came from (6:10)
- Logistics and benefits of running the cohort of five accelerator model (7:46)
- gener8tor’s applicant growth (10:00)
- Discerning company #5 from company #6 (11:29)
- Run-through of the different programs offered by gener8tor (16:00)
- Music and arts focused accelerator programs (25:41)
- gener8tor’s expansion tactics (30:02)
- gener8tor’s success and impact on community (36:42)
This episode is sponsored by Integrity Power Search, the #1 full stack high growth startup recruiting firm between the coasts. They partner with venture capitalists, private equity groups and CEOs to build amazing teams for the world’s most disrupting companies.
Learn more about or get in touch with Integrity Power Search: https://upside.fm/integrity