The Lightning Lab is a locally run accelerator programme designed to turn competent teams and workable business concepts into investable businesses.
This week we talk to Paul Spence, founder of Polanyio and I Want My Name, regarding his recently successful entry into the Lightning Lab Electric Accelerator programme.
Balance Transfers: Could you tell us a little bit about your Lightning Lab journey, and the project you’re working on at the moment?
Paul: So we had a company, Polanyio, what we’ve proposed for our Lightning Lab project is a product called Helium, which is a data analytics and data matching service for companies in the energy sector.
Balance Transfers: On the Lightning Lab website there’s a statistic from the Global Accelerator Network that 56% of startups raise money immediately after an accelerator programme, which compares very favourably to the less than 1% of startups that actually successfully raise funding. What is it that you think that Lightning Lab and other GAN accelerators add to the process of creating a startup that leads to such a difference in capital raising success?
Paul: That statistic you quoted is horribly skewed because it’s horribly weighted to startups in Silicon Valley, where there’s a lot of capital floating around. New Zealand is not at all like that. Having said that, the accelerator environment really pushes people to excel. More importantly, it really puts you through a methodology to test your hypotheses. The companies that find their way towards the end of the acceleration process tend to have a properly run board, they’ve been out and they’ve tested the ability of what they think the market is looking for, and in many cases they come back and they have to change/pivot to something a little bit different. That’s a different journey to companies just working by themselves and perhaps building products in the hopes that customers will somehow come to them.
Balance Transfers: I guess it’s about testing the concept or proving the concept. How do you think that that has translated to your own project experience so far with the Lightning Lab?
Paul: We haven’t started Lightning Lab yet, but my experience is twofold. I was the co-founder of another technology company, which from day one, we took it global, and we chose not to take any investment or essentially have any external input into how we develop the business. So we were fortunate that it took off and we had a fantastic team and we just built the thing and got it out globally. So perhaps it was a bit of good luck, a bit of good timing, and the fact that we built something people were really looking for.
I think it’s going to be a different pathway in the accelerator programme. I’m excited and terrified about it. I’ve been a mentor in accelerator programmes and startup weekends and other similar things, and I’ve seen how it works from the other side of the table. This is going to be a lot of hard work. It’s a different approach to what I’ve personally been involved with in the past.
Balance Transfers: How rigorous is the selection process for the programme? What resources did you have to invest in terms not just of money, but of time and energy, to bring you to this point?
Paul: To this point we’ve initially, myself and another co-founder, who’s our Chief Data Scientist, we’ve not invested any amount of capital. That’s the beauty of software businesses – you can essentially build things from scratch without a huge amount of capital investment. My personal perspective on capital raising is that you should try and create as much value in your company before you even go anywhere near investors, and keep control throughout the whole process. So for this accelerator programme, the goal for them is to deliver investable companies at the end of the programme. We’ll have a choice at the end of it whether we go down that track, of course, but in my opinion we won’t want someone coming in until we’ve fully validated the product that we want to deliver.
Balance Transfers: Lightning Lab Electric is sponsored by a number of organisations relating to the energy industry. Does that mean that the product that you develop and pitch needs to be tied to the energy industry?
Paul: Primarily energy sector is the focus, yes, absolutely, however part of the acceleration journey is that you get to test out your hypothesis and validate the idea that you’ve been working on. It may well be that you get part way through acceleration and realise that what you’ve been working on really isn’t going to go anywhere, there’s no customers for it, and they need to think hard about what they’re going to turn the time and resources that they’ve got into.
So given the talent that’s on board with this group that’s going into the new programme, we may see other products come out that are heavily data-oriented, but perhaps the customers are outside the energy industry. That would be a perfectly valid outcome. But primarily the electricity industry is a big focus. There are opportunities there. It’s a very fluid market at the moment, there’s new innovations arising, and some of the bigger companies are struggling to keep up, so that’s why they need small scale agile companies to work together to create solutions for their business and for their customers.
Balance Transfers: Is there a particular reason why there’s been such a focus on the energy sector?
Paul: Possibly because we haven’t done one yet! (Laughs) But like I said, I think it’s a very interesting landscape at the moment, there’s a lot of innovation happening at the edge, the big energy companies want to get a piece of that action, and they understand that their business model is probably going to change and be disrupted over time and they would rather participate than be on the outside, I think.
Balance Transfers: I guess disruption is never really foreseeable, even for a large company?
Paul: No, well look at Kodak.
Balance Transfers: So now that you’ve been successfully accepted into the Lightning Lab, what opportunities does that create for your team?
Paul: I think primarily we really need to validate the concept that we’re working on. It’s going to open doors for us that would take months or years for us to get to by ourselves. I know we’re going to have great mentor support, and if we get, at some point down the track, the need for capital to take it on, then those guys are going to open doors again.
Balance Transfers: What do you think makes the difference between a successful and an unsuccessful entry into Lightning Lab?
Paul: I think you have to ask the panel. (Laughs) I’ve been a mentor but I haven’t been on the selection panel! I haven’t elevated myself to those lofty heights just yet… I think primarily what they’re looking for, and how we’ve tried to pitch it, is we think that there’s an opportunity in the data analytics space, but we will need coaching and industry advice. All we’ve got to offer is a really good team. We’ve got two data scientists, a guy who is both a developer and a business analyst, and myself – I’ve already been through once with a successful tech company, so I think for us that was the biggest factor that we had, was our team. I think that was quite attractive.
I guess the idea, at this stage – but I don’t put too much emphasis on that, because things can change as we go through the programme. I think coachability is a big one as well – they want to know that you can take direction, that you’re open to coaching and you’re prepared to take advice.
Balance Transfers: Even though that sounds like quite a small team, it sounds like a huge amount of expertise. Will other successful applicants necessarily have that level of expertise?
Paul: I think there will be a bit of a cross section. We don’t have an energy industry expert on our team, but then I think we’re going to get to interact with a few, so that will be helpful. Some of the other teams – I mean I haven’t met the others, but I suspect they will be a mixture of people from engineering and science backgrounds, to people who have done other work for technology companies, but having not met them, I can’t comment in great detail.
Balance Transfers: Is it possible for someone to come as a rank outsider, and still have a successful application or entry into the Lightning Lab?
Paul: I think they’re probably looking for a mixture of experience and freshness. At the moment there’s a lot of conversation going on in the technology industry in New Zealand about diversity. On our team, we’ve got me, an old guy who’s already done a tech company previously, a couple of young guys, one of whom is a highly skilled recent migrant, and another chap who’s parents were migrants and he grew up in New Zealand and he went to university there. So we’ve got an interesting mix of skills and cultural backgrounds. I think that’s important. When we talk about diversity, it should not just be guys and girls, it should also be about age, experience, ideas and cultural background.
Balance Transfers: Are there any particular business models that seem to be more attractive to Lightning Lab Electric (based on your mentoring experience as well)?
Paul: I can’t really comment on that because I don’t have a lot of insight into what the assessment panel is looking for. They have their own goals that they want to achieve. I think it’s pretty clear that, from my reading, data analytics and machine learning is going to play a bigger and bigger role in all our lives, but particularly in the utilities sector, where they have increasing amounts of data, and they are looking for ways to generate new revenue streams and create value out of that huge amount of data that they’ve got.
Balance Transfers: Applications for Lightning Lab Electric have now closed, but are there any upcoming Lightning Lab scheduled to be held in Wellington any time in the near future?
Paul: There’s nothing on the website at the moment, but I would be very surprised if there wasn’t future accelerators planned around New Zealand.
