Accelerators have gotten a (sometimes appropriately) bad rap for taking more value from startups than they deliver in return. Judging their merit can be a very subjective measurement, having much to do with the stage of the company upon entering, the particular areas of expertise of each accelerator’s directors and mentors, and the effort that a startups founders put into making the most of the opportunity.
But there’s one category in which a well-connected accelerator could make all the difference between success and failure, or at the very least, dramatically shorten the path toward success: financial services.
Former Square co-founder Jim McKelvey knows a thing or two about disrupting the financial sector and the enormous obstacles facing even the most savvy startups in the category. McKelvey has partnered with Cultivation Capital and the St. Louis Regional Chamber to launch a fintech (financial services technology) accelerator in St. Louis.
The new venture is called SixThirty – an homage to the height and width of St. Louis’ Gateway Arch, measured in feet – and will be closing applications for its first class of companies next week on September 6.
“We could have saved 18 months if we had access to SixThirty when we were launching Square,” McKelvey says.
Instead McKelvey and his co-founder, Jack Dorsey, spent the better part of two years relying on “basic hustle,” to get the necessary financial sector introductions from friends, family, classmates, and advisors. It was wildly inefficient, the sort of thing that has sunk plenty of early stage companies.
The primary benefit of participating in the program is not the money, although participating companies do receive $100,000 in funding. The bigger value comes through the access to St. Louis resident corporations like Mastercard, Scottrade, Edward Jones, US Bankcorp, CitiMortgage, Wells Fargo Advisors, and Stifel Nicolaus, the majority of which are either sponsors of the program or have committed to attend its demo days, McKelvey says.
“Typical startups need three things to be successful: a great team, a fantastic product, and money,” McKelvey says. “Those three legs of the stool are sufficient in most markets. But, in fintech, there’s a fourth requirement: access to the financial world. And that’s a heavily regulated world that’s controlled by incumbents.”
SixThirty aims to shortcut this relationship-building process.
While innovation isn’t in the DNA of most large financial institutions, they have a vested interest in bringing innovative technology to their customers, according to McKelvey. And as easy as it is to cite the “Innovator’s Dilemma” and argue that incumbent companies would deliberately stifle external innovation out of protectionist fear, the best companies in the industry simply don’t think this way, according to the SixThirty founder.
Each SixThirty class will have just four participants, which is as much a reflection of McKelvey’s desire to work with “only the best,” as it is his team’s limited bandwidth. He’s also conscious of the value of his corporate partners’ time and wants to make sure that each meeting and pitch they attend is worthwhile.
The accelerator will host two classes each year for a total of eight companies. There is no limit on the stage of companies entering the program, although McKelvey notes that the further along a company is in its development, the greater chance that it can establish a meaningful partnership with a major financial institution.
Surprisingly, SixThirty has seen the majority of applications to date coming from outside the greater St. Louis region. Even more unexpectedly, McKelvey says that there has been a ton of international interest in the program. In the search for the best possible entrepreneurs and early stage companies, however, this is a welcome development.
St. Louis’ lack of engineering talent once forced McKelvey and Dorsey to move Square from the midwest to Silicon Valley. So SixThiry is, in part, an effort by McKelvey to bring jobs and innovation back to his (and Dorsey’s) hometown. But the program is also a recognition of St. Louis’ inherent advantages, given its heavy concentration of financial services giants. The belief is that with McKelvey’s post-Square credibility, the doors to these corporations will not be quite as closed to SixThirty participants as they were when he was launching the company years ago.
Accelerators are still not for everyone, but McKelvey is betting that SixThirty can create the next Square.
[Image via Wiki Commons]