Justine and Olivia Moore

@justinemoore_85088

How to start a startup incubator (from the founders of Stanford’s Cardinal Ventures)

Before we joined the investment team at CRV, we were undergrads at Stanford interested in helping student companies launch and scale. In 2015, we founded Cardinal Ventures, which has since become Stanford’s premier on-campus incubator. We graduated in 2016, but the program is still running under a new student team.

Every year, Cardinal Ventures graduates two classes of 15–20 companies each, with founders spanning a variety of undergrad and graduate programs. There are now more than 100 Cardinal Ventures alumni companies, many of which have raised venture funding or graduated other accelerator programs — including Athelas, Nova Credit, OhMyGreen, Pair Eyewear, and Knowhere.

Above are some of the student companies that have graduated Cardinal Ventures in the last three years!

We’ve been excited to see students nationwide launching similar programs, and have received many requests to share the framework used to create Cardinal Ventures! This article is a direct response to those requests. Cardinal Ventures is still a work in progress, but we learned a lot from our experiences (and many mistakes!) and hope our journey is helpful.

Need-Finding & Structuring the Program

We started Cardinal Ventures to fill a need in Stanford’s entrepreneurial ecosystem. We wanted to fit between the classes & clubs that help students form an idea, and the incubators & early stage investors who fund and support full-time entrepreneurs. When we spoke to student entrepreneurs, many of them felt that they didn’t have adequate resources for this “in-between” stage — especially since incubators and investors were looking for a business model and traction that was hard to develop as a student founder.

A few examples of the resources available to Stanford students at various stages of company-building. For student entrepreneurs, making the transition from the “idea” phase to working on their company full-time isn’t easy. We created Cardinal Ventures to give students more time and resources before making this decision.

Some of our founders had done more work on their companies than others, which informed their goal-setting while in Cardinal Ventures — some startups focused on just building an initial prototype, while others actually signed customer contracts. However, almost all were in the post-idea, pre-full commitment phase. Many of our founders wanted to further validate their idea before they decided to drop out or commit full-time after graduating.

The Cardinal Ventures model won’t work everywhere, as it relies on having a large pool of motivated student entrepreneurs who have done some work to develop their ideas. We’ve seen awesome college programs focused on helping at the earlier stages with need-finding, or helping at the later stages with funding. If you’re interested in starting a program, we’d recommend landscaping what’s already available on campus and talking to student and alumni entrepreneurs to get their perspectives.

From our conversations with Stanford founders, we came up with a list of key resources that we wanted Cardinal Ventures to provide: (1) a small grant to get companies going; (2) mentorship and advice from expert investors and operators; (3) a supportive community of like-minded student entrepreneurs; and (4) access to further funding and investor connections.

To accomplish these goals, we designed Cardinal Ventures as a ten-week program with the following structure:

  • Once or twice-weekly speaker sessions and workshops
  • Matching with three mentors, who meet with their teams 2–3x
  • Social events and mid-quarter check-ins with teams
  • Final demo day to investors, press, and broader Stanford community
  • $1k (now $5k) equity-free grant, as well as free or discounted startup resources from Amazon, Google, Wilmer Hale, SVB, and others
Student entrepreneurs pitching at a recent Cardinal Ventures demo day.

Finding Resources & Running a Pilot

Host Organization

The first step is to find an organization that can support your program with space and (potentially) early funding. We were already working as the CIO’s of Stanford’s student government (ASSU), which operates as an independent non-profit and has a ~$20M endowment and offices on campus. After developing a business plan and presenting to the ASSU Board, we got a budget to run a Cardinal Ventures pilot with six startups in spring 2015.

We’ve also seen entrepreneurship programs run successfully within university departments or as student groups. We’d recommend trying to find $5k-$10k to run a pilot, depending on how many companies are in the cohort — you’ll likely want to offer some resources to them, and will need a few thousand dollars for events. It’s also key to have at least one room that you can use a few nights a week for meetings, speaker sessions, and other events. We’ll talk more about finding financial and resource sponsors later in this article!

Curriculum

It was very important to us that the true “instructors” of Cardinal Ventures were the speakers, mentors, and other experts that volunteered their time — not us! However, as directors of the program, we needed to create a curriculum around our programming that would lead teams towards the pitch day, and decided to focus on a different topic each week.

Below is our curriculum from spring 2016. We also recommended relevant articles and videos to the topic of focus each week, which we mostly pulled from entrepreneurship class syllabi. We decided early on that each of our speaker sessions and panels would be open to Cardinal Ventures cohort members only, as we wanted to create a safe and interactive environment for both the speakers and the student teams. It also made Cardinal Ventures more attractive as a provider of exclusive resources and access to experts.

An early version of our schedule of speakers and events for spring 2016.

In our first few Cardinal Ventures sessions, we required teams to have a business plan by the end of the program. We soon realized this was difficult to accomplish in a ten-week period, and isn’t necessary to raise funding in the current environment. We therefore focused on having a pitch deck for each team by the time of demo day. Another early change we made was to turn most speaker events into panels — it was easier for the speakers to prepare, and we found it encouraged more lively and interesting conversations.

People

Our speakers, mentors, and event attendees provided the core value of the Cardinal Ventures experience, and we were very focused on building a top-tier community. We were lucky that Stanford has a large base of local alums who were excited to work with student entrepreneurs, and focused on creating a positive experience that made them want to continue participating. Here’s what we looked for and provided to our key stakeholders — though many of them generously volunteered their time just to be helpful to students!

Speakers

  • Ask: One hour time commitment to come speak with the Cardinal Ventures cohort. Many of them generously stayed for 30 minutes or an hour afterward to answer student questions.
  • Value: Investors gained visibility to student founders and the ability to engage with teams before pitch day. Operators got visibility for their company, which helped them recruit for intern/full-time roles from our founder cohort or their friends.
Our outreach strategy to speakers and mentors changed pretty significantly as the program developed. Once we had a website up-and-running as well as some press to link to, we tried to keep emails short and sweet so the reader could understand the ask quickly and do more research on the program if they were interested.

Mentors

  • Ask: Three to five hour time commitment that involved meeting with one Cardinal Ventures team two or three times over the course of the program.
  • Value: We developed a process for mentors to meet with teams and rank who they were most excited to work with, which we hope was valuable. We had several investor mentors invest in their CV mentee post-program!

Event & Pitch Day Attendees

  • Ask: Come to the Stanford campus for three hours to watch our companies give 5-minute pitches, and network with them afterwards.
  • Value: Opportunity to learn about and potentially invest in promising early-stage Stanford companies. We also made sure to cater the pitch day with great food and drinks!

Student-run programs can have a reputation for being unorganized or poorly run. We wanted Cardinal Ventures to build up a great brand as quickly as possible, so focused on making every interaction with outside parties (speakers, mentors, event attendees) as professional as possible — especially when it came to scheduling!

Speakers received an event confirmation the day before as well as instructions to the venue and a list of companies/teams that would be in attendance. They received a gift and a thank-you note afterwards. Mentors received an invite to a mixer at the beginning of the quarter, weekly updates from their mentee team on progress, and a survey from our Cardinal Ventures team mid-quarter and at the end of the quarter to gauge their satisfaction with the program.

Startups

Perhaps the most important component of the program — you need to recruit teams! For the first few sessions of Cardinal Ventures, a key component of our marketing to students was the quality of the speakers and mentors we had recruited. It’s important to schedule speakers early (months in advance) and ask permission to include their name or photo in emails or flyers.

The flyer for our very first quarter of Cardinal Ventures! We featured a few of the VCs who had agreed to come speak with our teams.

In our application, we asked for each team member’s name and resume, as well as a one to two page description of their business idea and any traction thus far. This application has become more complex over time, but we’d recommend you carefully tailor the questions to the stage of company you’re looking to recruit. The more you ask for, the less applications you’ll receive, but the companies that do apply will likely be a better fit.

It’s important to structure application reviews to ensure the companies are fairly and consistently evaluated. We had a spreadsheet where each startup was ranked from 1–5 on criteria including idea, team, commitment, and fit for the program. A subset of these companies (usually double what we needed to fill the class) was brought in for a twenty-minute interview focused around specific questions or concerns that came up in the application.

In certain cases, we asked experts to participate in interviews. These experts were typically PhD students or industry professionals who could validate the tech behind deep tech, hardware, or biotech/medical device projects.

Building a Team

For the pilot, which included only six startups, we essentially ran the program ourselves. Fair warning — it was a lot of work! We quickly found ourselves working 40 hours per week in addition to classes, and decided to bring on a bigger team for the next session (fall 2016) to help Cardinal Ventures scale.

We can’t emphasize enough the importance of making excellent hires. The people you bring on will be responsible for representing your program to entrepreneurs, investors, press, and others in the community, and you want to make sure that they reflect your values and the culture you want to create.

We were lucky to find the perfect first hire — Courtney Buie, a graduate student at Stanford at the time (now at First Round Capital). She had previously interned for StartX, so she had experience managing the operations of an accelerator, and also had a connection to the entrepreneurial community at the Graduate School of Business through her fiancé (hi, Spike!). Most importantly, she was the ideal cultural fit for the program and played a key role in helping us make decisions around what to focus on as we scaled.

After bringing on Courtney for the second quarter of the program, we started making hires to manage specific tasks. We brought on one person to lead each of the following initiatives — speakers, mentors, sponsors, and external communications. To ensure that they fully understood the type of work they would be doing, each candidate was asked to attend at least two events and complete a short project related to the initiative he or she wanted to lead.

The Cardinal Ventures team in early 2016. From left to right: Henry Magun, Olivia Moore, Courtney Buie, Justine Moore, Yael Lederman, Michael Gioia, Sherrie Wang, Albert Gianatan, and Ela Heussen.

Though having new team members was a huge help, it also complicated our operations. When we were running the program together, we were always in-sync on our decisions and processes, so it seemed less necessary to rigorously document everything. As we were onboarding new team members, we realized the importance of saving everything in shared drives, outlining responsibilities, and setting up a system to track progress. At the time, we used Google Drive, but CRV portfolio company Airtable can do this better!

Sponsors and Next Steps

After running the pilot, we needed to think about how to make Cardinal Ventures financially self-sufficient. Many accelerators or incubators take equity, which generate cash when a company exits. This is tough in a student program for many reasons — most notably, we wanted to be founder-friendly, and it’s not fair for students to have to give up a stake in their idea so early. It would also be logistically tough for us to keep track of all of these investments, especially given naturally high levels of student turnover.

After ruling out equity investments, we decided to reach out to potential sponsors who might be willing to pay or provide free services in exchange for access to our pool of talented student entrepreneurs. We found that the following types of sponsors were most interested in this type of program:

  1. Service providers. Banks, accounting firms, and law firms are always looking to connect with early stage founders who are starting to establish infrastructure around their companies. For example, law firms can help these startups incorporate during the program and form relationships with the founders to serve their future legal needs (e.g. issuing equity to new employees, structuring investment documents, etc).
  2. VC firms. VCs are interested in connecting with student startups for multiple reasons, the most obvious being that it may lead to an investment. We expected that seed stage firms would be most interested in sponsoring the program, but found that later stage firms also wanted access to our teams for recruiting purposes (not every startup would be successful!) and to keep an eye on what’s happening on campuses.
  3. Tech companies. We found that most large tech companies are willing to provide student startups with free access to their resources. For example, Amazon may give startups AWS credits, while Google could provide AdWords credits and Stripe may give free online bank accounts.
  4. Corporate innovation arms. Many corporations (e.g. automotive companies, CPG brands, financial services firms) have innovation teams tasked with staying updated on developments in their field and forming relationships with early stage companies for potential acquisitions. These teams often have large budgets to sponsor programs for startups and are eager to get access to talented students.
Check out the sponsorship guide prepared by the current Cardinal Ventures management team for examples on how to articulate the value of your program and what benefits you can offer to sponsors.

In exchange for either funding or services, our sponsors received early access to teams, were invited to sponsor-only events, and served as mentors or speakers throughout the program, among other benefits. We created a packet for potential sponsors that gave an overview of Cardinal Ventures and the various levels of sponsorship. The cost for each tier of sponsorship should depend on the funding you need to operate the program and standard sponsorship levels for your region — ask around if you aren’t sure!

Conclusion

We’re excited to see Cardinal Ventures continue — it’s amazing to watch founders graduate from the program and continue their journeys, whether that means pursuing their company or moving on to other adventures. Working on Cardinal Ventures was one of the most rewarding parts of our time at Stanford, and much of that is due to the relationships we formed with all of the amazing students who participated in the program.

We’re so grateful for the many amazing speakers, mentors, and advisors who helped us shape Cardinal Ventures. We want to give a special shoutout to David Hornik at August Capital for supporting and guiding us from day one, Shai Bernstein at the Stanford GSB for helping us shape the curriculum, and JJ Singh for providing invaluable feedback on the program structure. Konstantine Buhler was also instrumental in helping us understand the venture landscape and get the program up and running, from strategizing about the long-term vision to hosting panels!

Thanks for taking the time to read this! If you are a student interested in starting a similar program on your campus, please feel free to reach out at any time — we’re available via email at twins@crv.com or on Twitter @venturetwins.

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