Episode Summary
Executive Summary: In this episode of This Week in Startups, host Jason Calacanis interviews Siobhan DeLay, CEO of MassChallenge, a global nonprofit accelerator network. They discuss MassChallenge's unique model—taking no equity, offering non-dilutive grants up to $1M per cohort, and operating across 7 locations with a community-driven selection process. The conversation covers the accelerator's metrics (2,458 startups accelerated, $6.2B raised, 157K+ jobs created), the difference between East and West Coast investor approaches, the shift to virtual programming during COVID-19, and lessons on startup resilience and sustainability.
Main Topics: MassChallenge's Nonprofit Accelerator Model (Priority: 5/5): MassChallenge is a global nonprofit that runs competition-based accelerator programs without taking equity from startups. It selects <10% of applicants through volunteer expert judging, awards non-dilutive cash prizes (typically $50K-$100K), and focuses on early-stage companies across industries. Measuring Success Without Equity Returns (Priority: 5/5): MassChallenge tracks success through metrics like startups accelerated, funding raised, revenue generated, and jobs created—not IRR. Their 10-year track record: 2,458 startups, $6.2B in funding, $3B+ revenue, 157K+ jobs. 90% of alumni are still operating or acquired. East Coast vs. West Coast Investor Culture (Priority: 4/5): Calacanis and DeLay discuss regional differences: East Coast investors focus heavily on IP and diligence, while West Coast investors are faster, more risk-tolerant, and benefit from power-law returns (e.g., LinkedIn, Twitter). DeLay attributes East Coast conservatism to fewer mega-exits and a more formal investment culture. Virtual Accelerators and COVID-19 Adaptation (Priority: 4/5): Both speakers discuss the forced pivot to fully virtual accelerator programs during the pandemic. Calacanis notes that Zoom pitches may expose charisma deficits and force substance over form. DeLay sees opportunities for broader investor reach and deeper diligence but acknowledges the exhaustion of constant video calls. Startup Resilience and Runway Discipline (Priority: 4/5): Calacanis criticizes founders who raised on short runways (6-12 months) and laid off employees within days of COVID-19. He advocates for 18+ months of runway and warns that fragile businesses fail in black swan events. DeLay agrees, noting that many companies in unaffected industries cut staff too quickly. Government and Corporate Partnerships in Accelerators (Priority: 3/5): MassChallenge is 80-90% funded by corporate sponsors, with the rest from government and foundations. Governments focus on job creation and ecosystem building (e.g., fintech in Massachusetts). Corporate partners contribute expertise and potential customers, but DeLay emphasizes she would sever ties if they exploited startups.
Key Arguments: MassChallenge's no-equity, competition-based model is a competitive advantage because it attracts startups and partners who prioritize impact over financial returns, though the speaker questions why they don't reinvest returns to make the program evergreen. East Coast investors are overly obsessed with IP and due diligence, which slows decision-making and leads to missed opportunities; West Coast investors benefit from density of deals and power-law outcomes that encourage faster, bigger bets. Virtual accelerators can work if they force deeper scrutiny of substance over charisma, but they require new tools (persistent video channels) and a shift to rolling cohorts to maintain momentum. Founders must maintain 18+ months of runway and resist the temptation to raise frequently at higher valuations, as black swan events can shut down capital markets for extended periods. The pandemic is a forcing function for sectors like telehealth and edtech, breaking through regulatory and adoption barriers that previously stifled innovation. Federalism and strong state leadership are proving more effective in crisis response, potentially leading to regional blocs of governors coordinating policy.
Data Points: Startups accelerated: 2,458 - Over 10 years across 9 programs in 7 locations globally Funding raised by alumni: $6.2 billion - Cumulative funding from all sources Revenue generated by alumni: $3 billion+ - Cumulative revenue Jobs created by alumni: 157,000+ - High-paying jobs across the globe Cohort size (Boston): 100 startups - From ~1,000 applications annually Acceptance rate: <10% - Based on community judging of applications Cash prize range: $50K - $100K - Non-dilutive grants awarded to 10-15 startups per $1M Boston pool Alumni survival rate: 90% - Still operating or acquired Funding sources: 80-90% corporate - Remainder from government and foundations Notable alumni valuation (Flywire): $1 billion+ - Unicorn status; went through in 2010 as 'peer transfer' Notable alumni valuation (Ginkgo Bioworks): $1 billion+ - Unicorn; pivoted to COVID-19 solutions with $25M commitment
Pivotal Quotes: "At the first sniff of that, I break up with that partner. So we are focused on startup benefit. It's do absolutely no harm." — Siobhan DeLay: Responding to concern about large corporations potentially stealing startup ideas in the accelerator "She would never survive virtually over Zoom because they'd say you just said this. I googled it and you're wrong. You're lying." — Jason Calacanis: Discussing how virtual pitches reduce the ability to charm investors and force more factual scrutiny, referencing Elizabeth Holmes "I've been preaching it for the last five years, telling these founders have 18 months of runway... And if anything happens, if God forbid there's another terrorist attack or anything, any kind of black swan... you don't have enough runway to do it." — Jason Calacanis: Criticizing founders who raised on short runways and were forced to lay off employees within days of COVID-19
Implications: The episode underscores the value of non-dilutive, competition-based accelerators for early-stage startups, especially in a downturn. It also highlights how COVID-19 is forcing permanent shifts toward virtual operations in accelerators and investing, while reinforcing the need for startup resilience through longer runways and sustainable business models. The contrast between East and West Coast investing cultures may narrow as remote diligence becomes the norm.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.