Rick Clonan serves as Vice President for Innovation and Entrepreneurship for CenterState CEO where he provides high-level venture development assistance for early-stage entrepreneurs, emerging businesses, and innovation industry leaders. Moreover, he assists mentorship efforts and provides technical assistance in developing business plans, marketing plans, and funding strategies for companies that are part of The Tech Garden.

He is one of the people behind Genius NY, the largest, year-long, business accelerator program for the unmanned aerial systems (UAS) industry. It brings together some of the most promising startups at The Tech Garden in Central New York, and it is operated by CenterState CEO.
Genius NY

What are the uncommon best practices for running an accelerator? What have you learned with Genius NY?

We’ve learned a lot. We’ve had four years now in our Genius NY accelerator. We decided early on to focus on a very specific sector: UAS (unmanned aerial systems). In the startup world, this is very narrow and we did not know at the time how our pipeline would look like and how it would be affected.

Why did you choose this and why Syracuse? It is not one of the most popular startup destinations in the US.

A couple of things came together. First of all, Syracuse is where I retired from my 20-year Air Force career. I ended my career at an Air National Guard Base for the first Air National Guard. They are the first Air National Guard Base to go from F16s, from manned aircraft to drones. Being there, we were the first to do it, so we have that skill set. General Electric, Lockheed Martin, and others were interested in this sector and there was a lot of organic growth in military electronics, radars, sensors, and even unmanned systems. At the same time, the FAA set up seven sites in the US to explore how drones integrate into the national airspace. And we are one of those sites. All of this made me believe that maybe we have enough organic support to go ahead and focus on UAS, UAB.

From what I know CenterState CEO is supporting Genius NY, but did you go specifically after governmental support or other funding?

We talked to the FAA, we talked to CenterState CEO, local businesses, investors, and other agencies. We were able to obtain some grants for Genius NY from NY State. There actually was an economic development vision for unmanned systems, and I just put another piece to the puzzle. That helped us with the focus. Focusing makes everything so much easier. It really helped us on the pipeline.

I know exactly what trade shows to go to, exactly which magazines people read, which websites are relevant and we can dedicate our advertising dollars right there. When you’re doing a general incubator or general accelerator, you have to really spread around your budgets and try to hit a little bit more of a shotgun approach. For us, the pipeline was easier. The resources were easier and team building was easier because when I built the team, I built on their experience in those areas. Focusing on a sector had many, many advantages.

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Why an accelerator and not a seed fund or a venture?

We looked into many options. We could have just taken economic development dollars and we could have gone to mature companies like our local Lockheed Martin, and offered them support to incentivize their mature business to expand in this area. If we look at the big picture of economic development, where jobs are really created, we realize that that’s not where they are created. That money can melt away. We can convince a large company like Lockheed Martin to, maybe, hire 100 people for our UAS initiative, but studies show that those 100 people in a different division may be laid off, so the Net is Zero over many companies over time. So, we concentrated on early-stage startups.

We decided that we want to go for startups and we had to realize one important thing: we’re not in a major innovation hub. We’re not in Silicon Valley, Boston or New York City, we’re not in Geneva or Israel. When we actually say that we know where we are and what we can do, to us that equals a lot more hand-holding. Meaning we have to get the companies in here and we have to actually show them what to do. Because we don’t have the osmosis, we don’t have the ecosystem and we can’t just give someone a chunk of a million dollars and expect them to know what to do.

That led us to an accelerator, where we have to package everything up. We have to package the resources and the services and say “here’s how you do the business plan”, “here’s how you go to market”, “here’s how you build your sales team”, “here’s how you integrate technology”. The best model for us was an accelerator because we can do all that in a one-year-in-residence accelerator, and we can put all the resources on the table, the money, and make sure that everything is spent wisely.

What did you consider when you chose a duration of one year per cohort?

We tried to almost make a hybrid. We looked at accelerators, which are a lot shorter usually, and we saw that that sort of intensive instruction and intensive handholding can really get old after a whole year. This is why we decided to do a two-phase accelerator. The first three months are sort of a traditional accelerator. They are about intensive business planning, strategy, go-to-market plan, and so on. We wrap our entrepreneurs around a lot of resources to help make that happen. We offer more educators, more advisors in our own internal service.

After the three months of work, the five teams pitch to our judges and our advisors and we give the top team a million dollars in funding and give the other four teams 500.000 dollars. The next nine months are all about executing. It’s really an intensive accelerator in phase one and an intense incubator in phase two.

To get to these five teams, how many teams get into the three months accelerator?

All five of them. We took a big chance by having all five teams in the money quotes. All five know that they are going to get funded. Now, of course, they can all drop out for various reasons. But they all have a pretty good shot. They do their job, we do our job and everyone makes money.

Choosing so few startups to go into a one-year project, where you don’t know as a guarantee that things will work out, is the complete opposite of spray and pray and you have good results. How are you keeping the startups successful?

We did take a big bet on that. But we try to get the best, most advanced teams. And as we get a better reputation and as we keep going through Genius NY I, II, III, and IV, we are getting better and better teams that are more advanced. In Genius NY I, they were all very, very early. In Genius NY IV, we have three teams that are going to raise new rounds any day now, and they have been here for two months. We are looking at the long game. The Spray and Pray approach is a very short term approach to me. You put your effort into it and see if it works and if it doesn’t work, you move on.

We have Genius NY I teams that we are still helping. They have been here for four years now. It’s really a long-term game and that’s the difference. We think that all the teams coming in have the same potential. The industry tells them “We don’t see your potential if you can’t do it in one year.” But we come and say “We see your potential. We don’t care if it takes five years. We’ll still be with you.”

So how many of the companies are still functional?

With Genius NY IV we are up to 22 teams. Of these 22, 20 are still here. What happens is that these 20 teams are now interacting and we have a team from Genius NY I, from cohort I, meeting a team from cohort IV, and they start working together. What I built here is a mini-ecosystem. Everyone’s still being supported and now there is actually increased benefit.

What are the biggest mistakes that you made, the things that helped you learn to do things differently? How did the initial approach clash with reality?

It actually worked out pretty well. I was very surprised, but what I got from past experiences is that I understood how the ecosystem helps. The one thing the ecosystem does is help with finding people. We would go and just email our contacts and the people we know and ask them to judge or review the business plans we received and so on. Because we get about 400 applicants each year and we need people to review those business plans, to shortlist them. After that, we have to have judges interview and listen to pitches on the shortlist. For this, we needed a much larger pool than our own contacts.

I found that it is very easy to go ahead and blast an email and get a bunch of people to volunteer to do that, but guess what, those 30 judges know nothing about UAS, UAB. Maybe some of them are investors, maybe some of them are now business owners and some of them are professors. I found that you have to be very selective in who your judges and your qualifiers are. We went too generalist on the first one. And now we only have our ten go-to people who know what we are looking for. That helped a lot in the pipeline and with getting better and better teams.

Are there any other things during the program that you would do differently now as opposed to three or four years ago?

Of course. That’s how we created our internal services. It is easy to give someone a million-dollar check and then introduce them to ecosystem members, like someone from marketing, or website, or maybe an accountant, or a lawyer. But we found that we really needed our internal vetting process, our go-to people, for service work too. In that first year, we had to figure out exactly which lawyer was best for raising capital or advising on cap tables. And which lawyer was best for hiring a team and which accountant was better. Our service provider selection also had to be refined and tightened up. And now we have an internal sales center and a marketing center. We have actually hired someone to be on call and do the marketing work and the sales work for these Genius NY teams.

We have trained them in exactly what we want and how it fits in. It saves us from going out on the internet and finding ABC marketing firm or using The Tech Garden marketing firm. This is just low-level stuff, but it gets them on the right foot. All of this is the stuff that the interior needs because if you’re in a major innovation hub, everyone knows who the best lawyer in town is to go raise money. Everyone knows who the best accountant in town is for a startup. But here in the interior, we don’t know that, because there is not as much deal flow.

Mentoring is a very diverse and controversial aspect of many accelerator programs. What is the role of mentoring from your point of view? What works in your case and what doesn’t?

One important thing we found is that trying to get a mentor too early does not work. Mentorship is intense. It requires a lot of volunteer work, a lot of hours. It requires a commitment. If a startup is still in the accelerator and still trying to figure out where they’re going to go, then they’re not ready for mentorship.

We divide our industry-experienced people into two groups: advisors and mentors. Advisors can come in and out and they can help on specific things. If someone needs help on a certain technology like control system for a drone, we would know exactly who to go to and they might do two one-hour meetings and get the person right on track. Another advisor might be someone who is good at cap tables and they could do a workshop for us or come in and help one group on a specific task. The advisor works very well for most of the accelerator. When the startups get near the end of the accelerator, when they know what they’re doing and when they’re going to market, then we try to pick the right mentor.

We have one team that’s doing weather, micro weather for drones. Because drones need certain weather predictions that airplanes don’t have. The perfect mentor for that team is someone from AccuWeather, a mature weather company that is in the industry and can really help this startup. But bringing that mentor in too early is just wasting people’s time. We really try to wait to find the exact right mentor when the company is as mature as we can get it. Then we do a signed agreement and say the mentor will meet this entrepreneur four times a month, for four hours a month and the entrepreneur will be available four times a month, for four hours. This is not a binding contract, rather just a signed agreement that they are going to be there for each other.

What we found in the past is that we introduced two people and thought there was a mentor-protégé relationship, but we checked back in six months later and found out they had met twice, and then it fizzled out. Mentorship is unpaid, but they’re free to do their own deal. If it turns into a lot of hours, the mentor might charge the entrepreneur, but it’s not what usually happens.

Considering that mentoring comes up later in the process, do you do any workshops or education at the beginning, in the first three acceleration months?

Yes, it’s all intense. We have a business planning process that I brought to the incubator, called integrated business planning and it has 12 elements. For instance, market segmentation, price, solution, cost, design, distribution, etc.

We teach the entrepreneurs each element and what they should do. We make the entrepreneurs do their homework, do their research, and bring us back some data, and we put that into their business case. At the same time, we do a workshop, we bring an expert to speak on the topic, and then we do a workshop to reinforce the topic.

Let’s take “pricing” as an example. We have a workshop on how to price your product, how to do multi-step distribution, how to do four price points, MSRP, and all the way to discount and down to the wholesaler. Not only are we teaching that in the morning, but we are doing a workshop in the afternoon and we might even have a speaker that is very successful on some sort of product that went through distribution with multi price points. In the three months, it is all tied in just like that.