A few weeks ago the Creative Destruction Lab’s (CDL) inaugural space stream had their first “super session”, where teams that had successfully made it through the competitive CDL process presented their technologies, people, and business model to the entire CDL business network, including Fellows, Associates, venture capitalists, scientists, and many others.
The space stream had received a lot of attention. Announced during former CSA astronaut Col. Chris Hadfield’s “Life Beyond Earth” fireside chat last year (joined by Anousheh Ansari, Firouz Naderi, and Dante Lauretta), CDL’s space stream is a historic recognition of the growing number of space-focused startups both around the world and right here in Canada. CDL has been successful and hailed for its nine-month program that brings together investors and business leaders to help shape technologists’ ideas and dreams into promising new companies.
How did this new stream shake out? What worked, and what could be made better? SpaceQ took the time to speak with representatives of the successful teams to get their perspectives. What we found was a broadly successful program — but, like the CDL itself, one whose own successes may be generating significant challenges.
Mentors’ invaluable advice and networks
On one point, almost all the teams that were interviewed agreed: the Mentor network was the highlight of the space stream. Teams raved about how incredibly useful, even exhilarating it was to be connected to the extensive networks of the space stream’s various Mentors. Reaction Dynamics’ Bachar Elzein put it simply: “we were proud to be working with each and every one of these Mentors.”
SpaceRyde’s Saharnaz Safari talked about how the network helped her team. SpaceRyde, formerly known as Loonify when it started in CDL, focuses on using stratospheric balloons as a platform to launch rockets carrying small satellites into space for a fraction of the cost non-heavy launchers. This feat is now possible due to the shrinking size of both satellite components and portable computing power, but the semi-random movements of rising balloons meant that testing required difficult-to-get airspace clearances.
Thanks to the Mentor networks, Safari was able to talk with the director-general of the Royal Canadian Air Force about how to handle airspace issues and to work with Transport Canada and other regulatory bodies. She said that she simply “couldn’t have spoken with him without the CDL Mentors’ network”.
To her company, it was the space network that was the big selling point. Her team had worked with Y Combinator at the same time as they were part of CDL. Though Y Combinator opened many doors, CDL provided “a network to space in Canada and beyond … as a Canadian company, we were looking for Canadian connections, and wouldn’t have gotten the connections in Canada without CDL”. Thanks to that network, they successfully finished their first test launch right before the Super Session, and are raising funds right now for their first orbital test.
Other teams had similar experiences, saying that the advice and guidance they got from the Mentors was an enormous help. Cordell Grant and his team from QEYNet knew that they were “well along the technology path” for their satellite-driven quantum key solutions, but needed to advance their business. One of the Mentors they worked with, Helpful.com’s Dan Debow, told them “you need to find whose hair is on fire today” — to understand the pain points of their potential customers, and how their technology can help solve their problems. Despite Debow coming from a different industry, Grant kept an open mind. After intensive market analysis, Grant and his team at QEYNet are confident that they know exactly whose “hair is on fire”, and how to introduce them to his company’s solution.
Time crunches and competitive pressure
If anything, the issue may have been that they didn’t get enough time with the Mentors.
The CDL sessions involve teams having short fifteen-minute meetings with their “leads” and “critiques” — Mentors chosen by CDL to present their business’ characteristics and progress and to critique it, respectively. After that, the lead and critique have a few minutes each to present the company’s situation to the Mentors as a whole at the broader sessions, with company principals having thirty seconds to add anything necessary.
These meetings with the leads and critiques are critical. The lead and critique are almost solely responsible for presenting the company; founders have little time to correct or expand on the assessments. After that, if a Mentor didn’t agree to work with the team during the subsequent period between sessions, the team was eliminated from the program. Once they had Mentor support, they could count on that Mentor through the subsequent session, and often beyond; but almost everything depended on the lead and the critique.
Over time, many of the teams said that this wasn’t an issue, as Mentors became more familiar with their companies and what they were trying to do. Many teams ended up having Mentors that they worked with consistently, and who served as champions of a sort during sessions. SpaceRyde worked extensively with Col. Hadfield, and Safari expressed how “wonderful” it was, talking about how he was both “very helpful and very humble”. Many teams had stories like that about Mentors that they grew close with.
Early on, though, it could be daunting. One team said that early critiques could be “very aggressive, almost trial by combat”, even when the issues weren’t really relevant to the team. Another team expressed concern that the Mentors who came from non-space backgrounds may focus on issues that aren’t entirely appropriate to the space sector, forgetting that the lessons they learned may not always apply to space.
Due to the large starting cohort, one team was concerned that leads could find themselves with a lot of companies to summarize, little time to do so, and little time to familiarize themselves with them. They feared the possibility that “outlier” ventures providing novel and complex services may have “got kicked out because people didn’t understand what they were doing”, even though it was fundamentally viable. This could easily bias the program towards familiar and easily-understood teams and technologies, and against truly revolutionary startups.
(A different team disagreed with this idea, however, noting that “if you can’t explain your business in thirty seconds, you don’t understand it.”)
Either way, it was an extremely competitive process. Teams would always be surprised, and sometimes shocked, to return to the next session and discover how many familiar colleagues had been “cut” from their CDL cohort. After the first cohort, where (in one team’s estimation) over a quarter of teams were immediately cut, things stabilized a bit, but every team was under pressure to perform to remain in the program. The pressure still remained. Based on SpaceQ’s list of teams that participated in CDL, just over a quarter of the companies did not make it beyond the first session.
Teams themselves weren’t always aware of how well they’d performed or how close they came. One team was blindsided when a Mentor said that they were “the quintessential CDL company: we were going to throw them out in the first session, and they proved that they were worth keeping in.” When the team heard it, they were absolutely dumbfounded. They had no idea they came so close. They thought that they’d sailed through!
Vital venture managers and CDL turnover
This competitive environment forced teams to rely on every available resource. One of the most vital resources were their Venture Managers, who gave guidance on how to work with the Mentors, helped to prepare briefing documents for the sessions and meetings, and assisted with a blizzard of other tasks. For many teams, for all intents and purposes, the Venture Managers were the Creative Destruction Lab.
The Venture Managers came to be seen as the ventures’ close allies and one of their most valuable resources. Safari said that their Venture Manager would intercede on their behalf whenever an issue came up, and Elzein said that “everything was delivered in a timely manner” and that “the advice is the best you can find.” Atomos’ Kowalski said that the Venture Managers provided essential advice on working with busy and high-profile Mentors. QEYNet’s Grant said that they were “absolutely essential”, and “proactive in helping you be successful in the program.” If anything, he wished that they could play a larger role.
Like with the Mentors, though, the only issue may well have been that they didn’t have enough time with the Venture Managers. One team said that the Venture Manager’s (VM) assistance and insights were “valuable, but their time was so limited.” They’d wished they had more time to work with the VMs, and believed that the CDL should invest in bringing more VMs aboard so that each one had the necessary time to work with each of their teams.
Instead, though, many of the Space stream’s Venture Managers seem to be moving on to other opportunities. Many teams that worked with former CDL Space stream leader Sheret Ross were surprised when they learned that he was leaving right before the Super Session, to pursue other (unnamed) opportunities. One team talked about how they had several changes in their Venture Manager over the course of the sessions, as several of their Venture Managers moved on.
Many teams were understanding about these issues, and that Venture Managers leaving to pursue their own business dreams made sense. Leap Biosystems CEO Dave Williams said that end of the CDL process wasn’t necessarily the end of the relationship with the VM, either; that “relationships continue, activity continues, and things continue to grow and blossom”.
Still, it raises questions. Many teams were caught off-guard by Ross’ sudden departure, and his replacement by new Venture Manager Matthew Tweedy. Though the teams that got a chance to spend time with Tweedy, like Leap Biosystems, praised him for being as valuable an ally as his predecessors, many teams said that they had little time to get to know Tweedy or to get comfortable with working with him before the super session. They didn’t fault him, and thought he did a fine job. It was just an abrupt change.
Organizational questions persist
With the departure of Ross and of previous Venture Manager Michelle Mendes, questions still persist about who will be responsible for the CDL’s Space stream. No announcement seems to exist on who will be taking over the responsibility, whether by Tweedy, another current CDL Venture Manager, or someone else entirely.
This may be an issue. While teams praised the Venture Managers and Mentors, some had serious organizational and administrative issues. SpaceQ heard stories about administrative and organizational mixups, including scheduling problems and booking problems, that could have had a serious impact on the business’ viability. These issues may be related to turnover at the Creative Destruction Lab.
One team also relayed their shock and dismay that, unlike many other accelerators, CDL allows competitors into the same cohort. The team found themselves sharing Mentors with direct competitors, and became increasingly concerned about whether proprietary information could be shared between teams by shared Mentors, or even spread through the cohort’s Slack channels. A new business is going to have confidential information, and “Mentors cannot help us if we can’t share confidential information.”
The teams were forgiving of the organizational issues, recognizing that the space stream is new and saying that “they tried to the best of their abilities”. On this issue of competitive information, though, the affected team was much less charitable, saying that “this was one of the most frustrating things that happened at CDL”, and that CDL should learn from the example given by other programs.
SpaceQ spoke with Col. Chris Hadfield who indicated at the time (June 19) that he hadn’t had an an opportunity to sit down yet with the CDL team to discuss what lessons were learned, and what if any changes may be needed.
He also stated that it took him and the CDL 1 1/2 years to get the Space stream setup and that they had nearly 120 applications to select from. They eventually selected 26 companies and then added another three for the second session.
Helping ventures to become fundraising-ready
Fundraising is a critical part of most accelerators, and a good reason why companies get involved in the first place. The graduating teams recognized that this was a part of the CDL process, but that CDL’s approach was uniquely not about fundraising.
Vanessa Clark and William Kowalski of Colorado’s Atomos Space were part of both TechStars and the CDL, while Safari and SpaceRyde was part of Y Combinator. Both teams noted that, unlike TechStars or Y Combinator, CDL wasn’t as laser-focused on making the companies investor-ready, building their pitch deck, and on bringing angels and/or VC on board during a “demo day”. For those purposes, both teams said that the other accelerators were more useful, helping them to raise millions of dollars that they may well not have through the CDL alone.
Other teams’ reactions were similar. The CDL network provided them opportunities to access grants and government funding, and some did point to opportunities that had been opened up by the CDL network and successful capital raised through those connections. Mission Control Space Services CEO Ewan Reid said that they had “secured financing as a result of the CDL”, and that the timing of their access to investors was “right on point”. Wyvern Space’ Chris Robson has started a fundraising round and is already speaking to customers. Elzein has gotten support from Canadian Space Agency grants, and is reaching out to angel and strategic investors as they continue to move forward on testing their launchers’ hybrid propulsion systems. But almost all the teams interviewed noted that the CDL wasn’t a funding-focused process.
Instead, teams noted that what CDL provided them was the opportunity to become the kind of company that investors would be interested in. Elzein said that “the goal is to help entrepreneurs develop entrepreneurial judgement”, and several teams lauded the program’s ability to take technologists, scientists and engineers and help them think like business people.
Safari pointed to the successful test flight as a key milestone that will help them get investment — a test flight that happened thanks to the Mentors’ networks. Robson credited CDL for helping his company identify target markets and refine its pitch to both customers and potential investors. Grant and QEYnet actually had Mentors with an investment background telling their team “don’t raise money until you have to,” instead of rushing them into an Angel or Series A round. Atomos’ Clark and Kowalski said that it helped both Atomos and the other teams to become “realistic, venture-backable companies”, and to reexamine their pitch, their target markets, and even their company’s name.
Most dramatically, Dave Williams told us that LEAP Biosystems went from the dream of a group of former astronaut candidates to a self-sustaining business with an existing consulting client base, serious growth potential, upcoming medtech products, and materials for potential VC and Angel investors (some through connections made at CDL) … in only seven months. Thanks to CDL, they’re actually well ahead of their timeline.
A successful program, but it may be a “victim of its own success”
That was the concern raised by one team about the CDL’s space stream, and it fits the overall experience described by the teams.
Teams were consistent in their praise for the CDL, for the Venture Managers, and for the Mentors. There were some minor issues, like teams wishing that they had more opportunity to interact with each other or the scheduling problems. These issues will likely get resolved as the cohorts continue, and CDL leadership has been made aware of the confidentiality issues arising from having direct competitors in the same cohort. Every team was asked “was it worth it”, and every team enthusiastically said “yes”.
The departure of the Venture Managers, and the continuing uncertainty over the management and administration of the space stream, is more of a concern. At time of writing, it is still unclear as to who is going to be responsible for the Space stream, or who its managers will be, even though recruitment for the next cohort has already begun. Sources suggest that this is not an issue solely limited to the space stream, either, but that staff turnover is a continuing and growing issue with the Creative Destruction Lab, at least in Toronto.
But that turnover may itself be an indicator of how successful the CDL has been. CDL companies have raised billions of dollars, and the profile of the CDL has only risen over time. The teams were united in wishing the outgoing Venture Managers all the best, recognizing that their desire to pursue their dreams fundamentally matches the teams’ own pursuit of success. Having the CDL on your resume or LinkedIn page is going to continue to remain a big selling point for almost any business person in both Canada and the United States.
How the CDL will manage these retention challenges, and retain its own reputation, will be the key question going forward.
Marc Boucher contributed to this article.
Updated July 3, 2019 at 9:10 a.m. EDT – Corrected the following sentence in the second paragraph of the Helping ventures to become fundraising-ready section replacing Leap with SpaceRyde: Vanessa Clark and William Kowalski of Colorado’s Atomos Space were part of both TechStars and the CDL, while Safari and SpaceRyde was part of Y Combinator.