A couple years back, Peter Relan – the less-famous (or infamous?) co-founder of dot-com morality tale Webvan — launched a startup incubator called YouWeb. His thesis: Successful startups could be hatched for far less than the $800 million the online grocer raised. The handful of mobile and gaming companies YouWeb seeded got just $100,000 apiece; in return, Relan and his partners took a 50 percent ownership stake.
The strategy paid off enormously when Japanese social gaming kahuna GREE bought one of YouWeb’s portfolio companies for $104 million. The team behind another YouWeb hatchling, Spaceport, was acqui-hired by Facebook in a much more modest deal, but the dual exits were enough to convince Relan that he was onto something.
On Thursday morning, he’ll announce the launch of 9+, which he describes as his effort to “scale” the YouWeb experiment — with some tweaks. Rather than giving his entrepreneurs three months to bring a product to market, as YouWeb and other incubators like Y Combinator and 500 Startups do, Relan now believes a nine-month gestation is required for entrepreneurs to refine that basic product, put together a meaningful business plan, build out a workforce and forge deals with venture capitalists.
Relan also is adding a second campus in downtown Menlo Park to augment the original Burlingame site. That’s because where YouWeb spun off six companies in six years, 9+ plans to welcome 24 startup teams a year, split between two sessions of 12 apiece. It’s a quantum leap forward, though still less than the number in each Y Combinator batch.
The dollars are bigger, too: YouWeb was capitalized by Relan and three partners for just $2 million; with 9+, he’s shooting to raise $10 million. (Notably absent from the list of 9+ investors is David Roux, the Silver Lake co-founder who worked with Relan at Oracle and later helped capitalize YouWeb; both men tell me Roux, who left the valley for Virginia a few years back, is more focused now on philanthropy than seeding tech investments.) On the other hand, Relan’s brought in Soma Somasegar, vice president of Microsoft’s developer tools division, as an investor, along with several ex-Oracle and Yahoo hands and venture capitalists who’ll advise the 9+ entrepreneurs.
Still another difference from the YouWeb days is the terms those entrepreneurs will receive: Rather than selling half their companies for $100K, they’ll get a term sheet that Relan has modeled on Y Combinator’s. “YC’s deal is $20,000 for 6 percent equity. We’ll be offering $30,000, and since it’s three times the time commitment [plus free office space], it’s going to be 18 percent equity.” Besides the cash, 9+ will offer an $80,000 convertible note, as Y Combinator companies receive from outside investors.
Relan envisions his new accelerator as the Stanford to Y Combinator’s UC Berkeley: “They’re both amazing institutions,” he said. “Berkeley takes more students and is a little less expensive.”
One thing it doesn’t sound like 9+ companies will have to do is give Relan the CEO role; he assumed that title at most of YouWeb’s startups, but his job at the new project is described as “Chief Mentor.” He’ll continue to serve as chairman to the couple of remaining YouWeb companies, which share most of the Burlingame building. And while Relan said he’s still open to gaming companies, he’s mostly going to be looking this time for startups focused on mobile and wearable computing and big data.
The application period for the inaugural 9+ class starts today and runs until August 31. The nine-month incubation session begins October 10.