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Summary:

Germany’s IdeaCamp, a short mentoring program for budding entrepreneurs, is causing concern among Berlin’s startup community. Why? Because it asks attendees to give up a fifth of any business developed as a result of its three-day workshops.

ideacamp.de logo

Starting on Thursday, Berlin plays host to the latest edition of Ideacamp, a hackathon that claims to help you “found your startup in three days”. On the surface it looks like typical fare: €150 for a long weekend featuring a mixture of brainstorming, workshops, and training sessions aimed at helping budding entrepreneurs develop an idea and start their own company.

Except there’s one glaring difference between this event and most others like it: the real price for taking part is not just your time, or even your cash — it’s 20 percent equity.

On their “Participation” page (in German) the group says it has a “philosophy of low participation fees”, promises to help them achieve “instant success”, and offers support to startups once they have completed the camp. But attendees also have to agree, up front, to give away up to 20 percent of any company they start.

“For startups that we continue to support after the camp,” it says, “We get involved with 20 percent equity.”

Signing away so many shares in your company for something so vague makes IdeaCamp more than a little unusual, even in the world of accelerators and bootcamps.

Y Combinator, the industry’s most famous accelerator program, has spawned startups including Reddit, Airbnb and Dropbox. It is very public about what it offers: three months of intensive mentoring, a small sum for living expenses, connections to Silicon Valley’s biggest investors. For that, it takes an average of 6 percent equity.

For a more local comparison, take pan-European incubator HackFWD, which happens to be holding its own quarterly startup camp in Berlin at the same time as IdeaCamp. Run by a team of experienced entrepreneurs and led by Xing founder Lars Hinrichs, HackFWD takes 27 percent equity in return for a full year of intensive mentoring and up to $250,000 of funding.

Community concerns

IdeaCamp, which has been running events in Germany since April 2011, was started by consultants Katja Andes, Kalle Eberhardt and Philip Wilhelm. The team says it is inspired by the likes of Eric Ries and Tim Ferriss and ultimately wants to help people follow their dreams. The site lists official mentors who work in areas like SEO, customized printing and crowdsourcing.

But its offering has concerned a few local entrepreneurs, who told us that they worried about the lack of transparency and the nature of the deal on offer.

“Incubator models are fantastic for the right type of founders, particularly if they’re young,” one Berlin founder, who asked to remain anonymous, told us. “But 20 percent is madness, and a bit exploitative. You can’t validate all the meaningful risks in three days, no matter how good you are.”

Another said that while it “totally makes sense” for there to be a three-day event dedicated to helping entrepreneurs develop their ideas and skills, it “should be independent from any equity finance deals.”

The arrival of deals like those IdeaCamp seems to be offering is, perhaps, a consequence of the glut of accelerators that have appeared in the wake of bigger names like Y Combinator, TechStars and Seedcamp. With excitement about startups growing across Europe, dozens of bootcamps have appeared in a short amount of time. Last year we wrote about how they offer wildly varying deals to founders, and in some cases even offer terms so onerous that they effectively kill the companies they are supposed to support.

When asked to explain IdeaCamp’s approach, founder Kalle Eberhardt said that taking a share in the companies it helped build was a way to “show our support for the team.”

“We ask for 20 percent equity because we are sure that this is a fair deal for both sides,” said Eberhardt in an email. “Most of our participants come to our camps with nothing but the idea that they want to change their lives, follow their dreams — and to reach that, start their own company. As they don’t have a business idea, or they lack the knowledge of how to implement the idea, they come for our support.”

So how is IdeaCamp’s program different from what other incubators — including those that take a smaller equity cut — provide?

“Our share in the companies might be higher because we accept almost everyone interested in founding their own company to our workshops,” Eberhardt wrote, arguing that although the organization asks for 20 percent up front, it is only a starting point for further negotiations with “businesses we believe in.”

“Our primary goal is not making money with these camps. We are not interested in a sale of our share after a few years, but want to support people in achieving their dreams,” he continued. “Our maxim is to help people become financially independent. If people get that and can do in their lives whatever they want, 20 percent equity for us sounds fair, I think.”

  1. This article is interesting indeed. I think that our Camp is being misperceived:

    1. We dont see ourselves in the same ‘niche’ as ycombinator and hackforward although we greatly admire their programs.
    – Our main goal is to help first time entrepreneurs to set up a business that will allow them to finance their ideal lifestyle (4-hour work week style).
    – Thus, we aim towards scalable but automated lifestyle (cash flow) businesses.

    Maybe this did not become entirely clear through our new website. We are working on it.

    2. We only take equity if and only if the work shop participants want our help with the ideas they developed in the workshop. If they want to do it themselves, they are free to build their own business without Idea Camp mentorship. Only if we become active as mentors do we ask for a (negotiable) share. So participation in the workshop is not necessarily linked to giving up part of your company for mentorship and operational support.

    We hope that clears up some of the doubts about our project. Glad to answer questions regarding our mad and exploitative 20 percent. =)

    T

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    1. Bobbie Johnson Friday, March 9, 2012

      Thanks Thomas, the response is much appreciated.

      While I’m sure you are committed to getting people out of dead end jobs and into entrepreneurship, I think at the very least you have your incentives lined up in a very unusual manner — and one that could potentially be hurting, rather than helping, those who come to you.

      After the responses from both you and Kalle, I’m not sure this is merely an issue with the way the copy on your website is written.

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  2. Elaborating on my https://twitter.com/#!/davestone/status/178043773710893056

    The thing with young accelerator programmes is who knows if they’ll actually bring value? Saying & doing are very different things; sure everyone knows there’s risk involved with startups.. but..

    Incentives need to be aligned through the whole process; there are ways of dealing with it; sure in different situations.. but..

    I’ve been critical about accelerator programmes in the past but generally kept my opinions to myself bar the odd bar-rant because I don’t have a solid, better suggestion. However have followed a few accelerator programmes over the years; some closers than others.

    My 2p? If this is aiming at ‘lifestyle businesses’ it has no places in the ‘high growth startups’ world we live in—participants expecting that will be in for a shock—missmatch.

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    1. Hi Dave,

      thank you for your comment on this. You are absolutely right. We are not aiming at high growth startups (which does not mean it couldnt happen).

      Most participants come to us because they want to become financially independent and work from anywhere they want.

      And you are also right, that incentives have to be aligned throughout the process. In this case, we have to become active operationally or our equity isnt worth a penny =). Also, we negotiate the final deal with each of the idea camp startups. What we dont want: Work and mentor for free, help to get a business up and running and then get dumped.

      Thomas

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  3. Simon Jagers Sunday, March 11, 2012

    I believe that the best reason to offer equity would be to gain access to resources. Access to knowledge ranks first, partners second, customers third.

    Knowledge is the key-driver for innovation. Equity partners should be able to contribute to product development as a solid product or service is the basis for startups of any kind.

    As partners can accelerate business in many ways, for instance by contributing to development or creating an integrated offer, partnerships can greatly improve the speed at which new products are adopted. Ideally, a new product/service should become part of an existing eco-system. Partners can offer that eco-system.

    Customers fuel a business both by providing operating capital as well as early feedback gaining access to customers is a key part of any business. A mentor with equity in a startup provides social proof that a new venture is worth considering and thus can provide access to customers in the early stages of a new venture.

    Providing capital is not in my top 3. I believe that startup businesses should not depend on capital as abundance of capital kills creativity. Bootstrapping a new venture is like a litmus test, both for the product and for the entrepreneur.

    A good resource for information on bootstrapping is provided bij “eq journal”, prof. Bruce Firestone’s blog. (www.eqjournal.org).
    Jeff Haden is another source of sound advice on how to run a (startup) company. Jeff Haden writes for Inc.com and businessinsider.com.

    Simon

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