MACH37 is an American seed accelerator that launches new cybersecurity companies. Rick Gordon, managing partner at MACH37, says that although it’s “still early days, we’ve demonstrated that we’re good at it.”
The accelerator was funded for the first three years by the Virginia Commonwealth. “There’s a really rich talent base in the mid-Atlantic region that is not being optimally harnessed to solve some of the vexing sec problems experienced by the commercial sector,” says Gordon, explaining why the accelerator was needed.
Now funded entirely by the public sector, the 14-week program trains entrepreneurs in how to build and position commercial companies, how to inspire investors, and how to be successful in the long-term.
Their long-term success is the end goal, explains Gordon, “because then I get ROI”. MACH37 invests really early on, then helping the business with their go-to-market strategy. “We invest before the prototype is even built in some cases,” says Gordon, adding that their considerations are how it will scale and how it will be financed. “Every venture capitalist will tell you they bet on a team, but we invest so early we don’t have that luxury. Instead, we bet on a concept and a founder.”
Annually, MACH37 offer 12 companies a $50,000 flat investment fee in return for 8% of the company, a fee which Gordon says “should let them eat until they get funding.” To date, 70% of the companies they have invested in have later received funding.
Once they receive funding and hire stuff, the new investors allow MACH37 to take a step back. “Our model is to get them in good hands, and then take off on their own.”
Gordon says that MACH37 is so important because seed rounds are notoriously hard on the east coast. “Usually it’s multiple rounds of convertible debt. It’s not like the West Coast; the money is on the east coast and they don’t like to fly.”
Most of the founders that Gordon works with are technical tecchies. “Technical founders are paired with seasoned entrepreneurs. Sometimes, tech founders end up being price takers, not price sellers. Tech founders do all the hard work in order to get to market, but then have to pair with someone who can build a company, thus having to give up a lot of their company.”
The biggest challenge for start-ups in the industry, says Gordon, is that it’s “too noisy. There’s too much investment going in to companies that aren’t unique. Of the 600 companies exhibiting at RSA, 80% will have been over-funded. There’s probably some irony in there,” he adds.
“There is too much money flowing in, but it’s not informed or intelligent money. So that becomes just noise, and the problem with noise is that everything becomes labelled the same,” he explains. “Even if your idea is unique, the branding gets stolen immediately. Everyone says the same thing but their products haven’t changed at all. They just follow the trend.”
Of MACH37 investments, Gordon expects 15% to “target exit and give a great return.”