1Mby1M Virtual Accelerator Investor Forum: With T.M. Ravi of The Hive (Part 1)

Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with T.M. Ravi was recorded in September 2016.

T.M. Ravi is Managing Director and Co-founder of The Hive, a venture studio. The discussion touches upon a couple of key issues: the prevalent incubator/accelerator model of 3-month classes, we agreed, is bogus; and Future of Work: Utopia or Dystopia?

Sramana Mitra: To set context, please introduce Hive to our audience. What kinds of companies do you incubate? What is the thesis around which you’re building this program?

T.M. Ravi: The Hive is a co-creation studio. It’s somewhat differentiated from accelerators in that what we are doing is working with entrepreneurs to co-create companies. Generally, we get involved at the very beginning, and we collaborate actively with entrepreneurs for the first 12 to 15 months. We’re joined in the hip with them to get their company off the ground and create momentum.

We help them with building the team and fine-tuning the business. Typically, we’re putting $1.5 to $2 million upfront. We also help them in go-to market and technology. From that point of view, it’s significantly different from an incubator or accelerator like Plug and Play.

Sramana Mitra: We don’t consider Plug and Play an accelerator or an incubator at all.

T.M. Ravi: They’re, in some sense, a real estate play.

Sramana Mitra: YCombinator is the real accelerator.

T.M. Ravi: In contrast, we work with four to five companies a year and tend to spend a significant amount of time with these companies and put more capital than these folks would typically do.

Sramana Mitra: The big differentiator is that you’re putting a million to two million into these companies as opposed to YCombinator, which is putting $120,000 per company and doing a lot more companies. There are some other accelerators that put in $15,000 to $20,000 and take 5% to 10% of equity, which I think is a terrible model.

T.M. Ravi: I would agree with you. The issue with the model is it tends to have a much better success rate for consumer companies because in a short period of time, consumer companies, in many cases, have an opportunity to show whether they’re going to make it or not.

Sramana Mitra: I don’t agree with that at all. I don’t think consumer companies can show anything at all in three to four months. I think this three to four months of incubation is a completely flawed model to begin with.

T.M. Ravi: We’re on the same side here. The real challenge is with enterprise B2B style companies.

Sramana Mitra: To get a meeting with a CIO is going to take you three months.

T.M. Ravi: Exactly. A large fraction of the class is walking dead. They’re not fundable by VCs. Many people think of us as a venture studio where we are a source of capital but we are also, operationally, very active. The other part of the question that you asked was what kind of companies do we incubate.

The Hive is very focused on a common theme, which is around AI and data. We have a point of view that the enterprise is going to disrupt different vertical markets and create a lot of opportunities and efficiencies. Akin to what we saw with the Internet about 15 years ago, we see this as a long game. Everything that The Hive funds and supports is an application or use case of data and machine learning.

We generally don’t invest in infrastructure. With software infrastructure, we have a point of view that there’s a lot of great infrastructure being developed in open source. Facebook and Google continue to do great work, which they put out in open source periodically. Microsoft, SAP, Teradata, of course, continue to innovate. Our focus is on applications and use cases of AI and data across IoT and online.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With T.M. Ravi of The Hive
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