Three Thirty Five


Photo by Major Shawn Fitzgerald, West Point’s Dept of “PANE,” Physics & Nuclear Engineering

Part of our approach at Grand Central Tech to fostering tech-enabled entrepreneurship is a clear recognition that the broader startup economy often feels like it’s shaped by a few players, “constrained to a narrow few of the well-connected,” as our co-founder Matt Harrigan puts it in another post. So as we strive to build a more inclusive and diverse tech culture, one that reflects the fabric of New York City, we tap sources of innovation that might be overlooked by other accelerators.

One of them is communities of veterans, who along with underrepresented minorities, and female founders constitute the majority of our first class of startup entrepreneurs. Beyond veteran-powered GCT startups such as VA Loan Captain, Nagare, and Augmate, we’re finding ways to help foster innovation and entrepreneurship among the next generation of our armed forces.

So we’re thrilled by the opportunity to play host to a strong example of this in action from a singular source, the United States Military Academy’s Department of “PANE” (Physics and Nuclear Engineering) at West Point. This semester, Major Shawn Fitzgerald challenged his students in his Advanced Physics II course to take on the challenge of creating infrastructure to support the nation’s growing electric vehicle fleet.

“Every cadet at West Point takes a year-long core physics curriculum that includes mechanics and electricity and magnetism. As part of this curriculum, cadets complete an interdisciplinary project,” says the major, who notes this type of project has never been done before at West Point. “This year, I wanted to challenge my advanced students to attack a real-world problem that has interdisciplinary aspects from a different angle.”

One of the end results of his teams tackling a go-to market plan? A chance this spring to pitch real VC’s, including several West Point alumni, at our offices for real-time critiques, including from GCT company startups.


Jourdan Urbach, founder of video app Ocho, dives into the cadet presentations, business plans

Ocho founder and CTO Jourdan Urbach prefaced in his feedback to the first set of cadet presenters, noting that thinking like startup founders is more than a classroom exercise: “Your future has even higher stakes than leadership at the startup level. You’re going to be the future leaders of our country: the generals, the governors, the CEOs. So your innovation is truly America’s innovation, and the earlier you get in touch with your entrepreneurial sides, the stronger our country will be in your hands.

We couldn’t agree more and look forward to sharing more from this spring’s cadet presentations and insights from Major Fitzgerald’s students, the next generation of leaders, in innovation and overall.

(And if you or or a vet startup founder you know is tackling a real-world problem through technology, taking inspiration from Uncle Sam’s recruitment strategy: “I Want YOU!”)

Applications for our 2015-2016 class are open through May 1! Apply Now!

When you start a company, or join a startup, you’re quite literally investing in yourself—your abilities, your vision, your conviction and that of your team. This is a profound truth that is reflective of some major shifts in the “what” and the “why” of career development and talent management.

The “What”

As a founder, your very first investors and stakeholders are the team you’ve assembled. A founder bears two key responsibilities here:

The first is that of having lured these individuals away from other opportunities (more to come on that in the next paragraph);

The second is the responsibility of creating a team with the domain expertise, technical talent, and hunger to relentlessly attack the challenges of your market. I’d also add that this includes creating a culture that continuously motivates your team to perform at the highest levels, and which in turn, attracts other great people.

Attracting a great team is of course important as it relates to executing against your vision, and building and selling product. It’s also, and I’d argue almost as importantly, a proxy to the world around you of your ability to communicate your roadmap, vision and market opportunity, precisely because other excellent people have bought into it with enough passion to join you.

As an employee, this dynamic is amplified. When you’re deciding to take on a role (or not), you’re asking yourself one big question: “Do I believe in this company, this team and this mission enough to compensate for the opportunity cost of doing anything else?” Your overall compensation is going to be some compensation of cash (probably not much), culture/fulfillment, and equity/options (where you’re capturing this “upside opportunity”—and literally investing in the ride).

Just yesterday, we spoke with an investor who quite succinctly framed this: “If a founder can’t attract a great team, that means that at the most granular level, they can’t attract a ‘first investor’”—why would I back them then?”

The “Why”

The increasing shift of workers to the entrepreneurial ecosystem is reflective of many things, not least of which is a generational shift around viewing one’s own career path.

Historically, the path was pretty clear: graduate from school, either go to graduate school or enter a “training program” (you still see this at banks, law firms, etc) with a class of people in the same “year” as you, and work your way through the ranks where you’re compensated for your loyalty and performance through salary, benefits/perks, maybe a bonus, and some kind of stock options that tie your long term success to that of the company’s, as well as some promise of stability (often backed by the balance sheet of a large company). If you are fulfilled by your job, that’s pretty nice “icing on the cake.” Your upside, for the most part, was capped, but so was your downside.


The point of the matrix above is to suggest that one’s fulfillment in a job operates on a spectrum that really does boil down to some existential questions about what drives you as an individual.

The downturn of 2007-2008 in many senses had the effect of “breaking” this implicit social contract for many. With something like 8.8 million jobs lost during that time, for many that illusion of stability was shattered. And it had the effect of refocusing many people’s efforts from upfront dollars and stability (the lower right hand quadrant) to fulfillment in their careers and upside opportunity (the upper left hand quadrant).

There are a million inputs that have driven an influx of great talent into the entrepreneurial ecosystem (including low interest rates and regulatory changes that have driven $$ into the asset class, lower costs for starting a company, greater support system, etc), as well as both good (the rise of a new generation of entrepreneurs, the sharing economy, etc) and bad (a generation of unemployed or underemployed temporary workers) outputs from this shift. These are also shifts that have historical context and precedent, and are often framed in the same insidious light as “McJobs” were in the 90s, but the shift nonetheless remains constant and places larger companies at particular risk of brain drain.

Give credit where it’s due: a number of the leading corporates—including our partners at Google, Microsoft, IBM, Intuit, L’Oreal, Pepsi and JP Morgan Chase are working with us to break this binary model and to provide new means of engagement and fulfillment for their employees precisely by exposing them to the best parts of the entrepreneurial ecosystem. These companies are trying to move their value propositions to current and would-be employees from the bottom right to the top left and, in so doing, align with the current major motivators of premier talent.

Our Take

Choosing to start, or work at a startup invariably injects an element of risk into your career, as quantified often times by lower up front pay, and lower visibility into the future. However, the upside is equally attractive—the opportunity to have a direct impact on your fortunes and to benefit directly from that. There’s no bigger, or better way, to bet on yourself and a team than that. And that’s precisely why we look to the strength of the team as one of the single biggest factors for inclusion at GCT.

Are you part of a great team? We want to hear from you. Applications close May 1.

Sometimes it can be difficult to capture the speed of how quickly things happen here at Grand Central Tech! Our Open House to recruit our next class of startups was a fantastic way to show off the velocity of how we work here—and more than 600 of you agreed with your RSVPs! We had a chance to meet some amazing founders and learn about some great companies. Get a sense of what GCT speed is like in this time lapse of what happens when several hundred NYC startup founders stop in to visit at once.

Applications are now open for our 2015-2016 class. APPLY BEFORE THE MAY 1st deadline!

Because Grand Central Tech takes no equity and charges no rent, people are always looking for a “gotcha!” That we ask GCT companies to commit to staying in GCT’s building (335 Madison Ave) for 4 years is what these cynics often latch onto, but they couldn’t be more wrong. Here’s why:

When you’re starting a company, almost everything is a big headache with some relatively high stakes: from fundraising to finding and building a great team (and culture), determining the sales/distribution and handling customers to legal, to payroll, and finding office space. Our goal at GCT is to eliminate as many of these headaches as possible, and to allow our teams to focus on those items that are most important to any startup: building product and selling it.

While we’ve been able to amass many resources to help our companies do just that, one major headache that we’ve been able to completely eliminate is the question and cost of space in the near and long term. Because of our unique relationship with our building, GCT has access to some unbelievable space for free (and all the other trappings you’d expect – internet, printers, lounge, event space, etc). This is a structural advantage that we’re able to leverage for GCT companies in a few key ways:

1.) Mindshare & Growth:

Put simply, there are plenty of real things to worry about when you’re running a high growth company. If things are going extremely well (in any sense), that likely translates to increased headcount. That in turn means the need for more space. We can keep going down this rabbit hole, but GCT affords its companies the opportunity to grow pretty much unencumbered to match its business needs. The largest company in our first class started as a team of six and is now at 20 people. That we’re able to accommodate growing and thriving teams is an area of pride for us.

2.) More productive dollar allocation:

Office rents aren’t cheap anywhere, let alone in Manhattan (or in SF, where it’s just as high). Every dollar that goes to rent is one that isn’t going to talent or marketing, and that’s just a suck on your balance sheet. GCT Companies get a full year of free, dedicated, premium space.


Those are dollars that can (and should) be reallocated to productive activities. That this happens at the single most critical time in a company’s lifecycle is what makes it so valuable.

What’s the net impact of GCT from a cost-saving and productive dollar reallocation perspective? Let’s say you’ve raised a $1 Million seed round. And let’s say you have a team of 8 (which is the average size of our companies at this time). This is your first institutional capital, so it’s time to put up or shut up.

If you take on a long-term lease in a private office, you’re paying about $65 per square foot, with 150 sq feet per person, which works out to about $80k per year. But you’re never going to find a space that fits that perfectly, and even if you did, you need to plan for growth, since it’s a long term lease — so the real number is 2x that, $160k, or 16% of the money you’ve raised. The other option is to join a coworking space. We analyzed 20 coworking spaces in NYC for the price of a dedicated, open desk and found that the average cost is $560 per month. At 8 people, that’s still $50k per year, not including any “extras” like services or event space. That’s still 5% of what you’ve raised, or another month’s runway. (Thanks to Nelson Schubart for these statistics. Follow him on Twitter here.)

Because GCT plans our classes in a way that allows our companies to expand without worry, we encourage them to take that “extra” money, and reinvest it in other, more productive activities, like headcount (or, if they’re scaling well, to extend runway).

We think the combination of these two benefits adds up to a profound innovation in the accelerator/coworking space market. The timesuck of determining future real estate needs in a definitionally uncertain context is tremendously wasteful and distracting. Doing away with it entirely, and to the benefit of a company’s bottom line such that they can reallocate those resources towards that other constant headache: finding/securing/maintaining top talent is of considerable value to our companies.

But what about the four-year thing?

One of the most valuable things that our companies get from their year at GCT (and I think anyone who went through a similar program will echo this) is the community of high achievers they’ve spent the last year working with. We’ve worked closely with our building to make sure we can preserve these relationships We built out a 40,000 square foot coworking facility precisely for this reason, but we also have access to great private offices elsewhere in the building. All of these efforts, along with the commitment we ask of our companies, are made with the singular goal of creating a single point of density of the best tech companies in NY.

But let us be clear on this commitment — in all cases, we endeavor to work with our companies to accommodate their unique needs after the conclusion of the program. If there’s a circumstance that means they can’t stick around, whether they can’t afford it, they get free space from someone else, need to move because of illness, family or customers — we work with them to make sure that we’re a resource and not a burden. Our top, and only priority, is to equip our community with all the tools they need to succeed, and we will never stand in the way of the growth and success of our companies.

Grand Central Tech is now accepting applications for it’s 2015-2016 class. Apply now.

“But what’s in it for you guys?”

This is the question Charlie and I inevitably face in the course of any conversation where we’re describing Grand Central Tech’s model. It’s a fair enough question in its own right, and I’ll answer it in a second. But the routine with which we get asked this is telling in its own right because it makes clear that the Tech/Startup sector has, by and large, been programmed to think the model for venture success goes something like this:


It’s as if it’s now just a matter of course that some percentage of a startup’s equity — very often secured at a brutal valuation and/or in exchange for what are, by definition, the “unguaranteeable” benefits of participating in an accelerator program — is a required ticket for entry into the startup “big leagues”.

Not only does this not have to be the case, but there is meaningful upside to doing away with this “convention”. Indeed, by not taking any equity, GCT is able to attract a caliber of entrepreneur and company that doesn’t buy this standard “initial value exchange”. Our application window for the 2015-2016 class has been open for only a few weeks, and already we are seeing the same phenomenon we saw last year: we are attracting experienced founders who have already built and sold successful businesses; first-time founders with formidable pedigrees and deep industry knowledge; companies with the dual conviction that they are:

1.) Building something big and important, and
2.) Don’t need to take a bad deal to achieve growth.

So back to the question at hand: What’s in it for us? By dropping the equity requirement while still providing an overabundance of top-flight resources to help our companies succeed, we’re able to attract the absolute best startups in NYC. By providing space in our building for them to grow into, we’re providing clarity to the typically stressful question of real estate needs as they relate to variable and unknowable company growth rates. The net result? We are creating a single point of density of premier startups that compounds annually to the benefit of our companies, and, in turn, to the benefit of Grand Central Tech.

Another way of putting our model is as follows: Grand Central Tech is a platform business. Like any platform business, the opportunity is to take a cut of each transaction on the platform while also generating upside from the value of the entire platform (like a bank servicing individual accounts and investing the total value of all accounts). We’re forgoing using the former lever, in the hopes that the value of the entire platform will be made that much richer as a result, and are focusing our efforts there. I guess you could say we’re doing away with startup ATM fees?

More broadly speaking though, the question of how startups gain access to the resources they need doesn’t have to start with who gets what. Indeed another way to answer the question: “What’s in it for us?” could be, “The satisfaction of supporting the growth of the NYC startup/tech sector the right way, without having first calculated how we might be able to extract the maximum possible benefit for ourselves, personally” — but we don’t want to step on any toes…

Applications are now open for our 2015-2016 class. We would encourage interested companies to apply ASAP. We are also hosting an open house on April 1 from 6-8pm should you want to come by and see the space, or ask any questions. Please RSVP here.

Here at GCT, we spend a lot of time thinking about the intersection of education and technology – particularly as it relates to two key areas:

1.) As a robust and increasingly attractive market
2.) Through the lens of our educational programs, partnerships and outreach

Two of the companies in GCT’s first class aim squarely at educating students with real-life skills in unique and remarkable ways:

Hopscotch is a platform that kids use to code their own games and art in a fun, welcoming and collaborative environment. The thousands of projects that are published every week on the platform, and by an even split, across gender, highlight the appetite for, and opportunity to, teach students to love to code by placing it within the context of a fun and immersive experience.

NextGenVest arms students with practical skills they need to be productive leaders in the modern world. They ranges from how to manage personal finance (including student loans!) and how to prep your first resume, to how to interview like a pro. NGV does this on the micro (school) and macro (collaborative) level – online and in person – allowing the students themselves to learn by becoming the teachers of the content. We’re proud to host 300 of those students here at GCT in April.

What makes them both special is reflected in their growth and engagement: the ability to contextualize learning in a way that more fully engages the individual and enriches the educational experience. They also highlight how education, and perhaps more importantly, access to education is being transformed by technology.

This past weekend saw a flurry of great discussion around higher education, including “How to survive the college admissions madness” from Frank Bruni, while Chris Dixon and Paul Graham also had a great Twitter back and forth on a similar issue At the heart of both is the evaluation of the pricetag (and the value) of higher education.

While I’ll happily dust off my 12th-grade philosophy chops to note that in the Platonic ideal, education is a virtue – something that is a good in and of itself, and therefore requires no further justification – the fact that costs of education have outpaced price appreciation across nearly any other asset class across the long term and short term merits a deeper examination of the true “value creation engine” of educational institutions.

The following table provides a quick comparison across a few categories that represents the “value” drivers of education and six tiers of post-secondary educational institutions :

Elite Colleges & Universities “Middle Tier/Regional” Colleges and Universities Public Universities 2 year Community Colleges Trade Schools For Profit Universities
Job Training/Employability High Mid Mid Low High Low
Network High Mid Mid Low Low Low
Credential High Mid Mid Low Mid Low
“Experience” High High Mid Low Low Low
Cost High High Low Low Low High

This tells us a few things:

● If you think that the core function of education is job training or employability, then the best ROI is at the “elite university and college,” “Public University” or “trade school” level
● The market is telling us that there’s a huge premium placed on “immersive experience,” as highlighted by the sheer number and cost of “middle tier”/”regional” private universities
● “For Profit Universities” of the University of Phoenix and DeVry ilk exist largely to prey on those who don’t know any better, and/or to prey on lax government loan programs.

At least two of these tiers deserve disruption: The market cap alone of the two largest for profit universities (APOL and DVY) is above $5 Billion; with average cost (tuition + fees) of $42k at private four- year universities, and an average enrollment of 1,920 students, that’s another $80.6 MM in revenue annually per school. Thank the for-profits for this much… they proved you didn’t have to be a 50+ year old institution to generate interest and yield admissions. But their credentials are dubious at best, leaving consumers still looking for that elusive value.

The massive debt burden awaiting most college graduates and (stifling economic growth) makes all that “immersive experience” that mid-tier/regional universities cling to as justification not enough to stack up. They don’t have the power of network and top flight instructors to justify the expense of an immersive experience. Given the arms race all these colleges underwent for facilities (justified in an era when “immersive experience” was more compelling, jobs more readily available, and alternatives no so well understood/pervasive), I’m not sure they can disrupt themselves. They may just have to go the way of the NCAA’s credibility and vanish.

The downside to this scenario would be the increasing disappearance of outlets for public civic discourse. Forcing education into night hours/weekends and disaggregated formats limits the vibrancy of the public forum. But new communities are emerging to take up this mantle. Accelerators and coworking spaces, coupled with the likes of GA, Fullstack, etc. are the new seventh tier of education. They are supplanting the traditional benefits of “credentials/reputation” with the upside of curriculum taught by experts in a way that responds to market forces and students that are dynamic in their own right. They are yielding value as evidenced by their expansion, enrollment rates, and job placement stats. They are creating and nurturing new, and ultimately more valuable networks. Indeed, the marketability of even elite credentials is facing erosion from the likes of Github.

GCT’s own selection process (and hiring) reflects these values. In fact, the only time we ever even look at someone’s educational pedigree is if there’s literally nothing else for us to look to as a proxy for performance. And our internship program immerses recent high school grads from 8 area schools with the very best startups in New York – providing them with real life hands on experience on an even playing field regardless of background. That 85% of them have been offered ongoing work with the companies they interned with speaks more to their abilities than ours.

Hopscotch and NextGenVest are just two examples of GCT companies that are making tech better and that reflect what we look for in companies: great teams building robust underlying technology that attacks lucrative and important markets whose needs aren’t served by existing solutions. If you’re working on something big and important, we want to hear from you. Apply now!