9Mile Labs ends B2B accelerator program but will continue investing in early-stage startups

After three-and-a-half years of running an accelerator that graduated six cohorts with nearly 60 companies, 9Mile Labs is putting an end its 3-month startup program.

But the Seattle-based organization will continue making investments — just not via the traditional accelerator model.

9Mile Labs has decided to stop running its own cohorts. Instead, it will invest money from its funds into startups that are participating in other top accelerators around the country.

Sanjay Puri, who co-founded 9Mile Labs with Kevin Croy and Sandy Sharma in 2012, told GeekWire that the shift will help the firm scale faster and use a lower cost structure.

Puri explained that 9Mile Labs considered increasing the number of companies it accepted into its accelerator and the amount of money it invested. But the founders saw more efficient growth opportunities with this new model that lets 9Mile Labs invest in a larger pool of geographically diverse startups, while also removing the need to maintain a physical space, employ staff, or put on Demo Day events.

It also offers more flexibility, as the deal flow window is now open throughout the year, versus only for specific cohorts.

The general idea is to take advantage of the experience gained and connections made over the past few years running its own accelerator, and use that to support this new model. 9Mile Labs is now somewhat of an angel investment group with a focus on B2B startups in accelerators.

“We love what we’ve done over the past three years,” Puri said. “But we always talk about, how do we continue to (refine) the accelerator model? Five years from now, it won’t be what it is today. It will continue to evolve. We want to stay ahead of the curve.”

9Mile Labs, which had its most recent Demo Day last month, is already in conversations with several accelerators around the U.S. It will still target pre-seed stage B2B and enterprise startups, much like it did for its own accelerator.

Previously, 9Mile Labs would invest anywhere from $35,000 to $105,000 in exchange for 7 to 10 percent of a startup’s equity, while providing workspace, connections, and more.

Now the firm will invest between $50,000 to $100,000 in a startup, with the valuation dependent on specific accelerators and terms. Croy noted that 9Mile Labs will be taking smaller overall stakes in individual companies, “but we are mitigating some of the risk,” he added.

Puri said that the new model will help fill a funding gap for early stage startups in the growing number of accelerators.

“There is an explosion of accelerators across the country,” he said. “It’s a real investment class. We believe there is a big gap for these companies, from when they enter the accelerator and when they raise their next round.”

From their own experience, and from speaking to managing directors at other accelerators, Croy and Puri say having an established external investor visit portfolio companies at an accelerator and make seed investments in an efficient manner is a win-win for all stakeholders.

“We understand and appreciate how valuable an entrepreneur’s time is,” Croy said. “We meet with them for an hour and get back to them within three business days with a yes or no.”

With the new model, Puri said that 9Mile Labs is able to “cherry pick from a pre-filtered set” of startups, given that the accelerators have done their due diligence. 9Mile Labs will also continue to do its own vetting, both of accelerators and startups.

“This model allows us to leverage those relationships we’ve already built with accelerators,” Puri added.

9Mile plans to fuel new investments as part of the new model from its existing fund, and has communicated the change to its backers. The firm will keep its name and some office space in Seattle’s Galvanize building.