Jeff McDermott, founder of The Lights on Lab, is many things but slow-moving is not one of them. He is an entrepreneur with drive and vision who connects fragmented pieces of the startup ecosystem to create new opportunities at a rapid pace. His sharp mind and broad skillset help him connect with industry players and his candid yet friendly style proves that you can be both expert and human at the same time.
From resource allocation to team development and exit- Jeff was hands-on every step of the way with his Startup Studio, The Lights On Lab- which was sold earlier this year. I was thrilled to sit down with Jeff and chat about how he built, ran, and exited his The Lights on Lab.
*General overview of conversation/ transcript but quotes are not verbatim
DL: Lights on Lab is not an incubator, it’s not an accelerator or a coaching program- can you explain what it is and highlight the goals you had for the organization?
JM: Lights on Lab began as an incubator because I wanted to build companies by partnering with entrepreneurs. But, most of them didn’t know what they were doing and didn’t want to listen- it’s hard to manage people in that capacity, especially when they’re remote. So, we scrapped the incubator model in late 2014 and we restructured it as a private equity firm. So, an entrepreneur would come to Lights on Lab with an idea (something we can validate) and it’s our job to help build the internal teams, find out how much money we need to raise, raise the capital, and then take the venture to market. And that’s how the Studio model came to be.
DL: Great. Correct me if I’m wrong but let me see if I can sum it up: you want entrepreneurs to come to you with an idea, and then you’ll help them build a team, test the idea, and validate it in the market. But, before the venture even launches fully, you want to have a buyer or someone in line for acquisition of the venture.
JM: Yes but we don’t help them (the entrepreneurs) we just do it.
DL: Oh- so an entrepreneur just comes to you with an idea and you + your team will build the venture for them?
JM: Yes and, depending on their background and what they can provide we bring them in to help build the company.
DL: And how do the entrepreneurs get paid so to speak? Is it through the equity they hold? Meaning when you’re able to sell the venture to a buyer or find a company that wants to acquire the startup they get a big portion of the sale price because they hold the majority equity in the venture?
JM: Yes and no. That is the case sometimes, but other times we sell the venture back to the founders because really they needed someone to build the startup and put together an operational plan + provide them with direction for exit. We call it corporate Studio building- corporations will partner with Studios and say “look we have all these internal ideas but we don’t have the resources or manpower to get them off the ground. That corporate Studio model was about 80% of what we did.
*Side note- Jeff is not saying he would take an idea from a founder, build their startup, and then sell the venture back to him or her. He’s saying big corporations would approach Lights on Lab with an idea they wanted to build but didn’t know how to or didn’t have the passion to. Jeff and his team would build the venture and then sell it to the corporation. This is somewhat standard in the corporate Studio partnership model.
DL: So, tell me a little more about the people you had on your Studio team internally. Were they tech people, designers, entrepreneurs in residence…?
JM: No, we didn’t have any technical people or any designers.
DL: So, how did you build the products?
JM: We focused on building the companies, not the products. So, we helped with the business planning, we fund the market validation tests, we assess the competitive landscape, figure out viable revenue streams, and design a plan for scale- we were always looking for an 85% market approval rate.
DL: Interesting. It sounds like in-depth and high-level market research. What was your differentiation?
JM: We would start with a simple survey, maybe put a landing page up, and see how many people are interested in the idea before it’s built. Our core activity was validation so we were really good at either proving or disproving level of demand right upfront before a product was ever built.
DL: And that’s what Startup Studios need to be really good at. They spend so much time in the beginning stages of company building so they need to be fantastic at figuring out what measurements prove success and develop a process for quickly eliminating ideas with no market demand. So, tell me a bit about your specific role within Lights on Lab.
JM: In typical entrepreneur style, I started out doing everything but I like copywriting and being involved in that upfront consumer engagement stage. I would get in with the survey questions and idea validation and helping identify demand. I also brought in resources like strategic partnerships and then if it comes down to raising capital, organizing and lining up that.
DL: What kinds of businesses did you create within the Studio?
JM: We stayed away from AI and those deep tech businesses that you need millions of dollars to create. We really liked service-based businesses.
DL: And why did you ultimately decide to sell Lights on Lab?
JM: Most of the portfolio companies that we developed internally were all catered toward entrepreneurship. So we had a lead gen business, we had a mentorship matching venture, we had an incubator business and an accelerator business. Over the course of it all, we got connected with a company that wanted an entire entrepreneur ecosystem and we had one.
DL: So it made sense to sell it all as one package.
JM: Yeah, we were selling it as a “business in a box” and hoping the end result was a retail location- like a coworking space- using our resources and catering specifically for entrepreneurs. Our vision for it was to develop an entrepreneurship hub. Everyone was doing this kind of thing online but with the online stuff, there’s little to no accountability.
DL: I see and I agree with you there. So, now that you’ve sold Lights on Lab- what’s next for you?
JM: Well that was only a few weeks ago so I’m looking around for what to do next. I don’t think I’ll launch a new startup- even though I have a lot of ideas- but I would kind of like to go out and help other people launch and scale their own Startup Studios. I get calls all of the time from founders who want to start Studios but don’t know how. I would love to help with that.