“The Role of Accelerators and Incubators” at Venture Association New Jersey Meeting
Tuesday, July 3, 2012 • 9:40pm
The regular monthly meeting of the Venture Association New Jersey (www.vanj.com) was held on Tuesday, June 19, at the Hanover Marriott, Whippany, NJ. The featured speaker was Heather Gilchrist, Managing Director, RAK Tech Fund (www.raktechfund.com), a seed fund based in SoHo with a preference for lean startups and companies that participate in high quality accelerator programs. Her topic was How Accelerators and Incubators Have Become New Work Models for Startups.
“The underlying problem is that large institutional investors have simply become too big to invest small amounts of money,” Gilchrist told the audience. “They also can’t commit enough manpower to deal with a large number of small startups. As a result, accelerators and incubators have become the new work model for startups.”
The difference between an incubator and an accelerator, according to Gilchrist, is that incubators tend to be nonprofit, usually funded by a state or a foundation, and are primarily focused on building relationships. Accelerators, on the other hand, tend to be for-profit enterprises that emphasize deadlines, short term results and fast return on investment, often reducing time to exit from 4-5 years to 2-3 years.
“Another arrangement gaining popularity among startups is co-working shared spaces in which different companies share common office and/or laboratory space,” said Gilchrist. “Advantages of such arrangements include not only low overhead but also access to a diversity of talent.”
A recently formed organization that combines the advantages of accelerators with co-working shared spaces is TechLaunch (www.techlaunch.com), which was created to turn innovative ideas into successful enterprises through an intense 12-week program called LaunchPad. “Beginning in August of 2012, in return for a 10 percent equity stake, ten to twelve startup companies will each receive $18,000 to $20,000 of seed capital, training and support to turn ideas into reality,” said Mario Casabona, Founder and General Partner, TechLaunch, LLC.
“The training and support includes one-on-one mentoring from successful entrepreneurs and access to business and engineering experts, university professors and interns,” Casabona noted. “Work space, conference rooms and even living space (optional) are provided at Montclair State University. Support also includes legal and accounting guidance, insider-access trips to Fortune 100 corporations and successful startups, and frequent exposure to leading Seed Investors, Angel Investors and Venture Capitalists during and after the program.”
Although both the East and West Coasts are centers of entrepreneurial activity, there are differences between the two regions, according to Gilchrist. “West Coast startups are more prone to offer their executives stock options, while East Coast startups tend to emphasize salary,” she said. “Also, West Coast investors tend to be people who were successful entrepreneurs and now have funds to invest, while East Coast investors are more likely to be members of the investment banking and financial services communities.”
Gilchrist predicts that accelerators and incubators will play increasingly important roles in the future. “Several universities, traditionally seen as sources of new ideas, are not starting incubator programs,” she noted. “In the future, we will also see more vertically specialized incubators focusing on specific related technologies.”
Next Meeting: The JOBS Act & Crowdfunding, July 17
The next regularly scheduled VANJ meeting will be held on Tuesday, July 17, and will feature a panel discussion on the topic of Democratizing Capital Formation: The JOBS Act & Crowdfunding. Moderated by Frank J. Graziano, Managing Partner, Monmouth Venture Partners LLC (www.fjgraziano.com), panel members will include Ryan Feit, CEO and Co-Founder, SeedInvest (www.flyingkitemedia.com), Vincent R. Molinari, CEO and Founder, GATE Technologies (www.gatetechnologies.com), Stacey Rasgado, VP-Corporate Development, SecondMarket (www.secondmarket.com) and David Sorin, Managing Partner, SorinRand LLP (www.sorinrand.com). The panel will explore the details of the recently enacted JOBS (Jumpstart Our Business Startups) Act, its implications for capital formation and the opportunities it creates for entrepreneurs and investors.
Advance reservations can be made by calling Clara Stricchiola at (973) 631-5680, faxing (973) 984-9634 or e-mailing firstname.lastname@example.org and mailing a check ($35 for members, $55 for non-members) to VANJ, 26 Main Street, Chatham, NJ 07928-2402. Registration at the door is $75 after 12:00 Noon on Monday, July 16.