Early-stage venture accelerators nourish a network
As 500 Startups reflects on a strong launch and works to further nourish a network, or ecosystem, of resources available to its entrepreneurs, other local early-stage venture fund and seed accelerators as well as incubators are looking to do the same.
500 Startups is calling its first year in Miami a success.
“We feel it’s just the beginning,” said Ana Paula González, head of Miami operations for 500 Startups. “It takes a while to see true impacts and results. We are happy with the first year.”
The organization is searching for high-impact startups focused on technology to join the next round of programming in the fall.
Companies turn to 500 Startups when they have a product with demand in the market, Ms. González said. “They want to understand: ‘How can I build a better sales and marketing process around this?’‘How can I build my team to scale this?’‘How can I fundraise this?’‘How can I test new avenues of growth for this?’ We have a structured program to help.”
Endeavor is a non-profit in the same business. Claudia Durán, Endeavor incoming managing director, writes by email that the organization supports entrepreneurs at scale globally, picking high-impact entrepreneurs on a rolling basis and providing a network of targeted services to support the company’s scale, including access to talent, markets, capital and mentors.
The term incubator loosely applies to LAB Ventures, a venture studio with a team of five people who brainstorm startups, build a prototype, and find a full-time entrepreneur who will become the co-founder and chief executive officer. They commit to one or two new concepts per year. LAB Ventures supports the startup until it can stand on its own and raise outside capital.
The organization focuses on software that can support realtors and real estate construction.
“We think it is an interesting sector where South Florida has an important role to play,” said the organization’s chief executive officer, Tigre Wenrich.
But accelerators and incubators aren’t limited to technology. StartUP FIU incubates or cares for entrepreneurs in different niches, including food.
“I feel often times we have to bake equity into the development of a program,” said co-founder Emily Gresham. “When I started looking around at incubator programs three or four years ago there were barriers to entry. Either you had to have $250,000 or a million-dollar revenue before you got in. Many times, companies die before they get to $50,000. The question I am asking is, how are we being inclusive, how can we meet people where they are in their stage of development versus getting them where we think they should be?”
Entrepreneurs take about two to seven years to complete the program until they can cover their expenses. The program expects Sherronda Daye of Sweet Jalane’s to be the first graduate after completing two years. Ms. Daye is $9,000 away from moving into her own commercial kitchen and storefront. Products like that of Ms. Daye and others are on the shelves of Whole Foods in Pembroke Pines and West Palm Beach.
Business models for accelerators and incubators vary as much as their niches. Take LAB Ventures as an example. The company requires ongoing funding in order to pour money into its concepts.
“The difference is, a typical venture fund will write a check to invest in what somebody else is doing,” Mr. Wenrich said. “At the end of the day, we are investing in companies that are going to take a long time before they are profitable. The return is when we are able to sell them.”
A launch for an early-stage venture can last on average 10 years. Mr. Wenrich said, “These companies take many years before they give you a return.”
Non-profit models, such as Endeavor, rely on the support of partners, board members, and entrepreneurs.
StartUP FIU covers 75% to 90% of costs through strategic partnerships and its paid membership program. The rest is subsidized by the university.
Ms. González divides the business models in the field into two categories: “There is one that is tied to an investment fund. The investment fund will invest in the accelerator that goes through the program. The investment fund manages investment fees to support the operation program. Typically, if you invest in that startup, you can also invest in that fee. That’s what we do in other geographies.”
The second model, she says, is the non-profit: “You are supported by sponsorships, grants, and service fees to provide the services. There are accelerators that will not give investment and will charge the startup a fee to participate in the program or they will take a small piece of equity.”
University programs are included in the non-profit model, she says.
The motivation for outside investors, such as Citi, is simple.
“We benefit when the local economy thrives,” said Inés Hernandez, South Florida community market manager for community development at Citi, a partner of StartUp FIU Food, “strategic investments we make in the market that try to build prosperity in a growing thriving local economy. [But] we don’t have any stake in the local businesses themselves.”
All ventures are looking to foster new entrepreneurs, ideas, and expand their network. 500 Startups, for one, is working to establish a more comprehensive ecosystem, Ms. González said.
“We realized that for a start up to succeed it’s not enough to give them an initial check and mentorship,” she said. “There has to be other pieces of infrastructure available to support the continued growth. They need access to continued capital as they continue to scale, they need access to markets, they need access to talent. You have to help develop the other pieces in the ecosystem so the startup has these resources to grow.”