By Young Soo YangWhile California’s Silicon Valley continues to be the mecca for emerging technology companies, New York City’s Silicon Alley has firmly established itself over the last several years as a magnet for dot com start-ups.
The state of New Jersey is now attempting to take advantage of its proximity to New York City and the venture-investment dollars flowing into the region through what is called a tech accelerator. It’s a program that supports and encourages emerging companies by pairing entrepreneurs with mentors, assisting them with product development and funding. The model has proven to be successful. File hosting service Dropbox and travel site Airbnb both came out of an accelerator.
The idea of forming an accelerator in New Jersey was conceived by Mario Casabona, founder and general partner of TechLaunch. Seeking help from the state, Casabona submitted a competitive bid to the New Jersey Economic Development Authority (EDA). The EDA awarded TechLaunch by committing funds of $150,000 a year for a three-year period with a condition to match 2 to 1 through private investment.
Another key partner in the project is Montclair State University (MSU). Casabona and TechLaunch Executive Director Travis Kahn selected MSU as the venue for the accelerator, attracted by the university’s infrastructure, resources and, not least of all, its proximity to Manhattan. Kahn says easy access to mentors and more importantly, investors, was key.
“The unfortunate reality is that some of these guys just aren’t willing to go very far to see the next deal,” said Kahn. “They see a lot of these types of opportunities each and every day, so you got to make it enticing and easy enough for them to come and be here.”
MSU’s ability to accommodate TechLaunch in a matter of a few months was also critical. Kahn says the school’s enthusiasm to be involved was a determining factor.
“They were excited by the prospect of our companies as they’re in development, really engaging with the Montclair State community and kind of helping to put some of the students here in touch with some of the exciting things that are happening in their area.”
TechLaunch received more than 90 online applications. When the field was narrowed to 25 semifinalists, applicants had to submit a video of recorded responses to interview questions and essentially pitch their products. According to Kahn, the challenge during the selection process was examining the pitched product as it existed and what it could be with the help of an accelerator.
Having gotten all the pieces together, New Jersey’s first accelerator premiered last month with the selection of 10 companies which will participate in a three-month accelerator called LaunchPad. More than half of the selected companies are New Jersey-based. The others are from New York.
The 12-week LaunchPad promises to be intense with the expectation that founders as well as the core team for each of the 10 companies will be committed full time. In addition to the mentorship and use of an office space provided by MSU, each company is given $20,000 in seed capital.
“We are in essence the first investor for many of these guys and in return for providing the office space and the program that we put together for them, which includes curriculum but also meetings with the mentors, we take a 10 percent equity stake in those companies,” said Kahn.
The program will conclude Nov. 1 with a demo day in which each company gets 10 minutes to present itself and its product to potential investors. Calling the day a coming out party for the companies, Kahn hopes to fill the room with investors.
“So that’s part of our job over the next 12 weeks is helping them really refine that story and make sure that their product is being built thoughtfully in order to address the concerns and the questions of the investment community at large.”
Kahn and his team will have their work cut out for them in getting the start-ups ready for the big day. They plan to go over product development strategy, money management, intellectual property issues, sales and marketing.
“So all of these are relevant topics that we’re focusing on week after week while these guys are in [their] spare time as we say building their company from the ground up.”
Techlaunch is committed to repeating the program next year but Kahn says they don’t want to plan too far ahead.
“You want to make sure that your eyes don’t get bigger than your stomach,” he said. “Right now, we’re just focused on making sure that this program goes smoothly and results in strong companies coming out the back end [with] success stories we can build upon for next year.”