Accelerators, Angel Boon or Bane? Meet Betaspring from Providence.

Incubators have been around since the wooly mammoth left without significantly impacting the angel investing environment. Then along came accelerators, including Techstars and Y-Combinator, eclipsing incubators by correctly providing the two things entrepreneurs most need, in order of importance,

         1   Money, and
         2   Coaching.

  

These are exactly the services that angels have traditionally provided, but the emphasis has changed. Now Angels are being asked for:

•    More money at a higher valuation,
•    Less advice or at least offered less control.

Some effects of this change are that it is now easier to find investments, so time spent seeking out deals and personal contact are less significant; valuations have increased, since more angels and VCs have simultaneous access to the same deals.

An advantage of the accelerator model is that, like an Angel Group, it can be readily adapted to local needs and conditions.  One example would be Betaspring and how it has adapted itself to the need for economic development in Rhode Island. 

Betaspring is a fund that runs an accelerator in Providence.  Investors in the fund include the Cherrystone Angel Group, individual angels, VCs, and local government. The current fund is capped at $4 million.

  

Talking yesterday with Managing Partner Owen Johnson and Startup Operations Manager Jenn Schwall, we learned that Betaspring runs on a model very similar to Techstars, where companies chosen for the program will receive between $12,000 and $20,000 intended to support  them through the 12 week residential program, in return for common stock. Upon completion, companies that choose to remain in Providence receive a $50,000 loan from the city.  “Companies come from all over, and are free to leave, but in our spring session this year 15 out of 16 opted to stay right here in Providence,” says Johnson.  Why do they stay?  While acknowledging that RI taxes are high, Johnson feels that new companies are not highly impacted by taxes, but the real reason they stay is “because the quality of life is awesome.”

Many of the companies applying to Betaspring these days lie at the intersection of mobile and the internet, particularly in mobile interfaces to the internet. Click here to see the companies that will be presenting at Betaspring's Fall 2012 First Look Day. If you are an Angel, Jenn Schwall extends the following invitation: "If you would like to attend First Look on November 6th at 10AM, please RSVP directly to me at jschwall@betaspring.com ."

We note from the Betaspring web site that several well known Angels from Boston, including Bill Warner , David Balter, and  John Landry are mentors in the program.  Johnson tells us that members from Launchpad, Common Angels and Angel Investment Forum have attended the First Look Day in the past. And we learned from Executive Director Peter Dorsey that the Cherrystone Angel Group has grown to 68 members, with 60% attendance at their meetings.

Angels came away with two big awards at the MITX Innovation Awards dinner last week; honored were the Common Angels and Bill Warner.

The CommonAngels was named Investor of the Year based on having the most portfolio companies making it to the finalist stage. “This award is a great honor,” says Common Angels Managing Director Chris Sheehan. “As investors, it’s a privilege to have invested in five MITX finalists – Apperian, Crashlytics, Insight Squared, Practically Green, and Yieldbot.  All these teams are building really innovative companies here in Boston.”

Entrepreneur and angel investor Bill Warner was inaugurated into the MITX Innovation Hall of Fame. He is widely known in our angel community for creating the MassTLC Innovation unConference and for his role in bringing TechStars to Boston.

The MITX Innovation Awards are described as “a competition that celebrates the innovations powering the future of marketing and revolutionizing the way we work and play.”

 

The 2012 MITX Innovation Awards Winners Circle:
Best Bootstrapped Start-Up Temperature@lert
Best Business Operations Simplifier aPriori Inc.
Best Commerce Transformer/Game Changer Catalina Marketing
Best Consumer Tech that Makes Life Easier True Fit
Best Contribution to Innovation by a University/College Northeastern Entrepreneurs Club & IDEA
Best Customer Engagement Driver WordStream, Inc.
Best “Doing Good” Innovation Temperature@lert
Best Mobile App Springpad
Best Mobile Solution SCVNGR, Inc
Best Use of Game Mechanics Practically Green
Best User Experience Brass Monkey
Best Wellness Innovation Ginger.io
Most Insightful: Analytics/ Business Intelligence True Fit
Best of Show SavingStar
PwC Promise Award Crashlytics
PwC Promise Award Evertrue
Investor of the Year CommonAngels

TechStars Demo Day is certainly the talk of the town today, particularly among start-up investors and entrepreneurs.  Thirteen companies presented to an audience of 500 investors, half Angel, half VC, yesterday. Premier tech journalist Scott Kirsner estimates that the speakers had lined up commitments of $5.5 million before the meeting even started.   I doubt our venerable City on a Hill has ever seen the likes of this event before; there will be another one coming up at the end of the year.

 If you would like to know more, click here to read Kirsner’s scorecard of the companies: what they do, who's involved, and how much money they've raised or are seeking.  He also presented his own innovation economy awards.   His Most Compelling Presentation award went to Chris Howard of Libboo.  Click here to see the others.

TechStars is what a called an accelerator in that it provides workspace, advice, and that most scarce of resources, cold hard cash, to fledgling entrepreneurs.   Companies accepted into the program receive $18,000 in seed funding in return for six percent of their stock. They are also offered an additional $100,000 in convertible debt. Participants get free office space for the duration of the three-month program, mentoring, and the opportunity to present to a group of investors at its conclusion.

TechStars is a relatively new concept. It was founded in Boulder by David Cohen, Brad Feld, David Brown, and Jared Polis in 2006. In 2007, I invited CEO David Cohen to speak at our regional angels’ syndication meeting here in Portsmouth, NH.  In 2009, Bill Warner, impressed with the program’s success in Boulder, pushed Cohen and Feld to clone the program here in Boston.  About six months ago Katie Rae became the Managing Director here. The results are both obvious and gratifying. Congratulations to all involved.

Some brief thoughts.  If you are an entrepreneur, work even harder. This program is exceedingly competitive, only one per cent of the applicants for this session were accepted. And buy a Charlie Card, you'll be going to lots of seminars and meetings.

If you are an angel investor, keep searching. Without good connections, you’ll most likely be shut out of these particular financings.  But since these companies represent only one per cent of those applying, search for pearls among  the other ninety-nine per cent. Look particularly at local companies that might not fit the TechStars profile.