I ran across this post about Launch Box Digital at the blog of Sramana Mitra, a Silicon Valley entrepreneur and strategy consultant who founded 1M/1M.
Written by guest authors Irina Patterson and Candice Arnold
I am talking to Chris Heivly, executive director of LaunchBox Digital, an accelerator program for entrepreneurs based in Durham, North Carolina. The program structure and workings are similar to Y Combinator and TechStars.
Irina: Hi, Chris. Let’s start with a bit of history.
Chris: LaunchBox Digital started in 2008 in Washington, D.C. We ran an accelerator session in the summer of 2008 and summer in 2009 in Washington, D.C. Last year, we decided to move that to Durham, North Carolina, and ran an accelerator session in the fall of 2010.
We have a full-year physical location now in a really cool restored tobacco warehouse. The address is 334 Blackwell St. in Durham, North Carolina. It’s called the American Tobacco campus. There are about 35 software companies as well as venture capitalists and venture banks. It’s a nice, tight little ecosystem of entrepreneurs, mostly software-oriented entrepreneurs as well as some other businesses.
Irina: Do you still have accelerator sessions?
Chris: We do. It only runs three months of the year. We’ve taken space all year round, and we’re augmenting the three-month accelerator with some mini programs that can also offer value to entrepreneurs in the area. This is the first year we’ve had full year space, where someone like me is committing time all year round. We’re going to do more than the three-month accelerators.
Irina: What kind of organization is LaunchBox Digital?
Chris: It’s definitely a for-profit. It’s set up like a venture fund. We’ve secured funding from a bunch of limited partners around the area. We then invest in up to 10 companies a year, in our accelerator session. We take a piece of equity for that – 6%. It’s set up like a venture fund.
There’s a group of us at LaunchBox Digital that [will] manage that fund over the next four years. We hope that some of those companies provide a nice exit, which provides a return back for our investors, like a standard venture fund.
Irina: Do you invest in all of the companies you incubate?
Chris: Yes. The way the program works – by the way, this is very similar to Y Combinator and Tech Stars. If you’re familiar with those, it’s a similar model.
We have an application process. We accept up to 10 companies. If you’re accepted and you come in to the program, we provide an investment of $20,000 per company. For that, we take a 6% common equity interest in you. That’s the investment part.
Then we offer the program, which is all about mentorship and guidance. That runs for three months. We provide space, $20,000, advisory, and mentorship and for that, we take 6%.
Irina: If entrepreneurs are accepted and they have to come to North Carolina, they pay their own travel expenses, right?
Chris: That’s correct. They have to be here for the three months of the program. We built some arrangements outside of Launch Box with some of our partners to help facilitate their finding short-term leases for three or four months. We try to make that as easy as possible for them.
Irina: Do you have an industry preference?
Chris: Sure. At the highest level, they’re all software . . . there’s got to be a fairly large software component. We’re not doing pharma or life sciences or medical devices or dry cleaners or restaurants. These are all software or Web-based companies. To give you an example, we had seven companies that we went through in our first session here in Durham. There were two healthcare IT companies. There was a social media tool. There was a Web analytics company. There was a Web-based fantasy sports meets gaming, kind of a new gaming craze, a different spin on that. We had a Groupon-like company that came through. They’re pretty broad in scope, but they’re all software oriented.
Irina: At what stage of development do you prefer them to be when they come to you for acceleration?
Chris: It’s funny, that target keeps moving around a bit, but for the most part – well, to give you an example, we had one company that had a concept and had not written one line of code before they applied. At the same time, we had a company that had more than 40 paying customers. Generally, most companies are between alpha and pre-revenue. I just gave you two examples of someone who wasn’t an alpha and someone who was generating revenue. So, concept to less than $500,000 in revenue is the typical target.