N.J. is getting its first tech accelerator, called TechLaunch, funded by a partnership between the New Jersey Economic Development Authority (EDA) and private equity and founded by tech industry veteran and angel investor Mario Casabona. Casabona’s proposal was selected from a field of six prospects interested in starting a tech accelerator in N.J. after the EDA announced last year it would be seeking proposals. A competitive solicitation for a fund manager was released in October 2011. While the field was narrowed to two competitive bids, Casabona’s proposal was the only one deemed complete, EDA CEO Caren Franzini said in a memo to the board. Casabona’s company, “addressed all evaluation criteria and was the highest-scoring application,” she added.
Hosted by TechLaunch, the LaunchPad intensive business boot camp-type program is prepared to sponsor its initial class later this year at Montclair State University. The accelerator expects to mentor 12 companies in its first year, making average investments of $18,000 per company. The EDA is contributing $150,000 annually for three years, while TechLaunch will add $300,000 in matching funds each year. In exchange for its investment, TechLaunch will receive a 10 percent equity position in the fledgling companies.
A conference will be held to introduce the 12 company teams to the entrepreneurial community, then the 12-week LaunchPad boot camp will provide the selected startups with business training, networking with mentors and potential strategic partners, talks by guest speakers, exposure to panel discussions and professional development and technical help to develop their products. After the three months, the companies will demonstrate their products and make an investor pitch for potential follow-up funding. TechLaunch will follow the successful model of other tech accelerators, such as Dreamit Ventures, TechStars and Y Combinator.
While there is no requirement for LaunchPad graduate companies to remain in N.J., it is clearly the state’s hope that they will settle here. Franzini said, “We are embarking on a competition for innovation to reveal N.J.’s entrepreneurial strengths, using a model that provides a potential return on the EDA’s investment and allows N.J. to compete with neighboring states to maintain and attract technology talent.” Casabona said entrepreneurs with great ideas who want to compete for an accelerator spot do not have to come from the Garden State, “but we want them to be in N.J. and will try to provide incentives for them to stay.”
In an interview with NJTechWeekly.com Casabona was extremely enthusiastic about this new project, pointing out that he came out of retirement to take it on. He successfully sold his own company, Electro-Radiation (Fairfield), to Honeywell in 2004 and then continued on at Honeywell until 2007. Since his retirement, he has been involved in angel investing through Casabona Ventures (Kinnelon) and is chairman of Jumpstart NJ Angel Network.
Casabona explained he was inspired to create the accelerator by the passionate entrepreneurs he has met at NJ Tech Meetup(Hoboken) and NY Tech Meetup. By launching an accelerator, he and his team “will have the opportunity to select the ideas and the company teams,” and, after selection, “the opportunity to put them through a training process, a business boot camp where you can actually influence their creation. I saw this as an opportunity to add value” to N.J.’s startup technology process. For the entrepreneurs and TechLaunch as a company, “the outcome can be very rewarding.”
He continued, “My sorting parameters are that the company must have an innovative idea and a great team, and needs to be able to go through the boot camp process, develop a demonstration in three months and then give an investor pitch. We have an abundance of great ideas and entrepreneurs, but the real question is, What can you build and demonstrate in 12 weeks?”
The companies that can build a prototype within this limited timeframe are primarily in IT, digital media and Internet technology, in any consumer-facing industry, Casabona said. The companies will also need to demonstrate a reasonable valuation at the end of the 12 weeks. “We are putting in $18,000 at the beginning of the boot camp, for a $180,000 valuation. We are hoping that by its end, the valuation will be significantly higher. We will have actually ‘de-risked’ the startup obstacles,” Casabona noted. Ultimately, the proof of the concept’s value to the state and Casabona will be how many companies graduate from LaunchPad and receive offers for additional funding.
Asked whether the process of dealing with the EDA was cumbersome, Casabona replied he was used to providing the Department of Defense detailed requests for proposal (RFPs) from his days at Honeywell, so the process seemed reasonable. “I became aware of the EDA initiative last year and at that time wrote a proposal outlining how I would execute the accelerator’s creation.”
“Based on feedback the EDA got from industry and its legal department, it chose to release a competitive proposal in October. At that point, I decided to write a full-blown proposal, with details about exactly how the accelerator would be executed and whom the members of my team would be. Some clarifications were requested, which I provided by the middle of January.” One frustration: “They really ran it as a competitive solicitation; no feedback whatsoever,” Casabona said, so it was just a matter of how a competitor interpreted the RFP.
Casabona is enthusiastic about the accelerator’s location at Montclair State, which has the facilities, technical and administrative support, dorms and, more important, access to New York the tech entrepreneurs will need, he said. “New York has Internet Alley,” he added, and the accelerator will need to attract that caliber of entrepreneur.
Casabona is excited about the company’s prospective team. The executive director will be a new hire, he said, and while the accelerator has identified the person it wants, the company has thus far declined to release the name. Creating and supporting the boot camp’s curriculum will be Mary Howard of Design Technologies (Guilford, Conn.), a professional experienced in this area, Casabona said. “We are in the process of bringing aboard sponsors, mentors and guest speakers,” he added.