Two seed-stage funds, two different approaches
By Steven Overly,
Two seed-stage investment funds that were announced in the District last week will funnel money to fledgling ventures that can’t yet attract larger, institutional financiers. But the similarities seem to stop there.
In many ways, they reflect the diversifying nature of venture capital, particularly at the earliest stages when an upstart often requires less money to prove its viability.
A new accelerator program, dubbed Acceleprise, plans to open its doors in July to provide $30,000 and four months of mentorship to firms that sell software and other technology to large organizations.
The companies will be recruited from around the country and must temporarily uproot to the District. The trio of founders, local investor Sean Glass and entrepreneurs Allen Gannett and Collin Gutman, hope to raise most of the $4 million fund from corporate and individual investors.
The focus on enterprise technology firms marks a departure of sorts from several of the country’s well-known accelerators, such as Y Combinator, 500 Startups and TechStars, which typically attract Web companies that build products for the public.
“The area that’s ripe for a lot of successful companies to come out of, and at the same time it’s been kind of overlooked, is enterprise technology,” said Glass, a serial entrepreneur and the accelerator’s managing partner.
Investors are eager to funnel their money into the next Facebook- or Groupon-like blockbuster company, Glass said. As a result, enterprise technology firms sometimes struggle to raise capital, he said.
“The argument I have heard that makes sense is these companies require more time and money to start to get to scale,” Glass said. But today “it’s easier to build enterprise-class software that’s available through the Web at a much lower price than in the past.”
Acceleprise has recruited 40 mentors to date with plans to add another 60 before July, Gannett said. They will advise the firms on the nuts and bolts of building a business, from legal hurdles to securing customers.
The mentors include a few Washington Post executives, including the newspaper’s publisher and chief executive, Katharine Weymouth, as well as several investors at venture firm Novak Biddle (where Glass is a partner) and the president of D.C. Central Kitchen and past CEO of online marketplace Etsy.
Meanwhile, Accion International, a Boston-based nonprofit, has established a $10 million fund called Venture Lab that aims to provide between $100,000 and $300,000 to companies with technology that brings financial services to the poor.
Though headquartered in the District, Venture Lab’s staff and investments will span the globe, a decentralized structure that stands in contrast to Acceleprise.
“We will have a pretty lean team — someone in India, someone in Kenya, and then maybe one or two staff in D.C.,” said Paul Breloff, Venture Lab’s managing director. “We’ll have a pretty proactive focus in those markets, and all of us will adopt an all-hands-on-deck approach.”
Accion will put forward all of the money from its own coffers, rather than raise capital from external investors with potentially competing priorities. Additionally, Venture Lab will only invest in firms that have promising financial prospects and, more importantly, advance its mission of helping people to work their way out of poverty through microfinance loans.
“We intend to be investing in big ideas in companies that if successful can be winners from both a return and impact perspective,” Breloff said.