LaunchBox Cultivates the Scene for Start-Ups
Monday, August 11, 2008
Awake on an hour of sleep, the 20-year-old stood in a parchment-colored suit before dozens of investors, trying to convince them that his six-month-old Web company was worth their money.
"Who has a story about how they got here this morning?" asked David Adewumi, a rising junior at Penn State. The hands of about half the people in the room went up, and Adewumi started pitching Heekya.com, a Web site where users post personal stories with photos, video and text, then connect with each other like on Facebook and MySpace.
Heekya was one of nine start-up Web companies unveiled last week at an event in Reston organized by new local technology group LaunchBox Digital. The organization is trying to cultivate the scene for the area's technology start-ups by connecting them with experienced entrepreneurs and venture capitalists who can provide coaching on how to build a business.
"There was a lot more early-stage talent and ideas than there were vehicles to get them going," said co-founder Julius Genachowski, a former top executive with Barry Diller's IAC/InterActiveCorp. "We said there's really an opportunity to create a destination for cutting-edge talent and ideas in this region."
The event drew about 65 investors from Washington, New York and Boston, including high-profile firms such as Columbia Capital of Alexandria, to scout the companies LaunchBox had selected from 250 applicants.
The companies had spent the past three months pulling late nights writing and re-writing programming code and refining their products with the LaunchBox founders, whom they met with every two weeks at the company's Chinatown offices.
Don Rainey, a managing partner with local firm Grotech Ventures who attended the event, said LaunchBox could make companies less risky to invest in by providing advice early on. But the companies still face big hurdles, he added.
"Will the technology work, and will the market emerge? That's the quintessential question," Rainey said. "Is it going to work, and is it going to matter? "
LaunchBox gave each company $15,000 to $30,000 in exchange for 4 to 8 percent equity. The program had several sponsors, including The Washington Post Co., which said it retains a "nominal" stake in the LaunchBox portfolio. The founders, including Sean Greene of Rock Creek Ventures and former AOL executive John McKinley, also fronted money for the program.
In the late 1990s, incubators sprang up around the country, offering start-ups office space and material support, but not much in the way of guidance. LaunchBox is modeled after programs developed later, most prominently Y Combinator, a venture out of Silicon Valley and Cambridge, Mass., that has incubated 102 companies in three years.
Y Combinator is still trying to gauge its own success rate, co-founder Paul Graham said.
"It's hard to tell even after three years, because it can take five years or so to tell if a start-up is going to succeed for sure," he said.