Los Angeles Business Journal

Pace Setters

Accelerators quickly establish value in driving startups By Tom Dotan Monday, January 28, 2013

The local accelerators all tout the big names – well, big for the local tech scene – who serve as professional mentors to the programs: both MuckerLab and Launchpad list ShoeDazzle Inc. founder Brian Lee on their team of advisors; Amplify works with Jason Nazar of Docstoc, among others.

Like colleges, each accelerator has crafted a distinct identity that helps it stand out. Start Engine is the lenient one and appeals to companies at the earlier stages (though it takes the largest equity stake at 10 percent). MuckerLab lays claim to a sterling record, saying all eight of the companies from its first class received follow-up funding. Amplify is the most flexible and accepts startups on a rolling basis. Launchpad is the “entrepreneur friendly” one and takes the smallest equity stake, 6 percent in common stock.

Most of the accelerators in Los Angeles are backed in part by local venture capital firms. Amplify is financed by Rustic Canyon Partners, Launchpad is bankrolled by GRP Partners. Start Engine is backed by private investors.

Directors at the accelerators are still tinkering with the programs, however, trying to find the right balance after feedback from graduates.

“For six weeks there was a class every day almost – marketing, HR, legal – to the point that there was no time to build our product,” Jao remembered. “I’ve heard that they really toned it down with the classes.”

Funding race

This year, Launchpad threw down the gauntlet of funding battles among the accelerators when directors announced it was upping the initial funding of its companies to $100,000. (It’s actually $50,000 up front with an option for entrants to take the remaining money as a follow-on investment.)

That amount eclipses the standard $20,000 that MuckerLab and Start Engine offer, as well as the $50,000 Amplify uses for its standard up-front investment. Sam Teller, managing director at Launchpad, said the move to up the ante for incoming companies will give more help to companies at a time when venture capital investments have slowed.

This year, he said, “will be a more challenging year for fundraising. The goal of the $100,000 is not for the companies to hire more people or spend faster, but to last longer without the fear they’re going to run out of money.”

The other accelerators have taken notice of Launchpad’s increase, though none have yet to make any changes to their models. Erik Rannala, who heads MuckerLab, said he’s considering raising the initial investment, but pointed out the accelerator already offers follow-on rounds even though it’s not as explicitly stated as Launchpad does.

Page 2 of 3