NC IDEA Surpasses $2.1 Million in Free Money for Startups
It’s sort of a badge of honor to be rejected for a grant from NC IDEA (http://ncidea.org). I’ve been rejected once. OK, twice, but one application was just a cocktail napkin that said “Football. Nudity. Internets.”
It’s definitely a different universe when you land one. Just ask founders of StatSheet, Argyle Social, Spring Metrics, or one of the others who have won the grant and moved on to quickly raise seed rounds.
No wait. Those guys are busy. Don’t bug them.
Argyle Social (http://argylesocial.com) combines analysis of social publishing, customer engagement, and social analytics into a single dashboard. “We won a $33K grant from NC IDEA in January 2010,” says CEO/Founder Eric Boggs. “We used the cash to get from concept to alpha product to our first paying customer to seed financing in the bank - all in the course of about eight months.”
Spring Metrics (http://springmetrics.com) has developed technology to offer real-time conversion analytics. “It provided another level of validation internally and externally,” CEO/Founder Doug Kaufman adds. “It showed our team that other smart, experienced people believed in our vision - that goes a long way inside a young startup. Externally, it demonstrated to the investor community that we were developing a business that could have real market impact and revenue.”
StatSheet (http://statsheet.com) is a tech media company that humanizes big data to automate narratives for sports and other verticals (Disclosure: StatSheet was my client and I joined the management team there after their seed raise). CEO/Founder Robbie Allen says, “The grant money provided enough of a kick to get StatSheet to the point where I was able to successfully raise a seed round of funding a year later.”
Or you might talk to those who will be picking up their checks shortly, the just-announced Spring 2011 winners:
Loyalese (http://loyalese.com) has created an online eCommerce loyalty program that combines cash-back and customized rewards on the consumer side and referrals, recommendations, and custom offers on the merchant side.
NanoForge (http://nanoforge.com) produces copper nanowires, a low-cost alternative to crystalline Indium-tin-oxide used in touch screens, flat panel displays and photovoltaic cells.
OtherScreen (http://otherscreen.com) blends mobile Internet, broadcast TV, user-generated content and social gaming to tackle partial viewer engagement.
Sarda Technologies produces a more efficient semiconductor switch for portable, enterprise, and consumer electronic systems.
Keona Health (http://keonahealth.com) uses stats and intelligence to improve the entire healthcare process, from patient to provider. CEO/Founder Jason Skowronski has immediate plans for the money. “It will allow us to go after a bigger revenue opportunity in our market. We are already selling to student health clinics, and it's giving us the ability to rope in the student health payers, which is a bigger pie but requires time and the right expertise to engage.”
The Spring 2011 winners came from a finalized list of 23 early-stage startups hand-picked from an initial application pool of 110.
Yes. 110. Five out of 110 might seem like long odds if you’re talking about a raffle for an iTunes gift card, but when you’re talking about getting a low-strings-attached up-to-$50K grant to get your business off paper and into reality, I’m shocked that the 110 part doesn’t have an extra zero on it.
Since it started giving out free money to worthy entrepreneurs in 2006, NC IDEA has awarded over $2.1 million to 57 companies across 11 application cycles. That’s “awarded.” Not invested, lent, or racketeered.
What separates the NC IDEA grant from, say, a government grant, is that the program is not strictly for a prototype or operations or for a technology, but rather for the creation and sustenance of the company itself.
A second and far more important unique aspect of the grant is a symbiotic relationship with VC firm IDEA Fund Partners. The two entities are independent, but managed by the same team, which includes IDEA Fund founder and General Partner Lister Delgado. He explains that IDEA Fund can, and in several cases does, come in later and make an additional seed investment.
There’s brilliance in this.
The award may be a grant to the entrepreneur, but it’s an investment for NC IDEA. At the same time, IDEA Fund gets:
Deal Flow: The vast majority of the 110 (or so) companies that apply every cycle aren’t on anyone else’s radar. Sure, it’s because they’re much earlier than they should be to qualify for the vast majority of investment theses, but it gives IDEA Fund a leg up in the pipeline.
Success Rate: On the other end of the grant period, once the money and the connections and the support have all been put to use, the results are a very early stage company with a far better chance of providing a larger and quicker return on any additional investment.
Ecosystem Upkeep: Obviously, the more time and money that they put into the startup scene in the region where they do the bulk of their business (NC IDEA operates in the RTP, but is open to all of NC), the more active it becomes, the more deal flow, etc.
The entrepreneurs who apply know it’s not just about the money. Delgado says that companies will apply for the grant because of the relationship with IDEA Fund Partners, which makes the grant much more attractive than your average business plan competition and cash award.
From the beginning, NC IDEA has tried to help early stage companies grow to reach that next level, which you usually can’t do on $50K. This is especially true in a region that is not Silicon Valley, one that has a young and improving startup culture, but certainly no glut of companies run by repeat entrepreneurs with examples to follow. There’s a different, and usually tougher, path to travel to get funded.
So along with the cash, the winners get advice and mentoring. In fact, Delgado mentioned that they’ve recently started encouraging an advisory board if the company doesn’t already have one, and they offer to help to build it. This creates accountability and discipline, and some of the winners need this more than others.
There are also connections. They’ll bring in resources who are now interested in helping these companies out – including marketing, law, accounting, incubation space – again, all for free. And that includes publicity – in fact, Delgado had just finished speaking with a major newspaper about one of the winners before we sat down to talk.
However, the most important brick in the wall is the next investment, and the relationship with IDEA Fund Partners allows the startups to learn the process of fundraising, again, a much different task when you’re located outside the Valley.
And most importantly, they provide introductions to other VCs.
The result of all this is more than $30 million in venture funds that have been raised by about a third of the 57 grant winners. Most of that has been in the last year as these companies have moved from very early stage to early stage and so on, and some of those dollars have come directly from intros that NC IDEA made.
The list includes $10 million for CancerGuide Diagnostics, $5 million for fitness-technology-maker Valencell (http://valencell.com), and $3 million for guided biopsy optical imaging company Oncoscope (http://oncoscope.com).
So if the lure of free money, free advice, free services, and qualified introductions to additional investors isn’t enough to bring in more than 110 applicants, the beauty of it is that doesn’t matter, because they’re getting the right applicants. As long as that happens, the track record should continue, the ecosystem expand, and the numbers will take care of themselves.
The question should be: Why aren’t there more organizations doing this kind of grant program?
Joe Procopio heads up product engineering for sports media startup StatSheet (http://StatSheet.com). He also owns consulting firm Intrepid Company (http://IntrepidCompany.com) and creative network Intrepid Media (http://IntrepidMedia.com) and runs the startup social ExitEvent (http://ExitEvent.com). Joe can be reached via Twitter @jproco and read at http://joeprocopio.com.