Business Incubator Series: An Interview With Chris Heivly, Executive Director, LaunchBox Digital (Part 5)

By guest authors Irina Patterson and Candice Arnold

Irina: Do you compensate mentors who come in to help your entrepreneurs?

Chris: They’re all volunteers.

Irina: What are your metrics of success at LaunchBox?

Chris: There’re two measuring sticks today. The ultimate measuring stick, as a venture fund, is a return on investment to our investors. That’s obvious. We all know that that’s probably three, five, or seven years out that we see that.

The interim measuring stick that we use is of the companies coming through our session. How many can secure a first or next round of funding that can help propel them to the next step fast?

Not every company needs that, but for the most part, 96% of companies want to raise a round of funding, whether you want to call that a seed or a pre-round, typically between $300,000 and $500,000 to start to go to the next step.

So, the measuring stick . . .  about 50% of our companies garner some kind of funding within three to six months after they leave the accelerator.

Irina: Can you mention some success stories?

Chris: Sure. Of the 24 companies – and excluding the seven that we just went through that are brand new – of the 17 that went through LaunchBox ’08 and ’09, we had three companies get acquired already, one of which is a company call Unblab.

Unblab came out of the ’09 session and they got acquired by AOL, about four or five months ago. Unblab built Priority Inbox about a year before Google rolled out with it. They, provided a priority inbox for Gmail users up until the point Google came out with their own version. So, they were a good year and a half before their time – before Google’s time.

They created this notion of, how do I filter my e-mail and become more effective? Certainly, AOL saw the benefits of this, especially after Google came out with their own version. So, they gobbled up Unblab. What was interesting was they, like a lot of companies, came with a big idea. And what we really do, almost across the board, is whittle that idea down into something that’s much more manageable. So, we helped that team build out that first product, the priority inbox.

In this current batch, we have a company called Spring Metrics, a Web analytics company. It was one of our larger teams of four people, and they have an unbelievable pedigree. We had a product manager from Google, another project manager from Blackboard and two very strong developers from Motricity and Blackboard.

That team was able to gobble up all of the advice and opportunity that we gave them. At the end of the session, we have what we call Demo Day, which is when the companies do their eight-minute pitches in front of the investment community.

I can tell you that these guys are probably going to be oversubscribed, in terms of the round they are raising. They’ve generated a lot of excitement for their simple Web analytics, which is targeted at small and medium sized businesses. I think they’re hitting a great niche that’s large and growing.

Typically, e-commerce, small and medium sized e-commerce businesses, have a very simple way for companies to use their tools, and they’ve provided great insight to help these small companies convert more customers, which is the name of the game for e-commerce company. Spring Metrics is a great story.

Irina: Where do the investors for Demo Day come from, and how many do you have in the room?

Chris: This year we had about 300 people registered to be part of the event. Of those 300, probably about 110 registered as qualified investors. Of those qualified investors, I would say about 70% were local and 30% were from outside the region. These were angels to venture capitalists. So, they stand from local to national, from angel to formal, professional VCs.

Irina: Do you have any engagement with those companies post acceleration?

Chris: The answer is, sometimes. One of the other unique features of LaunchBox is that as part of our program, we – before – the companies come in, we take what’s called a warrant, which is an ability for us to invest up to $250,000 in one to possibly three companies coming out of the accelerator that we think show the most promise.

This segment is part 5 in the series : Business Incubator Series: An Interview With Chris Heivly, Executive Director, LaunchBox Digital
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