Business Incubator Series: Troy Henikoff, Excelerate Labs – Chicago, Illinois (Part 9)

By guest authors Irina Patterson and Candice Arnold

Troy: We have a rigorous curriculum. We make a huge degree of use of the mentors. We do have some other services around, for example, as I mentioned, pro bono legal for their business conversion [to the right corporate structure].

We provide them free office space. They’re all housed in our offices. We have about 10,000 square feet where all 10 companies are located.

I am there full time. We will have three other people there full time. A couple of other people who part of the program on an administrative level are there a couple days a week. There’s a fair amount of staff there to help them along the way with everything from building a financial model; putting together marketing plans; and technology help, all of that.

Irina: What else do you measure besides how much money your entrepreneurs raised and how many jobs they created?

Troy: Those are the two metrics that we’re driving to grow. We feel that those are the two that are going to be indicative of their success, their ability to drive the economy forward, the ability to drive the value of their companies forward.

Irina: What is the business model of your accelerator itself?

Troy: Excelerate is, again, what I refer to as for-profit philanthropy. There is a fund. The fund puts up all of the money. We have limited partners in the fund who have written checks to support this program. The money that they put up, hopefully, most of it goes to the benefit of the companies.

Our goal would be to have 99.99% of it go to the benefit of the companies.  Some of it goes into funding the $25,000 for each company. That is the investment. The rest of it comes out of the fund to fund the rental of office space, and there are small stipends for the interns – we have a couple of interns. We have to put on Demo Day, then of the expenses that go into keeping the lights on and the office running.

Me, I get a small stipend. It’s a tiny fraction of what I used to make or could make in the open market.

Irina: What’s your usual equity stake in the companies that you incubate?

Troy: The fund now owns 6% of common stock in the 10 companies each year. The goal is for the people who put up that money, the limited partners – and by the way, I’m one of those – the goal is for them to get a return on their investment. I’m sure they’ll get their capital back. They should get something beyond their capital. That money goes back to the people who wrote the checks for the investment initially, just as with any other fund.

Irina: Does Excelerate have any other sources of revenue?

Troy: We have some small sponsorships. I don’t even consider that revenue. We’re not a revenue-producing organization. As I said, it’s more like a not-for-profit. We just don’t have that IRS status.

We don’t have revenues. We don’t charge entrepreneurs a penny for anything. That’s part of our philosophy. There are a lot of companies that have said, “Oh, I want to help your entrepreneurs. I’m going to give them a discount on my services.”

We don’t like to promote things that are going to cost the companies anything. If you want to give your services free, we’re happy to help you promote to our entrepreneurs if we think it’s a good thing for the companies.

Irina: What is an example of the services you would promote to your entrepreneurs?

Troy: We’ve had tremendous support from our sponsoring law firm, McGuireWoods. They do all of the conversions for our companies. If the company is an LLC today and they have to become a C corp [so they can accept investments], all of that legal work is done totally free for the our entrepreneurs.

McGuireWoods does some of the legal work for us, Excelerate – for example, setting up a fund – for free. In exchange for that, they are our platinum sponsor and get top billing at Demo Day, and they get some advertising exposure.

This segment is part 9 in the series : Business Incubator Series: Troy Henikoff, Excelerate Labs - Chicago, Illinois
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