VictorySpark, Revolution Labs in Holding Pattern, Seek Funding

As the leaders of Milwaukee’s Global Entrepreneurship Collective get ready to wrap up their summer accelerator for military veteran entrepreneurs this week, the program is entering a bit of a holding pattern.

The Global Entrepreneurship Collective (GEC), run by entrepreneurs Greg Meier and Nick Wichert, operates two accelerators for early-stage startups: VictorySpark (formerly known as Vetransfer), which has held four accelerator sessions for veteran-led startups since 2012, and Revolution Labs, which held a pilot program last year for inner city entrepreneurs. Unlike well-known accelerators like Y Combinator and Techstars, the GEC programs do not take equity stakes in program participants, instead doling out small grants of $5,000 to $20,000 per company.

Meier and Wichert saw that most accelerators were targeting startups that were already generating revenue, maybe had raised seed money, and were ready to rapidly expand their businesses.

“That left the rest of the universe that, in our view, could benefit from the [lean startup] methods and processes,” Meier says. “Who’s going to provide the model for folks in the earliest stages? We saw an emerging gap there.”

Both GEC programs are funded primarily by state grants, and both programs have used up virtually all of their allotted money, GEC says. Meier and Wichert intend to keep the two programs going, but that will require them to secure more financial support from the state and other potential backers, such as private foundations.

The fate of the two accelerators will be closely watched by the broader Wisconsin startup community, considering the attention they have attracted from politicians and the media—particularly when the original Vetransfer splashed onto the scene. What happens to the GEC is also important because of the increased number of grant-based, seed-stage accelerators that have popped up in Wisconsin in the past year. Those include Discovery to Product (D2P), a University of Wisconsin-Madison program aimed at shepherding campus ideas to the point of licensing the technology or incorporating a company; and the Madworks accelerator, a Madison initiative that launched this summer as a potential stepping stone to later-stage accelerators like Wisconsin-based Gener8tor. Just last week, Startup Milwaukee and Innovation in Milwaukee (MiKE) announced they’re working on a new nonprofit initiative, The Commons, that would include a seed accelerator for local university students.

While these programs have some clear metrics—such as the number of jobs created and the amount of funding companies raise post-program—those milestones can take longer to achieve because the participating companies are at an earlier stage than in a traditional accelerator. And some of the return on investment can’t be quantified because the programs’ goals include fostering a stronger entrepreneurial culture in Wisconsin. The GEC takes that objective a step further by trying to coax more entrepreneurship from veterans and residents of low-income neighborhoods, two groups that are often overlooked in the startup world.

Although it can be harder to clearly demonstrate progress on changing the local startup culture, state officials say they’re happy with the performance of the two GEC programs so far.

“The thing that I got from their work was they pretty much confirmed that innovation and creativity has no bounds,” says Wyman Winston, executive director of the Wisconsin Housing and Economic Development Authority (WHEDA), which provided $50,000 to cover Revolution Labs’ operating costs last year. “I’m really pleased with the results of the first class, and I’m looking forward to supporting the next class that Revolution Labs would bring on board.”

Winston wouldn’t commit to additional WHEDA funding for Revolution Labs, but he says the program is “absolutely” a candidate for a couple of his agency’s upcoming competitive funding programs targeting startups.

Revolution Labs logoMeanwhile, Wisconsin Economic Development Corp. (WEDC) officials expressed interest in providing more funding to Revolution Labs. The agency previously awarded $50,000 for the pilot to invest $10,000 in each of five participating companies. Revolution Labs could win a piece of WEDC’s $1 million pot budgeted for seed accelerators statewide in fiscal year 2015, but the inner city accelerator would be required to secure matching funds from another entity, says Lisa Johnson, WEDC vice president of entrepreneurship and innovation.

“It is important that we’re investing in entrepreneurship in the inner city,” Johnson says. “We have to have these types of programs. We need the startup community being vibrant within our cities, especially Milwaukee.”

Four of the five companies that went through the pilot Revolution Labs program remain in business, while one, ImCoveredWI, is “in a holding pattern,” Meier says. Two of them, That Salsa Lady and Nappturalistic Beauty, are starting to generate revenue, he adds.

Meier and Wichert had hoped to run a bigger Revolution Labs class this year, according to a Milwaukee Business Journal article in March. But because they have yet to snag more funding, the program is unlikely to return in 2014, Meier says.

“It’s not something I’ll let go of,” Meier says of Revolution Labs. “I’ll keep knocking on doors and looking everywhere I can” for funding.

Meier is more confident that VictorySpark will be able to scoop up additional outside dollars, although that’s certainly not guaranteed. Efforts to attract more state funds will likely wait until next year, when the legislature votes on the next two-year budget.

“We’re fairly confident that the state will continue to fund us, based on the success of the veteran entrepreneurs,” Meier says.

VETransfer logoThe original Vetransfer received a $2.1 million, two-year federal Department of Veterans Affairs grant in 2011 to run a program that primarily connected veterans with business services, like potential financing and business plan coaching, Wichert says. It operated with a team of around six people in The Shops of Grand Avenue in downtown Milwaukee.

Vetransfer later morphed into a three-month startup accelerator led by Wichert, who previously co-founded a healthcare startup, MedPath Networks, that has since shut down, and Meier, an entrepreneur and former attorney who previously co-founded the now-defunct Milwaukee tech startup accelerator, 94labs.

Their program, now known as VictorySpark, received $400,000 from WEDC in 2012, with $350,000 getting invested in companies and $50,000 going toward companies’ marketing expenses, Wichert says. Last year, the state legislature awarded the accelerator $500,000 from the state Department of Veterans Affairs, with $300,000 earmarked for startup grants and $200,000 for entrepreneurship training and other program activities.

VictorySparkAll told, VictorySpark has pumped $650,000 into 40 companies from a variety of industries, most of them based in the Milwaukee region, Wichert says. Its latest class (pictured left) runs the gamut of sectors, from software to firearms technology to a company using worm farms to turn food waste into organic fertilizer.

Program participants have created about 130 jobs and raised an additional $2.5 million in capital, Wichert says. Recent examples include Mount Pleasant, WI-based 425 Inc., which reportedly raised $200,000 this year to grow its business around light-emitting diode devices for boosting emergency responders’ visibility.

The startup accelerator approach has become more popular with Wisconsin officials in the past couple of years, although they view it as only one piece of the puzzle for growing Wisconsin’s economy.

“I’m high on the accelerator approach because…I like the idea of having entrepreneurs supporting and mentoring entrepreneurs,” WHEDA’s Winston says. “That private sector-led approach I think is really important, and is particularly important in neighborhoods of inner city Milwaukee because so much of the existing infrastructure is nonprofit and driven by government.”

Johnson, of WEDC, sees a continuum of initiatives emerging to guide Wisconsin startups along the path toward a thriving business. For example, an idea and team born on UW-Madison’s campus could start with initial nurturing by D2P, then incorporate the business and move on to a grant-based seed accelerator like Madworks, which could prepare it for pitching to angel investors and winning a spot in a later-stage accelerator like Gener8tor, she says.

“I see this very much as complementary and providing an environment of ‘there are different ways of starting a company in Wisconsin,’” Johnson says.

Trending on Xconomy