Launch : Alaska Accelerator
Increasing the ‘deal-flow’ of startups
Alaskans have always had a knack for self-sufficiency, and that includes launching their own business ventures. Economists agree, however, that diversifying the state’s economy will be a heavy lift. New businesses with the potential to scale up quickly could be at least part of the solution, creating new jobs and spurring new industries in fields like energy and unmanned aircraft. The entrepreneurship cause in Alaska received a huge boost when the Municipality of Anchorage launched the 49th State Angel Fund (49SAF) in 2012 to invest in promising startups. This fund and its spinoffs have vastly increased the availability of risk capital in Alaska, but thought leaders in this space have identified the need to increase the “deal-flow” of startups that are good investment candidates with a likelihood of success. Enter Launch : Alaska.
What is Launch : Alaska?
Launch : Alaska (L:A) is a three-month, mentor-driven accelerator program that helps early-stage businesses grow into fundable, scalable ventures. Through comprehensive mentoring, a robust network, and seed capital, L:A’s mission is to help founders build great companies, raising the bar for entrepreneurship throughout Alaska. L:A is modeled after highly regarded accelerators in the Lower 48 such as Techstars in Boulder, Colorado, which has been instrumental in launching such high-profile successes as Uber, the ride-sharing service.
Applicants will face a series of vetting rounds including a competitive application process and a pre-accelerator program before they will be admitted into the L:A cohort. The pilot kicks off this summer with a cohort of five startup teams, which will each receive $25,000 in exchange for a 6 percent equity in their company. Once accepted, ninety days of immersion, educational workshops, and co-located office space at The Boardroom in Downtown Anchorage will position startup teams for growth, culminating in Demo Day when graduating teams pitch their refined business plans to investors for follow-on investment.
The L:A accelerator is not a business incubator, although it offers physical workspace to its participants. The average length of an incubator program is one year and is focused on product development; however, L:A strongly prefers companies that have achieved a degree of customer validation or another form of traction such as contracts or strategic partnerships. The intense program will not allow for extensive research and development.
L:A formed in late July 2015, and in August the US Small Business Administration’s Growth Accelerator Fund Competition awarded L:A $50,000 to fund operating expenses. To date, additional sponsorship has been received from the University of Alaska Center for Economic Development, which conducted the accelerator feasibility analysis and donated hundreds of in-kind staff hours. Finally, Alaska Small Business Development Center has also made a generous in-kind contribution by underwriting staff costs.
L:A recruited Lance Ahern—founder of Internet Alaska, Alaska’s first Internet service provider—as managing director and joined the Global Accelerator Network, an invitation-only group, to leverage best practices. The board, which includes entrepreneurs and community stakeholders from the University of Alaska Anchorage, University of Alaska Fairbanks, and Alaska Pacific University, meets weekly to aggressively develop the program and mentor network.
Value to Entrepreneurs
Admittance into the L:A program brings tremendous value to entrepreneurs. After ninety days, startups will exit the accelerator better equipped to enter markets and receive additional investment. L:A provides business acceleration, network connections, mentors, capital, and services as described below:
- Acceleration : Focus, Resources, and Industry Knowledge | During the L:A accelerator program, speed to market is improved by limiting distractions and committing full-time focus to the startup. Educational workshops help each team streamline information gathering. Mentor advisement, usually for several hours per week, aids in critical decision-making such as finalizing product market fit. Accelerators are designed to shorten the learning curve and reduce the risk of startup failure.
- Community and Connections | L:A immediately introduces startups to a robust network of stakeholders and industry experts. As in other accelerators nationwide, camaraderie develops between teams in the cohort and alumni teams, which facilitates information sharing and speeds introductions to investors, partners, customers, and employees. Throughout the program the managing director and staff will also work to align each team to appropriate strategic connections.
- Mentorship | Mentors include subject matter experts, innovative industry leaders, and seasoned entrepreneurs with track records of success. L:A leverages the expertise of its mentor network to guide startups through business milestones with greater ease. Mentors appreciate the disciplined approach to working with teams in a structured system that respects their time and is impactful for all parties. While L:A has established a roster of mentors and subject matter experts to assist the first cohort, the team welcomes additional community involvement from those with an interest and ability to assist fledgling entrepreneurs.
- Capital and Services | A host of discounted services are packaged for each team to utilize, including legal guidance, accounting, branding and marketing, and technical support. Each team receives $25,000 in seed funding to invest in their venture. L:A will streamline follow-on fundraising by organizing connections with potential investors, such as 49SAF and its partner funds; guiding startups through the funding process; and generating exposure and excitement during Demo Day. Additionally, the vetting process of admittance and program completion generates credibility among investors. About 30 percent of Global Accelerator Network startups raise a second round, and $1.9 million was the average second round raised in 2014.
L:A and 49SAF
The purpose of 49SAF is to increase the availability of risk capital for promising startups, while L:A seeks to grow the capabilities of these same companies. As such, they form complementary pieces of a startup-friendly ecosystem here in Alaska. Leveraging dollars from the US Department of Treasury, 49SAF and four partner funds have emerged which match 49SAF money with private investment. These include the Alaska Accelerator Fund, 49th Fund, Anchorage Opportunity Fund, and Anchorage Equity Partners. L:A will also have its own small pool of capital to make the $25,000 investment in each startup, and the partner funds may invest in L:A’s fund. However, the main value of a relationship between the angel investors and L:A is the opportunity for follow-on investment once startups emerge from the accelerator with expanded competencies.
Why in Alaska?
While more than three hundred accelerator programs exist in the United States, Alaska has never housed one prior to L:A. The project team strongly believes an accelerator will help make Alaska a more nurturing environment for high-growth companies by taking a systematic approach to growing the most promising startups. Alaskans recognize the need for a more resilient economy; L:A is one small step toward diversification.
While there is great social impact from the creation of new jobs and innovations, investors demand more than altruism. Companies that emerge from accelerators raise more equity financing, have a higher likelihood of survival, and experience improved outcomes. Seventy-nine percent of startups that have completed a Global Accelerator Network member accelerator program are still in business today, and on average, 6.7 jobs were created and $789,000 was raised per Global Accelerator Network startup in 2014, which all together means L:A can have a real impact on Alaska’s economy.
A better economic future is our responsibility. In the words of Joe Morrison, “Have a bias for progress. Build your Alaska.” It will take ubiquitous community buy-in to make L:A a well-oiled mechanism that helps startups grow.
Gianna Foltz is the Entrepreneurship Specialist for UA Center for Economic Development. She has founded two companies, was a Kauffman Entrepreneurship Fellow, and worked in entrepreneurial programming at Syracuse University. She serves as the Mentorship Coordinator for Launch : Alaska accelerator. Contact her at email@example.com.
This article first appeared in the January 2016 print edition of Alaska Business Monthly.