Chris Heivly and Dave Neal of The Startup Factory have just launched a new group of investments but the two are already thinking ahead to 2016 and possible expansion.
“Nothing that I can talk about yet,” Heivly says when asked about where, when, how – and how much.
“I hope I have something to say. When I do, you can expect a pretty big splash.”
It’s hard to believe that TSF is already in its third year. But Heivly and Neal spend little time reflecting, much more time on projecting.
With the latest group of four startups, including three with Triangle roots, TSF has now passed the half-way point on its initial funding commitment of $5 million.
Mix that with their own entrepreneurial personalities and it’s no wonder that the two are moving even more solidly toward expanding TSF to other markets – something Heivly first discussed last summer.
“We are currently raising our next fund to start in 2016,” Heivly says.
If that fund-raise is successful, look for new TSFs.
“What we will do is predicated on raising the new fund,” Heivly stresses. “Right now, I don’t know how long it would take. It could be weeks – or three months.”
One likely expansion candidate is St. Louis, where Heivly recently tested the waters with one of his job fairs. It was a sell-out.
Backers will be looking for proof that the TSF method of investment, tutoring, coaching and mentoring works. So far, Heivly and Neal say they have a pretty good batting average.
Of 22 investments made before the new group was announced, 18 are still in business. Sixteen of those are in the Triangle, by the way.
And Heivly is proud of what the “cohorts” as he calls them (as opposed to “graduates”) have accomplished.
“Ten or 11 have or (are) near raising additional funding at an average of $300,000,” he says.
“We are excited as the national follow-on average (in funding) is 25 percent to 30 percent, and we are tracking at 45 percent to 50 percent.”
Of the original $5 million, $2.6 million has been committed to the 26 firms chosen for investment. That includes an initial cash deposit of $50,000.
TSF also offers the prospect of follow-on funding itself, thus the other part of the commitment.
“We then reinvest a variable amount after they complete the session,” Heivly explains. “Looks like the each company on average receives another $50,000.”
The companies receive a graduation investment of some sort – if wanted.
“Every company that has wanted the additional note has received something,” Heivly says. “The amounts differ of course.”
The current group of four could have been larger but one startup team actually declined an offer, heivly says.
“One declined due to the full-time commitment needed from them,” he said.
Another startup “deferred” until the fall session in what Heivly describes as a “mutual” decision.
Once startups complete the three-month TSF session they aren’t necessarily shown the door. On average, three to five in each group stay at least a while in TSF’s space at the American Underground.
Heivly and Neal also remain available.
“Think of it as we operate as advisors on whatever they need,” he says. “We follow up with them continually and the good ones reach out to us continually.”
If past projects the future, TSF can expect a continued good “deal flow” of startups packing potential.
“The application pool/quality/reach/process was similar to the trend we were seeing previously,” he points out about the latest selection culling. “Most importantly, the quality of the final group of 12 were of the best quality.”
One other change is coming.
“Pitch Day” has been the closing event for each “cohort,” but don’t expect the same this spring.
“No final decision (has been made),” he says, “but we will be scaling back that event.”