LaunchCapital Opens To Seed Startups, Describes Unique Investment Approach

1/20/09

LaunchCapital, a provider of seed-stage capital for tech startups, is expected next week to publicly announce its existence for the first time and describe its plans to invest in young companies in the Boston area and beyond.

The Cambridge, MA-based firm aims to invest in startups at the earliest organizational stages, at a point when such companies are often neglected by traditional venture capital outfits that are looking to invest in more mature companies. Elon Boms, a founder and the managing director of Launch, explained the genesis of the firm to me in an interview recently.

“It was really the identification of a funding gap that we saw in the early-stage investment community that motivated myself and the [limited partner] to start Launch Capital,” Boms says.

Boms doesn’t disclose the name of Launch’s single limited partner, other than saying that the LP is a family office in New England. (For those who aren’t up on private equity lingo, a family office is an entity that manages the investments of a wealthy family.) Boms adds that the office—led by a family member that he worked with earlier his career—provides capital for investments in startups as needed. .

Launch, which was formally organized in early 2008, has offices in New Haven, CT, and San Francisco in addition to Cambridge. In addition to the obvious reasons of tapping investment opportunities in the three areas, the office locations also provide the firm access to students from such schools as MIT, Yale University, and Stanford University, who are contracted to perform due diligence on startups seeking financing. In fact, Boms says, Launch operates with four full-time employees and outsources most of its due diligence to graduate students as well as experienced businesspeople. The firm also tries to tap its neighboring universities for potential deals.

Boms says that the firm has especially close ties to Yale University, where he earned his MBA. His limited partner is also a proud Yale alumnus.

The firm makes investments of $125,000 on average in startups that typically haven’t raised a first round of venture capital, Boms says. And though Launch tries to be industry agnostic, he notes that the firm’s 15-strong portfolio includes many web-based and software startups because of such companies’ efficient use of capital. In fact, Launch invested in Xconomy’s … Next Page »

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