After a few years of organizing and bringing together local VC firms, picking an investment philosophy, and sifting through pitches from hopeful startups, Accelerate Long Island has selected its first companies to seed.
Accelerate LI, the broad, non-profit initiative to commercialize research out of Long Island’s research institutions, and its strategic funding partner, the Long Island Emerging Technologies Fund (LIETF), are investing a total of $500,000 into five local startups. Each of the five startups, which are either life sciences or cleantech companies, are getting $100,000 in seed money apiece—$50,000 in grant money from Accelerate LI, and $50,000 in financing from the LIETF—to develop their businesses. The five companies—Goddard Labs, Green Sulfcrete, PolyNova, SynchroPET, and Traverse Biosciences—are the first to win backing from Accelerate LI since the initiative came together in 2011.
“It’s a good group,” says Accelerate LI executive director Mark Lesko. “It’s nice to have the first five done.”
Each is getting the $100,000 up front. The non-profit organization isn’t getting any equity in return, though the cash it provides turns to debt should any of the startups either leave New York, go bankrupt, or go public, according to Lesko. The LIETF, however, a private fund backed by Long Island VC firms Topspin Partners and Jove Equity Partners, will each get convertible debt in the nascent companies that would turn into small equity stakes (less than 5 percent) upon a follow-on investment, like a Series A round.
Indeed, the cash is meant to provide a stepping-stone for these companies—$100,000, of course, is a nominal amount for a life sciences startup. But Lesko says that each investment was meant to be “impactful” enough that it would clearly get each startup to a milestone—like taking steps to protect intellectual property or running a key experiment—to boost its value and attract bigger investments. SynchroPET co-founder Marc Alessi, for instance, says that the cash is helping him close out a larger seed round. Goddard Labs is buying a key piece of equipment that will enable it to do more testing.
“We want to help them graduate to the angel investment level,” Lesko says.
Accelerate LI was formed three years ago by the presidents of several of Long Island’s big research institutions, including Cold Spring Harbor Laboratory, Brookhaven National Laboratory, Stony Brook University, as well as other participants invested in the local startup scene. The idea was to put together a broad, non-profit, regionally-focused organization that could turn the research coming out of the area into commercial products, and help spur the development of a startup ecosystem—in both biotech and tech—on Long Island.
The state of New York awarded Accelerate LI a $500,000 grant to get started, and a few other local VC firms—Canrock Ventures and Jove—started the LIETF, agreeing to plunk down $750,000 in private cash. Canrock has since bowed out and been replaced by Topspin Partners because the potential deals coming in were largely life sciences companies, which aren’t the investment focus of Canrock, according to Lesko. Accelerate LI still aims to use the remaining cash from the $1.25 million to invest in another five startups, and it’s investment philosophy—which was originally more tech-centric—is now a focus on life science and clean energy technologies, “with a bias towards tech transfer out of the research institutions on Long Island,” Lesko says.
“On Long Island there’s really no funding source at the proof of concept/seed stage [for life science companies],” he says. “Frankly, very few angels will consider those types of investments because there’s this perception that the timelines are so long that you won’t achieve a return on your investment for 10 or 12 years.”
The organization’s mission is broad: it’s not just trying to fill these gaps and seed fund startups, but help establish an entrepreneurial community in Long Island. It helps bring in seasoned executives (entrepreneurs-in-residence) and business school students to mentor young entrepreneurs and work on business plans so they’re ready to pitch their companies to the seed funds. It holds meetings and events gathering local entrepreneurs and CEOs to exchange ideas. Alessi says, for instance, that the organization has helped bring together “various silos in [the local] innovation ecosystem.”
“The experience has been very positive, even when negotiating the terms of the LIETF matching funds was appropriately tough,” says Traverse founder Joe Scaduto. “Interactions with Accelerate LI and LIETF forced us to seriously consider critical business issues, including market focus, product development strategy, and intellectual property…[and] gaining access to professionals with relevant experience has been invaluable.”
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