12 weeks, 9 companies, 7 lessons from an incubator fund

One of our partners, LaunchBox Digital, is an early-stage Internet startup incubator fund. It’s similar in structure to TechStars in Boulder, Colorado. Startup companies – or founders with ideas that could become companies – apply to participate. The projects selected for the fund commit to spending the summer working with the fund’s founders and their network of advisors and experts. The fund makes a small investment in exchange for some equity in the company – typically in the $15,000 to $30,000 range for five percent of the company, depending on the number of founders.

The founders spend the summer working closely with the fund and its advisors. They work on building the products, the business plan – and then they pitch their working demos and plans to venture capital investors in hopes of securing larger investments.

It’s a fast and intense process. Success depends on the quality of the portfolio, the quality of the founding teams – and on the ability of the fund team and its advisors to help the startups build strong demos and strong presentations to investors.

LaunchBox co-founder John McKinley was one of our judges at last year’s We Media Pitch It competition – and we’re planning a major expansion of our social venture pitch competition at We Media Miami 2009.

LaunchBox narrowed a field of 250 applicants to nine companies. I attended the final demos yesterday, then the LaunchBox team and company founders headed west to repeat the presentations today in Palo Alto.

Here are seven lessons for any new business or product team:

  1. Themes: ALL of the companies are worth watching individually and the portfolio mix itself reflected the investment instincts of the LaunchBox team. They invested in companies focused on games, music, video, advertising, college students, social networking and mobile messaging. Here’s what we didn’t see: journalism, politics, international affairs, civic engagement.
  2. Technology and Markets: All of the investments were about technology. All the companies had at least one engineer as a founder who acted as lead developer. LaunchBox did not invest in content, media or ideas. They invested in unique applications of software, algorithms and databases.
  3. Specific audiences: All but two of the portfolio companies were built for a specific audience. One was a story-telling platform that conceivable could be useful for lots of communities and professions, including journalism and scrapbooking. The lack of clarity on audience is probably a business challenge that will be addressed in further iterations. One of the products was built to be a smart messaging outbox for anyone – but anyone in this case is really a technically sophisticated digerati who wants to manage emails, IM, SMS, twitter and other delivery options. That’s really not anyone – it’s a definable target audience.
  4. Speed: These guys – yes, all guys – built companies ready for investment and launch in 12 weeks. If your product development cycle is slower, well, sorry, you’re slow.
  5. Networks: The fund depends on the capital, expertise and network of the partners. But it’s equally dependent on their professional networks and their ability to bring in high-quality experts to help with individual challenges at the individual companies. Some may have needed help with graphic design, engineering, marketing, audience acquisition, accounting, legal issues. The founders also needed to tap their networks to bring in a strong showing of investment friends to the final presentations. LaunchBox offered its friends a valuable service: in a world awash with entrepreneurs and business ideas, they reviewed several hundred to select nine contenders, then helped turn those contenders into something that a smart investor could evaluate quickly and confidently.
  6. Fit and Finish: None of these companies were built from clever skinning of Drupal or Ning. They’re all unique platforms designed to fit specific audience needs and behaviors – and they all paid attention to user experience and engineering. In one case, an online knockoff of Guitar Hero, the interface is a big part of the entire business.
  7. Pushing the envelop: The Guitar-hero knockoff could face legal challenges. They’ve already lined up good lawyers. Another company attempts to disrupt higher education by helping college students copy and share old exams and study guides. The business will live or die on college campuses – but it’s undoubtedly going to annoy some professors and university administrators who don’t want their materials, grading history or personal reviews shared with everyone. Another company will enter the crowded employment field, taking on Monster, Careerbuilder and newspapers.

Check them all out:

BuzzHubb: A Better College Social Network

Founders: Satjot Sawhney and Ashish Kundra

What: A way for college students to manage group communications with different groups of friends.

Heekya: The Wikipedia For Stories

Founders: David Adewumi, Kwasi Nti, Rasvan Orendovici and Avner Ahmend

What: Multimedia “social” story authoring platform.

JamLegend: Guitar Hero Goes Social

Founders: Andrew Lee, Arjun Lall and Ryan Wilson

What: It’s a Guitar Hero/Rock Band knockoff – but played online, not with a Wii or XBox.

Koofers: Crib Notes For Picking College Classes

Founders: Michael Rihani, Glynn LoPresti, Patrick Gartlan and Doug Feit

What: Share tests and study materials with students on your campus. Rate your professors, plan your schedule based on their grading history.

Mpowerplayer: Marketing Mobile Games On Facebook

Founder: Michael Powers

What: Markets mobile games through the web and Facebook.

MyGameMug: Match.com For Gamers

Founders: Raymond Lau and Erik Yao

What: Social network and personality matching service for gamers.

Razume: Resume 2.0

Team: Sam Blum, Kyle Stoneman (founders), Brian Turnbull, and Ryan Geist

What: Help young people get jobs.

ShareMeme: Evite Meets Twitter

Founders: Ahson Wardak and Luc Castera

What: It’s a smart outbox. You want to send a message to Joe. This knows where Joe is and how Joe wants to be contacted.

Zadby: Web Video Product Placement

Team: Tim McLaughlin (Founder), Beau Brewer (General Manager)

What: Creates a market and pay-for-performance business model for popular video bloggers to incorporate beer, chips, soap and other products into their videos.

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