LaunchBoxDigital Startup Incubator Raises Seed Round, Taking Applications

Good idea.
Michael, from your point as investor, what chances have this type of approach to discover a new … let’s say StumbleUpon or something very valuable?

Thanks.

I suppose Paul Graham can feel secure that immitation is the best form of flattery. That being said, none of these guys have really churned out a steady stream of real businesses. They should really be termed “seed-stage web app development funds” since they just churn out web sites that look the same and have one feature for the most part.

as an entrepreneur I would never ever go to companies like this.
4-8% for 15K??? no way in hell! I can borrow 15K from my family, friends, my credit cards, hell, ill beg for money if I have to.

The first link has .cm not .com

what’s 30k.. looks like a good way kick starting irc junkies

There’s also YEurope over here, and from what I’m hearing there are more similar incubators being set up in Europe.

Is there anything like this in Canada? Specifically - Toronto?

Hell, I wish I found a good developer and did not have to work - I would be my own incubator

…and some universities are also offering similar programs but taking no equity - like the Yale Entrepreneurial Institute - http://www.yale.edu/yei…. What a great deal for those who get in - stipend for 10 weeks in the summer, access to space and technology, and connections through Yale’s network to top tier venture funds like Sutter Hill and Greylock, top tier entrepreneurs (like Donna Dubinsky, Rob Glaser, etc), and service providors…

I think some of the people leaving comments are missing the point - its not all about the money (and office space). They’ll provide contacts and exposure that would be difficult to obtain otherwise (how many Y Combinator companies have been on Techcrunch?)…with that said I’d probably try one of these incubators as a last resort

So essentially they’re taking someone else’s money and investing it in someone else’s skill. No wonder this is becoming a popular business model. I have the domain appgarden.com. Maybe I could be the next ‘next Y combinator.’ Any investors interested? Any application developers interested?

Interesting that these are all creeping up. The model that failed so often before had a flaw, but I’m still not sure what it was. Often it seemed like the person in charge’s fault. The bay area alone lost (that I can count) almost 10 incubators over the past 8 or 9 years. The only one really left is the biotech one in san jose. Many of them were city or county subsidised. I wonder if these will last or produce much worthwhile.

The Siemens incubator seemed interesting (in Berkeley) as did the Labs one in Livermore, but they’re both gone. The city ones are almost all gone. I wonder if the angel round (rather than gov’t $$) makes people more accountable. We’ll see I suppose!

That little seed funding often times isn’t enough. The whole “venture capital” company launchboxdigital has less funding than your average startup. And they’re supposed to be the bank?

Their whole fund, 250k is barely enough to hire 2 professionals with. They’re supposed to be the bank in this paradigm.

I’ve seen poorly funded companies work, and man….
This business model sucks.

why would someone want to go live in washington d.c for the summer??

alex - agree. that is the only real issue i have with this.

User447 - the founders are all pretty successful and I don’t believe they’re taking a salary.

Seems that each chunk size is too small to justify the application process?..

@alex & @Michael Arrington,
Come on now, DC in the summer is not that bad, we have a lot of good bars and good parks, that should count for something. I can think of several worse places to be in the summer. With that being said, I am a bit biased given that I am in the DC area.

yeah Will, you tell em. DC is great - where else can you get a ton of world-class (free) museums, tons of national monuments (Washington monument, arlington national cemetery, lincoln memorial, jefferson memorial, etc..), a whole slew of universities, plenty of nightlife, tons of young people, and also be the capital of the free world. sure the weather isn’t as nice as california, and the traffic might be worse…but the high crime and shootings that DC is notorious for really don’t do it justice (that’s just the bad parts of town).

that being said, $15k doesn’t seem like enough to get much of a start with. maybe pay for some hosting and a month of adwords? but it might be enough to get it done. anyway I’m happy to see more stuff like this in DC, we need to represent.

Actually for a young person DC is a great place in the summer. Tons of young interns from all over the country are there and its a great party atmosphere. Its definitely annoying if you’re over ~23 but for students and recent grads it’s tons of fun and very conducive to work and play. You get over the heat/humidity after a few weeks.

Sounds like a bunch of rich guys taking advantage of some naive kids. Heck 15K is all it takes to buy 4% of someone. Let me say this as clearly as I can to anyone that is listening. If you are young and have good skills, work ethic and little responsiblilities, don’t sell yourself short. These guys are taking advantage of you. Move to Silicon Valley and do it yourself.

Hmmm…this company, and the ones it emulates, come close to hitting the mark. After all, it really doesn’t take a whole lot of cash to get a .com launched, and $5 - $15k can help bootstrappers considerably.

The question I’ve got is this: if an idea is a mediocre one, what good does making “contacts” earn anyone? And if the idea is a great one, why would the founders give up so much for so little? Far too many entrepreneurs overstate the importance of contacts…the biggest of the big became mega-successful because they provided a valuable product or service, not because they “met the right people” after spending summer camp at a quasi-rich uncle’s house.

Anyone involved in a start-up knows the inherent value of what they are building…or at least they’ve got delusions. Someone willing to exchange a 5% share for a paltry $5k is either involved in a sinking ship or too clueless to properly run a start-up. Why investors would want to piss away ANY money on these people is beyond me.

I suppose I would consider the idea a good one if:

1. I give up no more than a half-percent stake for $5k;
2. I’m not forced to play summer camp with them;
3. They initiate contact with me, not the other way around.

Sounds to me like this business idea was seeded and funded from a similar concept.

Alex I agree with what you are saying I laugh at anyone who moves or has moved here b4. I am interested b/c I have superiors and they probably wouldn’t like Boston too much, Boulder fuck outta here. Its not the money its the connections. Moving to Silicon valley is like an actor moving to LA or NY, how efficient is that business model?

Contacts? Please. Because Paul Graham can con a bunch of geeks who didn’t go to good schools and don’t know how to build their own network to do this doesn’t mean it’s really that useful. Getting featured on TechCrunch is great but it doesn’t mean they were successful. Ever think about the fact that their lone publicity is TechCrunch and similar blogs? That means they are designing products just to get featured here instead of building things customers actually care about.

YCombinator and similar incubators will continue to fail for a number a reasons:

- Awful valuations
- Selection bias: only conned-want-a-preneurs participate: real entrepreneurs realize they can build web apps on the cheap and get traction before wasting their time with incubators
- Lack of business sense (Paul Graham clearly has none - ever read his essays? He got lucky once. I’d love to see him try to run a company and make everything free and support it on AdSense or some stupid startup like Adpinion).
- Lack of viable businesses. Features are not businesses.

I believe connections are important - no doubt.
However, with the web craze and all this web2.0 stuff, I think that if you got a good product - be it a web site, an app, a widget - you don’t really have to move to Silicon Valley. The actors need to be in NY or LA because they have to be there physically. However, with an Internet connection, you can run a successful business out of… Antarctica (I am trying to be politically correct here )

Look at the PlentyOfFish guy - he’s in Vancouver. Look at all the cool Israeli startups, look at American startups located in other places, look at Europe and so on and on and on.

I guess being in Silicon Valley has its own charm because you are surrounded with people who think like you and have similar interests - that just cannot be uncool - and you can hangout with them, discuss, network etc. which would get you closer to VCs interested in this field and will allow you to get funding easier that someone without this kind of connections. But a good product speaks for itself and if you got one, investors will find you even at the end of the world.

Would be interesting to read what you guys think about this.

This is good to see and really only attracts the sort of people who are genuinely willing to do what it takes to try and start a successful online venture.

I’ve self funded and raised money several times, and the important thing with super early stage investment like this is not putting too much money of the table and getting everyone focused on getting as far as they can in 12 weeks. Theres no point in getting all caught up in valuatons at teh start, you pick people you want to work with (including money and network people like this provides) and get on with the job of creating some initial value.

Its about the number I spent on getting PlanHQ into beta with a few hundred people playing with it, and this is stage 1 in starting up for an online company.

Most people who seem to criticize this quickly on this post don’t seem to have much behind themselves, either anonymous or haven’t yet built a business yet, and just seem to be venting, maybe its because you don’t want others to get off the ground, and have a go.

It takes time, effort, vision and risk just to setup something like launchBox, if you’ve got your own money and want to do it then good for you, for others who want to work with people trying to help with time, a facility and cash, this is an option… options are Great!!

Too Many Spammers: you are so right: a good product is what you need and if you get coverage - the business will grow faster from the start, but if you don’t - it will not have a stealth start, but it will grow anyway.

Cheers, Launchbox!

FOLKS!!!!

Where were you all in the last dot.com boom-bust???? MANY incubators tried this model and it failed 99% of the time.

No matter how you slice it, there is smart money and there is dumb money, and any startup dumb enough to give away 8% of its company for $30,000 is really naive, must less pretty dumb.

If you look at the success rate of startups, the odds are STILL VERY HIGH that you will fail… that’s life and it’s a healthy Darwinian process where only the best survive.

Name me one company that an initial $30,000 investment made them a near overnight success.

Sure, $30,000 sure helps, but for 8% of your company? That’s why the industry has angel investors and things like convertible notes that are bridges to the next round.

AFTER you have given away 8% of your precious hot startup for $30,000, tell me what top-notch VC will want to talk with you.

Ok, if you are the next You Tube and can prove it, that’s another story.

Come on, I dare you, prove me wrong!

Jim

Even startups with good ideas, a good team and a good product will have a hard time raising money from VCs/Angel investors without a referral from someone they know (incubators).

It’s true you can launch a startup or raise money without the help of other similar incubators, but the odds of you succedding will be alot less.

27 — google took 100k did it not? sure they took more but the initial funding was 100k

If you create an incubator, bring in a bunch of people and ask them to brainstorm and come up with ideas, then the probability of failure is almost 100% because you cannot force good ideas to just pop up in their heads.

If you create an incubator, offer funding even as little as 15-30k and invite people who have some ideas already but don’t have the money or the conditions to bring them to life, then you got some good probability of success because these “simmered” in their heads for a while, which gave them the time to look at pros and cons, to maybe do some research on it, etc.

@27 - I’ll take you up on your dare. There are plenty of companies that have taken less then $30K and for equal or greater valuations. Look at YCombinator and some of their alumni companies for just a small example. While not everyone has been successful, there have been more than several successful ones (i.e. Reddit, Loopt, anywhere.fm, scribd). While they may not be getting valuations like YouTube (your reference), companies getting valuations like YouTube are rare. For a startup with no product developed, no sales, an incomplete team, and whatever else, a valuation of $350K-$400K is truly fair.

Giving away 4-10% of the company for $30K or less is not going to detract from major VCs putting money in. Look at the companies YCombinator has funded and see who has put money into them.

As a startup founder with numerous VC and angel connections, I can tell you first hand that many VCs like to see companies who take this route. In fact they often encourage very early stage companies with just an idea to do it. Companies like YCombinator and LaunchBox Digital answer many questions for VCs and act almost as “screeners” for them. For example, is the team truly dedicated to working on the product and delivering.

The value of the YCs and LaunchBoxs’ is not in the money, but in the connections and guidance they provide. For many startups this alone is worth 8% of the company. Take LaunchBox for example. If they were going to offer me the help of guys like of Ted Leonsis, Ross Levinsohn, Jon Miller, Scott Ferber, Raul Fernandez, and the money others on their advisor board in starting my company I would jump on that in a heartbeat. Many founders are technical with little business experience, to them something like this is an invaluable tool. During that 12 weeks they help you with the business side and prepare you to present to VCs and the press.

The key to all this is not what they do for you though, it is all about what you make of it. If you go in with the attitude of taking the $30K and developing your product and that is all you want then that is all you are going to walk away with. On the other hand, if you go in with the attitude of I am going to take advantage of every opportunity and connection they present or have then you are going to walk away with a significantly higher valuation and all sorts of investment from larger players.

@Arrington and all the other ‘clone’ comments.

“The model is based on the much emulated Y Combinator, which has now funded dozens of startups. London based SeedCamp and Colorado based TechStars have nearly identical business models.”

I really don’t get this. Investment firms, especially early stage investment firms where partners get involved with the investments are inherently not scalable. Does Sequoia compete with Kleiner? Sure, but because they are in businesses that don’t scale (i.e. investments per partner are pretty fixed), there are huge opportunities for both and they can co-exist.

This is even more the case with seed-stage incubators like Y Combinator.

Who cares if their business models are identical? Who cares if they compete? There will never be one winner like the dynamics of the startups’ industry that they invest in.

Just a clarification - The $250,000 mentioned is the amount that will be invested in LaunchBox08, our summer accelerator program (6-10 companies, $15,000 - $30,000 per company). LaunchBox Digital has other funds available for investments outside of LaunchBox08.

All these “incubators” have a flawed initial assumption that the reason startups fail is because they don’t have well-connected rich guys helping them along.

In fact, most startups fail because they have one or more of the following problems with they fail to understand and correct:

1) flawed assumptions about their market, its need for their product
2) flawed assumptions about how quickly they can get to market
3) founders who are technically savvy but unable to manage people
4) bad timing
5) wrong location, no supporting talent and infrastructure (don’t try to start a chip company in Florida)

Once the startups lacking good timing, location, market story or management have been weeded out, the rich guys with connections can certainly help move them along. But those companies are well beyond the “15K seed investment” phase.

Looking back at some of the now-laughable deals that were done by incubators IdeaLab, Garage.com, and others, I find it amusing that there’s a new crop of rich guys that are signing up to repeat the errors of the past.

Roy Smith

Can innovation be process-ized? NO! I was at a well-known West coast incubator in the dot-com-boom years…launched many companies and we had 3+ real exits resulting in nice distributions (in due time through, many years later). Did the incubator have something to do with it? Very little, I would argue as the successful “incubatees” had solid business models to start with and great CEOs + management teams. They would have survived and prospered regardless of the incubator. The incubator, IMO, served to create buzz, attract good ideas to our attention, allowed us to participate in many successful ventures. But the real value creation would have happened independent of the incubator environment.

Roy, how can you comments on laughable deals from idealab? Let’s get the facts right. Idealab, shortcomings notwithstanding, helped create Goto.com which was the precursor to Google’s paid search business model today. It also helped create NetZero, the low cost ISP which, while declining, may be the last one standing after AOL and ELNK circle the drain.

I agree with An ex-incubator above in that there is no way to put entrepreneurship on an assembly line. But, if you attract enough of an audience through to incubator, via the incubator’s network , you just may attract that one entrepreneurial nugget of gold which will payoff big for the investors and make up for all the other crazy, lame-brained ideas which will undoubtedly fail (and would have failed with or without the incubator).