Lessons From The Front Line Of A Microfund

One year ago today I blogged about a new microfund here in Nashville called Jumpstart Foundry.  I have decided that it is time to take a look back at this experiment. 

There have been several initiatives like this across the country and they seem to be playing an important part in helping launch new ventures at a time when we need them the most.

Jumpstart Foundry was started by a local venture firm called Solidus Company.  The goal was to support local entrepreneurs and to help accelerate the growth of start-ups in the Middle Tennessee area.  Like most microfunds, JumpStart Foundry (JSF) has focused on very early-stage concepts.

Each of the selected concepts for our first year of operating this microfund received $15,000 in equity capital and special arrangements with participating partners for marketing, accounting, legal and technology services.  In addition, three members of the group offered their knowledge and experience to mentor the entrepreneur and accelerate the success of the project.  In return for this investment, JSF received a collective 10% ownership in the Common Stock of the company.

Because I have established for the Belmont University centre for Entrepreneurship a “no investment, no consulting fee” policy for alumni and student ventures, I have not participated financially in this fund.  However, I have been very active as a participant in this program and as an adviser for a couple of the funded businesses (I also make it a policy not to formally sit on their Boards, however).

So far the project has been a success.

Vic Gatto, a partner with Solidus Company and the driver behind JSF, shared with me some of the reasons this microfund has been so successful thus far: 
Diversity & Quality of our Mentors:  “I intentionally have assembled a strong group of very talented folks.  We had a good group last year and this year it will be incredibly strong and deep.  No matter what challenge an entrepreneur runs across – one of our Mentors will have direct experience in this area and be ready to provide hands-on, direct, first person guidance.  This is true in the typical areas of accounting, finance, marketing, fundraising (like other micro funds).  But it is also true in detailed technical areas such as: Scaling performance in a cloud hosted app, choosing Ruby or PHP for dev, successfully negotiating angel term sheet,  the use of 99 designs to inexpensively build a subscriber base of users, as well as lots more…  The point is – our 60 Mentors are entrepreneurs & angels themselves…not in some distant past but right now – today.”

Program Content:  “Lean Startup / Customer Development in practice.  Everyone has heard the buzz words, but the JSF program will force you through the Build-Test-Learn loop. Our participants will iterate fast, build cool stuff, and get out of the building and learn about what works and what doesn’t for 14 weeks until they discovery a product / market fit with paying customers to prove it.  It is a very active – ‘jump in and swim’ approach to the startup process.”

High standard:  “We are going to be highly selective and targeted in who is accepted into the program.  JSF intends to launch 100% of our companies post graduation.  We can only achieve this in small batches.  Last year we ran at a rate of 1 per month as we built the infrastructure.  This year we will have a cohort of 6 over 14 weeks in the summer.  This may grow to 8 or 10, but we believe that quality trumps volume.    We will build Nashville one small group at a time over the next 5-10 years.  There is no shortcut that can maintain quality.”

JSF Angels:   “Jumpstart is creating an angel network for the explicit purpose of supporting our graduates after the program.  These angels understand the Jumpstart Foundry way and are interested in getting involved for two distinct reasons.  They know we have very high quality investment opportunities and they are interested in building the entrepreneurial ecosystem in Nashville.”

Alumni (and TS network):  “Over the next several years JSF will build a strong culture and alumni network.  JSF graduates will share a common bond with other graduates and current participants.  This will lead to opportunities available only to JSF alums.  However, we realise that building an alumni network  is a long-term process.  For this reason, we have accelerated this process by joining the Techstars Network.  It’s not an exaggeration to say that Techstars may be the greatest organisation for tech startup mentorship in the world.  Acceptance into Jumpstart means access to the TS alumni network, and that access is priceless.” 

One of the things we learned this first year is that our entrepreneurs, like all entrepreneurs, can get a bit lonely.  To help build a community of support, we are changing our model this second year from funding one deal a month, to funding a cohort of entrepreneurs who will all work together over the summer in a 14 week program.

JSF is now accepting applications for the summer 2011 Jumpstart Foundry cohort.  The deadline for application is March 18, 2011.  You do not have to be from Nashville or intend to keep the business in Nashville.  But, if your experience is anything like mine was when I came here eight years ago, there is a good chance that once you are here you will definitely want to stay here!

You can view a video about this microfund here.

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