As America’s heartland tries to reduce its reliance on traditional manufacturing, small cities are starting to follow the lead of their bigger counterparts by investing in programs aimed at boosting entrepreneurship in tech and other industries.
In Wisconsin, the latest example is Racine, a historically blue-collar city south of Milwaukee that was hit harder than some areas by the recession. A year ago, the city opened a free co-working space downtown for local entrepreneurs and freelancers, modeled after the hip, open office environments that have sprung up across the globe in recent years. The space is funded by the city and overseen by Gateway Technical College as part of a broader entrepreneurship initiative dubbed “Launch Box.”
Now, Launch Box is adding another facet that has become all the rage in aspiring startup hubs everywhere: an accelerator. The Launch Box Growth Accelerator, which received a $50,000 grant from the U.S. Small Business Administration in September, will hold a pilot 12-week session in March at the Racine co-working space.
Greg Meier and Nick Wichert, who lead the VictorySpark startup accelerator for military veteran entrepreneurs in Milwaukee, have been tapped to run the Launch Box accelerator. VictorySpark, which also received a $50,000 grant in September through the same SBA program, will hold its 2015 program in the summer.
“They have the expertise,” Launch Box manager Kristin Niemiec says. “So, we’re able to get up and running much faster than if we were to try to pull this together from scratch.”
The Launch Box accelerator will provide mentorship, product development expertise, and other services to help participants commercialize their ideas. The accelerator is open to any type of business, but will focus on early-stage companies that have yet to generate revenue, Niemiec says. Priority might be given to businesses led by women, minorities, veterans, and other groups that are underrepresented in the startup world.
Five to seven startups will be chosen for the first session, and each will receive a $10,000 grant. Launch Box is scouting other funding sources to supplement the SBA grant if the program wants to accept more than five companies, Niemiec says.
This grant-based accelerator model—different from the typical accelerator format that offers seed funds in exchange for a small equity stake—is growing in popularity in Wisconsin. Other examples include VictorySpark and Madison-based Madworks, which launched this year.
But running a startup accelerator in Madison or Milwaukee, which have larger populations and more vibrant entrepreneurship scenes, is one thing. Launch Box’s accelerator, which is only open to businesses in Kenosha, Racine, and Walworth counties, might have more difficulty attracting a steady stream of entrepreneurs with promising ideas.
Not so, Launch Box leaders say.
“We have innovative folks here,” Meier says. “When you give them a pathway, they emerge.”
Niemiec thinks an accelerator can succeed in Racine, pointing to the demand Launch Box’s 2,700-square-foot co-working space generated in its first year. Organizers hoped for 50 members. They hit that in the first three months and are now at 120, she says, with a broad mix of tenants that include home healthcare startups, a website developer, and a photographer.
“The reason why the accelerator model is important in places like Racine is we need more volume” of startups, Meier says. “We need more entrepreneurship there no matter what.”
That statement could apply to the whole state, which over the past few years has consistently ranked near the bottom nationwide for the rate of people starting new businesses, as measured by the Kauffman Foundation.
The Launch Box accelerator’s success will partly be judged by job creation and the amount of follow-on funding raised by program graduates, Niemiec says. But the accelerator’s bigger goal is to change the local culture, something that’s difficult to measure.
“I think we’re just trying to really just raise awareness of [entrepreneurship] and get entrepreneurs to kind of come out of the woodwork a little bit and celebrate them,” Niemiec says. “At times I think we don’t appreciate the fact that failure is not necessarily a bad thing, and learning from those failures.”
Organizers aren’t sure what the pool of applicants will look like for the first Launch Box accelerator program, but it could include hardware startups, which are sometimes outside the scope of three-month accelerators that have generally focused on software businesses. Launch Box might be attractive to hardware companies because participants will have access to Gateway’s engineering and manufacturing laboratory in nearby Sturtevant, the SC Johnson iMet Center, where companies could develop prototype products.
“I think that’s a big deal,” Meier says. “You don’t know who’s going to apply, but boy, I’d like to see a lot of” physical product companies.
That’s where Racine’s historic strength in manufacturing could play a role in fostering a startup community. The presence of companies like consumer products giant SC Johnson means there’s plenty of design and engineering talent in the area, Meier says. “You have the ingredients for developing and prototyping products,” he says.
