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Sunday, 13 May 2012 20:00

Start Garden seeks ideas to plant, grow

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Start Garden seeks ideas to plant, grow PHOTO: Joe Boomgaard
GRAND RAPIDS — Amway scion and ArtPrize founder Rick DeVos has launched "an unconventional venture capital fund" that blends elements of elevator pitch competitions, business mentoring and community engagement.

DeVos introduced Start Garden LLC, which is backed by a $15 million commitment from the DeVos family, on April 26 at a press event at the JW Marriott Hotel in Grand Rapids. The company will make initial $5,000 investments in new companies each week and then participate in follow-on investments of up to $500,000 as some of the ideas mature and develop into projects or businesses. Companies or individuals can submit ideas via the company's website, www.startgarden.com.

"It's unlike any fund in the world," DeVos said. "It involves hundreds of ideas, which can come from anywhere and from anyone."

The organization plans to make two $5,000 investments each week, one to a business idea selected by Start Garden staff and the other to an idea selected by community members in an online vote.

The program has been "overwhelmed" by the response to the announcement. In its first week of operation, online users submitted more than 250 ideas on the Start Garden website, which had more than 20,000 visitors, 1,825 of whom endorsed an idea.

In taking note of the volume of ideas, Start Garden staff decided to select two ideas in which to invest $5,000, in addition to one idea endorsed by the website visitors.

Start Garden selected Click Plow, a web-based product allowing users to simply schedule snow removal services, and NxtMile Sport Insoles, a product designed to reduce injuries in young athletes. The public endorsed Dirty Water Beer, a for-profit business that sells "distinctly packaged" beer and uses profits to fund fresh water wells in developing countries.

The ideas selected for initial funding must incorporate as a Michigan LLC and the representative must agree to return in 60-90 days to provide an update on the company's progress. Start Garden has enlisted partners including Steelcase Inc., Amway Corp., Cascade Engineering Inc. and Fifth Third Bank to provide resources and mentoring to companies.

"We're looking for people who do something smart with a little," he said.
If Start Garden staff thinks more investment is merited, it will decide whether to put an additional $20,000 in the idea to help move it forward. The organization said it will incrementally invest up to $500,000 in a project that demonstrates momentum and growth.

"Our philosophy is that it could be a big investment or a small investment, but it's always an investment in the next step," he said.

More developed ideas could be eligible to go immediately to the higher levels of investment, in the $20,000 to $50,000 range.

At the $5,000 investment level, Start Garden takes no ownership of the company, but it does retain an option to be an investor "should it turn into a successful business." As an idea moves to the project phase and into becoming a business, Start Garden has an option to remain an investor in the company, at the very least for 3 percent equity if the company issues securities in the future. If the idea continues to advance and the company seeks another round of investment, Start Garden has the right of first refusal to invest in the entire amount or a portion.

Investment industry supports concept

Reaction from the broader capital industry was positive and supportive of the idea, although sources were hesitant to call Start Garden a true venture capital fund. The dollar amounts of the investments and the style of investing place it more in the pre-seed fund category by definition, they said.

Semantics aside, the industry sources said the program is a good step forward in bringing more ideas to light and in providing resources to entrepreneurs.

"If you read between the lines and really understand what they're trying to do, they're really trying to get entrepreneurs out and going. That's always a great thing," said Raj Kothari, co-founder and managing director of Seneca Partners, a Birmingham, Mich.-based venture capital and merchant banking firm. "Sometimes, people need a kick in the pants, a vote of confidence to get going."

Merrill Guerra, executive director of the Michigan Venture Capital Association, said the program importantly blends monetary investments with added resources and mentoring that startup businesses need to get their ideas to the next level.

"Most business ventures don't need a ton of money right up front," she said. "If they get what they need and have the ability to get the next set of money after they hit key milestones, and they give them help to hit those milestones ... that makes sense. Every additional resource helps."

While Kothari applauds the program, he is quick to note that what it is offering is still small in comparison to what the state as a whole requires to really restart the entrepreneurial economy.

"We don't need one of these, we need 100 of these," he said. "It's an ecosystem. We've got successes and we've taken great steps, but we're still the little kids compared to the rest of the country."

Next steps

Meanwhile, DeVos said the community should expect another announcement later this year about a further development of Start Garden.

The launch of the program signals changes for DeVos' other entrepreneurial concepts. He said Start Garden is effectively the next step in the evolution of Momentum, which provided startup businesses with resources and mentoring. Meanwhile, the 5X5 Night experiment, which offered up to $5,000 for ideas voted on by a panel of community judges, is on hiatus but could morph into the public events for Start Garden, he said.

"Start Garden is looking for seeds. Start Garden creates the field and brings the water. We ask the people to bring their ideas and plant them. We ask existing businesses in our region to become the farmers. We believe the soil is fertile for business here and we can be the best place for someone to have an idea and run with it," DeVos said.

 

Read 1213 times Last modified on Thursday, 02 August 2012 20:00

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