GRAND RAPIDS — A business accelerator in East Lansing wants to extend into Grand Rapids this fall to tap into the local entrepreneurial ecosystem and support more high-tech startups.
Grand Rapids would become the second location for Conquer Accelerator, a partnership between Spartan Innovations L3C and venture capital fund Red Cedar Ventures, both of which are subsidiaries of the Michigan State University Foundation.
“What we’re doing is taking our program that we’ve had success with here and bringing it over to Grand Rapids,” said Frank Urban, director of venture creation in life sciences for Spartan Innovations.
“That’s definitely an ecosystem we’re interested in,” Urban said of Grand Rapids. “We have been fairly MSU-centric in the past, but we’re starting to open up a little bit to the surrounding ecosystems around our MSU community.”
Founded in 2015 with a goal of building profitable, self-sustaining companies, Conquer Accelerator annually selects five high-tech, startup businesses for 10 weeks of extensive training, and ongoing entrepreneurial support and mentoring. Each of the startups chosen from a field of applicants also receives a $20,000 investment from Red Cedar Ventures in exchange for 5 percent equity or a convertible note.
Urban specifically cites Spectrum Health as a partner that Spartan Innovations already works closely with, plus the university’s College of Human Medicine and the Grand Rapids Research Center that could support Conquer Accelerator in Grand Rapids.
“We have some strategic partners and potential strategic partners in Grand Rapids,” he said.
In its first four years, the business accelerator supported the formation and funding of 20 startups, 15 of which are still operating. Nine of the 15 companies are based in East Lansing, and four of those operate out of the incubator space.
The startups going through the program were able to leverage the initial backing from Red Cedar Ventures to collectively attract $2.3 million in follow-up capital investments and create 30 jobs.
Red Cedar Ventures and Spartan Innovations have since recorded one exit and are in negotiations for another of its portfolio companies, Urban said.
“We’re getting a lot of traction out of the startups,” Urban said.
The Grand Rapids Local Development Finance Authority, which operates the city’s SmartZone, last month approved a memorandum of understanding with the MSU Foundation for a local Conquer Accelerator. The LDFA would pay up to $120,000 to cover a portion of the costs to extend the business accelerator to Grand Rapids.
Conquer Accelerator’s goals are “exactly in line with the goals and priorities of the SmartZone” to nurture and build profitable high-tech startups that create jobs, said Jonathan Klooster, acting economic development director for the City of Grand Rapids.
“It actually is a perfect fit to achieve the priorities of the SmartZone,” Klooster said.
The MSU Foundation intends to base a Conquer Accelerator out of MSU’s Grand Rapids Research Center on Michigan Street in downtown, Urban said.
Pending negotiation of a final contract with the LDFA for Conquer Accelerator, Spartan Innovations tentatively plans to launch the 10-week program in Grand Rapids in mid September, Urban said. Advertisements and requests for proposals from startup businesses likely will go out in March, he said.
Urban expects to receive interest from 15 to 20 startups.
“We don’t think we’ll have a problem getting five teams,” he said. “There’s enough entrepreneurship and ideas out of Grand Rapids.”
The LDFA can bring to Conquer Accelerator several partners that are in the SmartZone, such as Spectrum Health, the Van Andel Institute, Grand Valley State University, Start Garden and The Right Place Inc., to identify startups that are prepared to participate in the training, Klooster said.
The program “is not going to be for everybody,” he said.
“It’s very intensive and it’s really intended for those companies that are ready to spend an intense 10 weeks with a lot of experts coming in to help them move the needle on their business, and they’re going to have to be companies that Red Cedar Ventures wants to invest in,” Klooster said.
Startups should have founders that “demonstrate a willingness to learn and the ability to accept and integrate feedback without being defensive,” and offer a product or service “that solves a problem for a specific customer,” Klooster said. They should operate with less than $1 million in external funding and have a scalable distribution model or proven ability to scale sales, he said.
“Ideally they’ll have a functional prototype or proven product success,” Klooster said. “This isn’t the program for somebody with an idea where they haven’t had some work put into evaluating that idea yet.”
Spartan Innovations initially plans to operate the Grand Rapids Conquer Accelerator with staff from East Lansing. The organization intends to train and turn over control of the business accelerator to a local team within a few years to “make it strictly a Grand Rapids thing with all Grand Rapids mentors and all Grand Rapids teachers and utilizing everything from Grand Rapids,” Urban said.
“Our goal is not to go out there and run this program like we run it in East Lansing and using all of our people. The goal is to take the program that we built in East Lansing and bring it out to Grand Rapids, train people in Grand Rapids how to run the program, and allow Grand Rapids to eventually run the program, and then they can tailor it for Grand Rapids,” he said.
In its first few years, Conquer Accelerator primarily selected student-run startups and broadened eligibility beyond campus in the fourth year. In the fifth year, the business accelerator will consider startups formed by university staff and faculty.
The training focuses on areas such as business planning, patent and copyrights, customer discovery, securing capital, and seeking federal grants for technology development from the National Institutes of Health, National Science Foundation and the Small Business Innovation Research (SBIR) program.
Conquer Accelerator in the 2018-19 fiscal year submitted 16 SBIR applications for highly competitive federal grants for startup clients, Urban said, noting that eight were funded.
Spartan Innovations eventually wants to extend Conquer Accelerator beyond just Grand Rapids and into other markets around the state. It will focus first on areas where “MSU has assets” that can support the business accelerator, Urban said.
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