About 55 miles from downtown Durham is the historic tobacco town of Danville, VA, a city once home to the largest single-unit textile mill in the world. Today, the tobacco auction houses and processing plants are gone, and outsourcing has caused the textile mill to close, but there’s a flurry of new industry settling into the area.
San Francisco drone and cybersecurity company KSI Data Sciences is one of the companies leading the charge. Its eastern U.S. office in Danville houses 24/7 customer support as the company continues to improve upon its cloud-based video and data management products.
KSI was able to make the move with help from The Launch Place, a nonprofit with the goal of supporting and funding up-and-coming startups while reviving the Dan River region economy.
Through a year-round application process and a pair of regional startup competitions, The Launch Place makes pre-seed ($25,000 – $75,000) and seed fund (up to $250,000) investments to early-stage and growing startups within the software, IT, engineering, hardware, electronics, bio-materials, health tech, green energy, advanced manufacturing and medical device industries.
“Our purpose has been to provide services for businesses in the region that want to expand and need help,” says Eva Doss, CEO of The Launch Place. “We are proud to be the lead entrepreneurial organization.”
Doss hopes that The Launch Place will create an entrepreneurial ecosystem that will not only bring in jobs, but companies that are enthusiastic about the city.
Growing from Small Town Roots
Originally called the Southside Business Technology Center (SBTC), The Launch Place was founded in 2004 when a group of CEOs, bankers, industry leaders and entrepreneurial enthusiasts in Southern Virginia wanted to simultaneously fill an economic and business community need.
During its first five years of helping existing businesses in their development efforts, the SBTC was able to build a network of support, accumulating funding from local governments in the region and consulting projects.
After receiving a $10 million grant for five years from the Danville Regional Foundation in 2012, the SBTC rebranded to The Launch Place and expanded its portfolio of service offerings, which included opening a second location at First Flight Venture Center in RTP.
According to a study conducted last year by DunRobin Ventures, the failure rate for a first year startup in the seed funding stage is around 86%. Venture capitalists, the study says, are wary to invest funds during this vulnerable stage in a company’s life due to this failure risk. The study also shows that the percentage of failure is significantly less if a company can make it to certain funding milestones.
This is a challenge The Launch Place has taken on full force.
“Companies coming to the area needed quite a bit of money, and we wanted to create an angel fund or network to support these ideas startups were coming up with,” says Doss.
To date, The Launch Place has invested $2 million in four pre-seed investments and seven seed investments to a total of 10 companies. The Launch Place’s twelfth investment will be announced on March 17. It averages about four deals a year.
But the support for startups doesn’t end with capital, says Doss. The Launch Place offers business services like marketing and public relations, market research, financial analysis and other consulting, as well as office space, residential and office rent subsidies on top of the investment funds.
Nate O’Keefe, founder of Roobrik, an online decision platform for caregivers of seniors, believes that the wrap-around business services made the difference during its two-year involvement with The Launch Place.
Roobrik received the maximum pre-seed investment in 2015, and then a follow-on $200,000 after closing three deals seven months later. Beyond the essential capital, the business analytics offered by The Launch Place helped Roobrik pull data on the span and interests of its audience in order to evolve its core product. Additionally, PR services provided by marketing manager Kelly Fitzgerald helped Roobrik earn appearances on several prime time television shows and reach a much larger audience.
“Their interest in supporting businesses is above all else,” says O’Keefe.
Creating an Environment for Success
Seed Fund Advisory Board (SFAB) member Marty Koszubowski says that when the SFAB reviews an application, members shy away from companies that appear to be approaching The Launch Place solely looking for money. The Launch Place wants to bring on companies that will not only succeed, but actively contribute to making the region a hub for innovation.
As part of the pre-seed or seed investment, portfolio companies must commit to the creation of jobs in the Dan River region, which includes Danville City and Pittsylvania County, VA, and Caswell County in NC. With a $250,000 investment, a company is required to have five employees working in the region within three years, with salaries averaging at least $50,000.
Chairman of The Launch Place Board of Directors Troy Knauss, an exited entrepreneur with 20 years of startup experience, is enthusiastic about the unique opportunity The Launch Place allots early-stage companies.
“Currently there is a lack of capital available to early stage entrepreneurs,” says Knauss, who joined the board two years ago. “The Launch Place not only gives capital, but the resources to make a company a company.”
Though starting a company in a big city like Raleigh would be easier, there’s less competition in smaller towns. Startups are also more appreciated because they can push an economy forward.
“Big companies are going to big cities and taking jobs from small towns and cities,” says Knauss. “Small towns need entrepreneurship to grow their economy. For The Launch Place to be successful, we need to make it valuable for people to come to Danville.”
KSI Data Sciences founder Jason Barton sees that value.
As a second-time entrepreneur, Barton says that raising money was harder for him this time around—he blames naïveté.
Bringing his business to Danville in 2014 allowed KSI to fully develop its data-sharing technology and reach a wider audience. After receiving a follow-on investment from The Launch Place last year, bringing its total funding from the nonprofit to $350,000, KSI is continuing to expand its line of MissionKeeper™ products and will be adding jobs to the Danville office to cover customer and cybersecurity support.
It’s already partnering with the Danville Community College to offer drone training courses, which not only benefit KSI’s own employees, but supports the budding technical industry in town.
Though Barton was skeptical about expanding KSI to Danville at first, he admits to being pleasantly surprised.
“When I went, I found all these positives,” Barton says. “We found ourselves in the middle of some great research and development, and I started thinking, ‘why wouldn’t I come here?’”
Panacea, a precision medicine manufacturer planning to bring its manufacturing operations to Danville, is receiving recruiting and talent training assistance from The Launch Place as part of its seed funding package.
Founder Andy Schwab connected Panacea to The Launch Place from partnering organization First Flight Venture Center because of the opportunity for funding. He believes that Danville will also offer key educational resources for his staff.
“There is a great training program for a wide range of needed skills at the Danville Community College, with extremely impressive capabilities in advanced manufacturing,” says Schwab.
Fostering Early Support
Jan Davis, a member of the Seed Fund Advisory Board since 2013, says that startup companies typically need to raise around $1 million to get started, and generally rely on an arsenal of funders. The Launch Place’s network of angel investors and connections with other incubators allows it to lead companies in the direction that will offer the greatest support so startups can progress with product development and building an employee base.
The Launch Place portfolio companies have received a total of $17 million in funding from other investors.
Another way The Launch Place supports first time entrepreneurs and early-stage startups is through its IdeaFest and Big Launch Challenge competitions.
IdeaFest gives 20 entrepreneurs two minutes each to pitch an original business idea in front of a panel of business experts, including investors. That’s followed by a three-minute Q&A segment. March 31 will mark The Launch Place’s fourth annual IdeaFest competition. A chance to take home a piece of $10,000 in prize money is at stake.
Doss says that the goal of this competition is to throw a spotlight on the entrepreneurial scene and cast a wide net that will bring in a diverse group of entrepreneurs within the industries The Launch Place supports.
Last year at the Big Launch Challenge, Encapsio, a producer of silicone microspheres for the cosmetic industry, took home a $20,000 first prize, and cell and particle research group Ascent Bio-Nano Technologies won $10,000 for second place.
Applicants for IdeaFest must be in the initial stages of development, with to-date funding reaching no more than $25,000. The deadline to apply for this year’s competition is March 1.
Though winners are not required to partner with The Launch Place, Doss hopes that participating companies will see the value of the nonprofit and doors will be opened for partnerships either with The Launch Place’s consulting services arm, the two investment funds or both.
Raising a Small Town Economy
Since The Launch Place has primarily been a first money source for its portfolio companies, Doss and her team think it is important to surround each company with additional resources that help it become a top supplier or product and attract future capital.
Their mission is twofold—to help these companies expand and create jobs and to continue to support more businesses with the funds.
Successful exits from The Launch Place will funnel returns back into the nonprofit’s funds, so it can continue to back future businesses that impact the region.
The vision is for The Launch Place to support a critical mass of startups over the next three to five years, all while creating jobs and economic impact in Danville and around the region.