In October, 2012, Insider Louisville was posting about Impulcity – one of our rare tech startups – leaving for The Brandery in Cincinnati, because Louisville didn’t have a startup accelerator … or really much at all in the way of startup infrastructure.
Then, last March, Velocity Indiana, the Jeffersonville-based seed accelerator, educational center and co-working space, appeared out of nowhere. Or at least that’s the mythology.
So, we started asking ourselves, “How did the Louisville area go from zero to 100 so quickly, with multiple incubators and accelerators now?” And the answer turned out to be a lot different than we expected.
The effort to create Velocity started in 2011 when Purdue University officials called Kent Lanum, executive director of the Paul Ogle Foundation, and Bryce Butler, Blue Sky Foundation executive director, with a proposal to create a regional accelerator.
The Ogle Foundation, a private foundation created by Silgas entrepreneur Paul Ogle, helps build Southern Indiana through donations to everything from historic preservation to scholarships.
Blue Sky Foundation, created by the Shine family, which owns Samtec, supports for-profit and non-profit ventures across a number of sectors including clean energy, mobile information and communications technology and agricultural technology.
Nothing went quite as planned, which tends to be what happens in the startup world. But Lanum and Butler persevered.
Velocity now operates at a facility in Water Tower Square.
The overall philosophy is that Velocity will have lots of small successes along with a few big hits. It’s not about creating jobs directly so much as creating a regional entrepreneurial culture, Lanum said. Then, the companies that do well ultimately will support Velocity, paving the way for the next generation of startups to go through the accelerator.
Lanum calls it “venture philanthropy. We’re trying to create more Paul Ogles.”
Insider Louisville: Let’s talk a little about the mythology of Velocity Indiana springing into being overnight. In fact, there were months of planning, right?
Kent Lanum: We were approached by Purdue University in 2011, Thanksgiving time frame. They had an opportunity to get money from the federal Economic Development Agency, a 1-to-1 match. They needed $4 million, and they had 25 days to raise it ….
IL: Twenty-five? Not 30! Why 25 days?
KL: Because (Purdue) held it and sat on it, then got all the funders together. Put it up on a board with an equal sign next to our names. Trying to get us to put up money for it. They had a (tax increment financing) district. They had a president going out, so he had money burning a hole in his pocket. There were a million dollars there. I pulled the (Ogle) board together, and we were able to put a million into it. Horseshoe Casino Foundation, they agreed to a half million. Blue Sky Family Foundation was going to do a half-million because that’s John Shine’s family farm where (Purdue Research Park) is (in New Albany.) We tried to get Purdue to put in a half million ….
We ultimately made the $4 million match. Unfortunately, when Purdue applied for the federal funds, the federal funds weren’t there. They got turned down. This sure deal they had got turned down. For various reasons, but I don’t want to get into that whole thing. Bryce kept going forward on it. Then you guys came back in the with the accelerator idea.
Bryce Butler: Purdue is a strategic partner of Blue Sky. We continued to have conversations with them about their expansion effort in the (research) park. We were one of the original funders of Purdue. We brought the Purdue Research Park to Southern Indiana back five or six years ago. They’re still growing like gangbusters. The largest capacity research park they have in their entire statewide network including West Lafayette. That was one conversation, and that’s still ongoing.
Simultaneously, we started working with Mark Crane, (former executive director at GLI’s EntepriseCORP) and some others on a regional accelerator. The original concept was to have one accelerator – given the size and demographic of our region – to have one accelerator that was regional. The intent was two locations, one accelerator, one group of mentors and one funding pool. But that didn’t end up panning out.
Louisville has a vertical focus on health care, aging care, and that’s definitely not something Southern Indiana is interested in. So we ended up saying, “Why don’t we do two? Louisville, you can continue to focus on XLerate Health (at Nucleus). And that’s where that’s gone. And what we’ve done is basically pick the ball up in Southern Indiana and we’ve been able to do it a little quicker because of the fact Blue Sky and Ogle came in with capital and said, “We’ll back this for three years.”
So in Indiana, we came up with more of a traditional sector-agnostic accelerator … Techstars-like, Y Combinator-like. And we specifically don’t accept FDA-regulated companies because we see the value-added for those companies would be to participate in XLerate Health (in Louisville.)
KL: We came to the decision last summer that we wanted to keep away from the real estate model and put our money instead of into a building, actually into a program that would then be able to run for three years as a trial. And that program isn’t just an accelerator. It’s also meant to be an entrepreneurial education center.
So we hope to see programs start blossoming out from around that. And from our side, we’re going to look at trying to put pods out there in Clark and Floyd counties where we can find businesses willing to host some of these people as they come through the accelerator.
IL: So you see Nucleus doing whatever they’re going to do, it’s still not clear. You see the other accelerators/incubators …
KL: Well, Bryce, you have your own with the social side of things.
BB: Right, we also do Village Capital (agriculture and clean tech incubator.)
KL: I think these can all thrive and survive in the same market. We’re just using our facilities and funding more as a regional convener …. If you look at our board of overseers, it’s made up of everybody from both sides of the river. Van Clouse at U of L. IUS. Purdue. JCTC. Ivy Tech. We have Doug Cobb on our board of directors.
BB: Well, the other thing was, one of the reasons we decided to do one in Southern Indiana independent from a regional accelerator was, when we looked at Louisville, they already had initiatives we didn’t have. Louisville has had EnterpriseCORP as part of GLI for the last 12, 13 years where Southern Indiana didn’t have that focus on young startup companies and the ecosystem. Our desire is the accelerator program would be a capstone program. But it would be one program of many, and that we were trying to do more than an accelerator that would be attractive to Southern Indiana. We also wanted to spur entrepreneurial thinking. Innovative experiences all the way down to high school and middle school. The leadership of the Ogle Foundation has helped drive that broader thinking.
KL: Well thank you. Nice plug. Thank you.
IL: That’s the important thing readers should take away … that this wasn’t as simple and condensed as everyone thinks. There were a bunch of pieces …
KL: If we can somehow help coordinate on our board of advisers cooperation between U of L and Purdue, for example. There’s talk of rapid prototyping labs. Joint ventures. We’re trying to figure these things out.
BB: If you look at Harvard, Harvard has this new thing called the iLabs. (Harvard) is basically trying to break down the silos at the universities and create a “third state” where they bring together the creative class, the engineering class, the science class and put them all into one collaborative state. To create an ecosystem for more innovative thinking. Getting the engineers out of the theoretical and more to the applied components of their programming. The accelerator is very important, but it’s a bigger conversation … trying to leverage the assets of the region.
That’s why we think partnering with Louisville, and not competing with Louisville, is the best option. Louisville has a lot of great assets … to be able say, “We’re located in Southern Indiana, right next to a major metropolitan area with a UPS hub that’s within two-thirds of the U.S. population by driving time.”
KL Remember our napkin drawing? Where we had, “Louisville is the gateway to the South, but we’re the gateway to the Midwest?” We can leverage the assets of two states. Indiana is, for better or for worse, considered a much better state business-wise. We have a lot of tools they’ll never have. Well, I wouldn’t say “never have.” Something that they’ll strive to have.
IL: Let’s say it: “Never have.”
KL: No, I don’t want to piss anyone off.
BB: There were some research reports that found psychologically, it’s easier for someone to move within their geographic region than it is to change regions. As we’re recruiting companies for our program, we’re targeting the marketing to the north. It’s mentally easier to say, “Oh, I’m just moving within Indiana.” Or, “I’m just moving from St. Louis to Indiana.”
IL: I completely get that. Before we forget, what was the breakthrough event that assured Velocity came into existence?
KL: In October or November, Bryce, you and I started talking after (the Purdue EDA deal) fell through. I was talking to you about the regional accelerator. You emailed or called me and said, “What if we moved on the Southern Indiana option?” and we called Mark Crane. We said, “Let’s stop waiting on it and let’s do it.”
BB: Go back about a year … the regional accelerator got to the point where it was still going to be regional, but Louisville was having a hard time coming up with the capital to cover their operating costs. So, I basically went to the table and said, “Look, we will cover the Southern Indiana operating costs … if you can find someone on the Louisville side to cover your costs.” So we kind of left it there.
As they were continuing to develop their strategy, they started to focus on health. When it went that direction, which I think was smart, it wasn’t as compelling for us. We didn’t think we had as much value to bring to the table when it became hyper-focused on health. So we said, “Why don’t we do both?” Kent said, “Why don’t we?” So we called Mark (Crane.)
KL: Yeah, he jumped on that with both feet! We called him Friday, and he said, “Let’s meet Monday morning at 9 o’clock.”
BB: So, literally, within a couple of weeks, they had a rough sketch put together. Kent presented it to his board (in December 2012). The board was like, “Yeah, let’s move forward with some investigative stuff.” Tony (Schy) came in end of November, beginning of December?
BB: Yeah, we met with him at the end of October just to brief him on what we were doing. We made that decision, “We’re going to need somebody full-time, and who’s the right person?” We all agreed Tony was the right person at that time. We said, “Why don’t you come in and be involved in the planning going forward? We’ll hit this thing running.”
(Editor’s note: Tony Schy, now Velocity managing director, co-founded Jeffersonville-based health insurance auditing firm Chapman Kelly. Schy sold the company in 2010.)
KL: We launched it, and I will say, it’s like driving a car and putting it together at the same time. We’re still putting the wheels on the car as we’re driving down the road. We’re working through our 501(c)3 (non-profit tax application), So right now, we’re still funding it privately. But we hope to have sponsorships. Corporate deals coming in. Other grant opportunities from other foundations that would like to do the same.
IL: That’s exciting. That’s cool.
KL: Well, it is. Ultimately, we’ll be looking at trying to figure out Phase II for these kinds of companies coming through and say, “Can we create a pool that can create some synergy … with true applicability? So they can actually survive.”
IL: So, you’re almost on the pledge plan? You have private money you’re rolling down the road on. Then, when you get your IRS non-profit status, you’ll go over to the money that was raised?
KL: Well, we’ve said from the get-go, “No public money.” Unless it has no strings attached. We’ve said we’re going to keep this as private as we can.
BB: We want public engagement. Our advisory board is made up of a lot of regional leadership. But at this point, we feel like we can be quicker and more responsive to the market if we keep the dollars private. I think it has proven successful, being able to launch this thing in the last nine months or so.
KL: We can’t announce a lot of stuff you and I know about (Bryce) but it’s been amazing the amount of feedback we’ve gotten regionally. Not just here, but Indianapolis. Cincinnati.
BB: We’ve had some major wins. Tony Schy was a major win. One of the things as we were looking at the landscape of accelerators that kept coming back as we were getting feedback from around the country was, “You want a successful entrepreneur, a seasoned entrepreneur, to be that mentor and drive the programming.”
He went to South By Southwest last spring as part of Velocity. He and Tendai (Charasika, new executive director of EnterpriseCORP) and Mark were the first entourage to go to that new Launchpad training (in Los Angeles). We knew from the beginning we wanted to integrate the new Lean startup methodology … into the core of our program. That’s the reason some of the startups in California agreed to come to our accelerator over others because we use Lean Startup principals in our curriculum.
KL: Between Bryce and me, we’re putting about $1.2 million roughly into this project over the next three years. And that includes the $20,000 per team we put out there. We hope to have 25 teams go through this during the next three years. Five this year, then 10 starting next year, then 10 the following year.
Here’s a list of Velocity Indiana programs:
· Mentor-driven seed accelerator programs (summer & fall)
· Startup Weekend NEXT programs (spring & fall)
· 5 Across, pitch competition (every other month with Awesome, Inc. in Lexington)
· Lean Analytics Workshop with Ben Yoskovitz (a one-time event and in conjunction with the IdeaFestival)
· Host for the World Affairs Council Exchange Program
· Community co-working and event space
· Startup Weekends (Louisville & Evansville)
· Purdue & IUS High School Summer Entrepreneur Academy
· Venture Sharks