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Entrepreneurs Polish Pitches for Excelerate Labs' Demo Day, Co-founded by Sam Yagan '05

ARTICLE BY: Melissa Harris

Chicago Tribune

September 1st 2011

Excelerate Labsan intensive summer accelerator for startups driven by proven entrepreneurs and investors, brought together two Siebel Scholars alumni who first met at a Siebel Scholars event in 2009. Jason Heltzer '02 is a Principal at OCA Ventures, which invested in this program led by entrepreneur Sam Yagan '05 (OKCupid, Sparknotes) and Troy Henikoff (SurePayroll).

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Excelerate Labs' Demo Day on Wednesday was like watching "American Idol" without Simon Cowell.

Ten entrepreneurs mounted the opulent stage at the House of Blues. Each had 10 minutes to make his or her case to an audience full of potential investors. One came from Hong Kong, others from Austin, Texas, and Silicon Valley, to scope out Chicago's most promising tech startups.

Every year Excelerate Labs gives birth to 10 companies after a three-month boot camp that provides guidance, discipline and exposure to elite investors. This year's class was selected from a pool of about 300 applicants.

Demo Day, with more than 400 attendees, is the equivalent of their graduation ceremony. No entrepreneur flopped, but some appeared more polished and their ideas demonstrated more potential to earn money. Each presenter, typically dressed in jeans and a T-shirt with their company's logo on it, exited the stage to whoops, applause and a hug from Troy Henikoff, Excelerate's chief executive. Now, they're on their own, but armed with contacts cultivated during the program.

"The reality is nobody's going to write a check today," Henikoff said. "The definition of success is getting enough interest so that you exchange business cards and have the next meeting, which is the meeting where the notes get taken and the real due diligence happens. … The goal (of the presentation) is to lay out the high-level business plan."

Of the 10 companies, three announced they had already received part of the funding they were seeking. BabbaCo, founded by Jessica Kim, sends a box of educational materials for children to subscribers every month. She said she has raised $875,000 from Lightbank, led by the venture capitalists who seeded Groupon and Silicon Valley angel investor Ron Conway's SV Angel.

Power2Switch, which helps people and businesses shop for lower electric rates, has raised more than half of the $950,000 it is seeking, said its chief operating officer, Phil Nevels. And Food Genius, a Yelp of sorts of restaurant dishes, had raised $160,000 of the $700,000 it sought, co-founder Justin Massa said. Most of this money came from angel investors, Henikoff said.

"It's coming from a couple of the mentors they were working with this summer," he said.

Excelerate also had an announcement. One company from last year's class, FanGo, a smartphone app in which people in stadium seats can remotely order food, was sold for an undisclosed amount to an undisclosed buyer. With that one sale, which Henikoff described as "modest," Excelerate recouped more than 50 percent of its investment in last year's class.

This year, Excelerate gave each company $25,000, in exchange for 6 percent equity, and helped open doors to people like Lightbank's Paul Lee.

"I met Jessica three months ago, and this is a true story, feel free to ask her, the first thing I think I told her was, 'You have an awful business,'" Lee said. "That first meeting didn't go very well. But within a span of two weeks, she had convinced me to get Lightbank to issue a term sheet to lead their next round (of funding)."

Kim also had changed her entire business plan.

Lee said the process went so fast that he needed "a sanity check" and called up Conway's firm for a second opinion. The legendary angel investor funded Kim as well.

Nearly 150 people like Lee met with this year's entrepreneurs. And it appeared many of them turned out to see how much progress had been made. (I overheard one guy say he could hold a board meeting at Demo Day, given his entire board was there. And unlike last year, when Mayor Richard Daley held a competing news conference announcing a technology infrastructure committee at Groupon's headquarters, Mayor Rahm Emanuel spoke at this year's event.)

"I saw these companies at the second week and they were rough, rough, rough," said Matt McCall, a partner at J.B. Pritzker's New World Ventures. In comparison, he described the Demo Day pitches as "clean" and "confident." That endorsement was important, since New World was giving each company $50,000 in convertible debt, essentially a loan that could later be converted into stock, and announced it would do so again next year.

Last year's Excelerate class raised more than $7 million. The equivalent for this year's class won't be known for months.

But Goshi's Jack Eisenberg wanted to make the transaction easy for those in the audience. He ended his presentation with his company's bank account routing number.

Melissa Harris can be reached at mmharris@tribune.com or 312-222-4582. Twitter @ChiConfidential. 

Link to original article: http://www.chicagotribune.com/business/ct-biz-0901-confidential-excelerate-20110901,0,1065878.column