Friday May 15, 2015 0 comments
FORT COLLINS -- Innosphere incubator is partnering with Covalency – a Denver-based partnership of seasoned C-level tech executives – to help promising young companies become acquired more quickly through a unique new program called Actuator.
Innosphere, a 15-year-old incubator that works with about 40 early-stage companies a year, helps startup clients move their products and services to commercialization.
Innsophere provides mentoring, business resources, networking opportunities, help with access to funding and office space for some companies.
But with Actuator – which will only be available to a small, highly-vetted number of companies each year – there will be more of a ‘hands-on’ approach, according to Mike Freeman, Innosphere CEO.
That includes skilled, active mentoring from Covalency execs, he said.
“What Covalency brings is they have very deep business expertise that we don’t have,” he said. “That’s why it’s a great partnership.”
Freeman said the goal of Actuator is to get those select companies into the sights of bigger established companies looking to expand their market offerings through mergers and acquisitions.
Freeman said investment in new internal technology among big companies – especially since the Great Recession of 2009 – has dropped dramatically. Instead, those companies are acquiring new technology by buying and/or merging with innovative startups.
“The strategy now is through acquisition – mergers and acquisitions – with over 100 acquisitions in Colorado in 2013,” he said. “For companies where it’s appropriate, we want to create a special program to get them on that acquisition path” right away.
“Getting acquired by a company that knows how to market and scale is the objective.”
Freeman said the goal for Actuator clients will be to speed up their exits and to speed up the ROI for investors who can potentially get their investment return back in half the time – i.e., five years instead of 10.
“(Investors) could conceivably do three or four companies in their career” instead of one or two, he said.
“The reason this is resonating so well, from Innosphere’s perspective, is that to be in total alignment with the company and the investor is where the magic is.”
Freeman said the Actuator idea is based on principles set forth in a book called Early Exits by Basil Peters (http://www.basilpeters.com/
“Exits are the best part of being an entrepreneur or investor,” Peters says in his book. “It’s when we get financially rewarded for all of the creativity, hard work, investment and risk we put into our companies.”
Peters notes that big companies “basically suck” at building businesses from zero to $20 million in value and need to acquire that new startup technology through successful M&As.
Innosphere is teaming with Covalency’s executive mentors – expert advisors and tech specialists – to work closely with the Actuator clients and put them on a much faster path to a successful acquisition/exit.
Actuator clients will be focused in the digital health, medical device, B2B software, cleantech, electronics and hardware and communication technologies industries.
The first three companies selected for Actuator support from Innosphere and Covalency are VAIREX air systems, a supplier of technology to the fuel cell industry; Leo Technologies, which has a sensor to measure hydration; and Yonomi, which offers an Internet of Things app for home wireless control.
Freeman said Actuator companies pay the same as regular Innosphere clients to be in the special program but Innosphere and Covalency will gain a share of equity in the company paid out at exit.
“That’s all very transparent from the start,” he said.
Freeman said he believes the Actuator program is exploring new ground.
“This is entirely unique,” he said. “As far as we know, we don’t know of literally anybody on the planet that’s doing it.”
Because of that, Freeman said the first year of the program will be “a work in progress.”
“We’ll learn a ton this year,” he said. “When the first exits happen – that will tell if it’s working.
“Helping each (Actuator) company to create the environment to be acquired is the whole objective here.”