Portrait of an Incubated Summer
Jeb Thomas was a freshman at Boston College when he decided he wanted to enter a venture capital competition on campus. The business major schemed up a business model with his roommate Thomas Coburn, a pre-med student with an entrepreneurial bent. They sweated and labored. They brought on a third partner. They solidified a plan. They would sell pap smears.
"We were three BC men just walking around campus trying to sell pap smears," Thomas, now a junior, says.
Thomas, as it happens, is just the kind of young entrepreneur Michael Gaiss, a senior vice president at Highland Capital Partners in Boston, wants to meet, and perhaps fund.
It was to that end that Gaiss launched a summer incubator called Summer@Highland in 2007. The small-business incubator brought eight start-ups selected by Highland to Boston. There, the aspiring entrepreneurs were provided with $7,500 in seed funding, office space, and advice from Highland partners. What sets Highland apart from other incubators is that it requires all applicants be currently enrolled in or recently graduated from an undergraduate or graduate program.
"What we were really trying to think out was how could be better connect and work with that next generation of entrepreneur," Gaiss says. "We decided to go out to universities and find entrepreneurs who were doing interesting things there and put them in a place to develop their businesses over the summer."
This year, Thomas and his partners—Coburn and Peter Casinelli, a Boston College sophomore—took another shot at entrepreneurship with a company called Additupp. Their idea, they say, will increase the effectiveness of online advertising. They're the youngest team at Highland this summer. And the program has evolved over the past few years. In addition to the $15,000 in seed funding that each Highland team now receives, they're also provided with access to mentor entrepreneurs, technical advisers, and investors. Thomas says there are also more quotidian benefits to spending the summer at an incubator.
"Every morning we get breakfast, and we can basically pig out all day," Thomas says.
In short: a college-age entrepreneur's dream. Additupp started the summer strong. It won the Boston College competition, where one of the judges of the competition was Dan Nova, a Highland co-founder, who also co-founded Lycos and was an early investor in Ask Jeeves. They had every reason to be hopeful.
"We had been accepted to Summer@Highland, we thought people would love this idea." Then reality kicked in, Coburn says. "We went to 20 companies and we wouldn't even get farther than the door, we weren't even getting to tell our idea to anyone." Highland helped. The trio discussed their approach with partners, and began tweaking it. It was just the first step in what they hope will be the start-up's long evolution.
Peter Bell, a partner at Highland who works regularly with teams at the incubator, says that the close relationships forged between the teams and the partners at Highland are an integral part of the start-up program. "I think the role of a mentor is one, to be a sounding board; two, to be present; three, to have expertise in their space; and four, to bring relationships to bear," Bell says.
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Unlike incubators in the model of Paul Graham's Y Combinator, Summer@Highland wasn't founded with the intention of producing as many successful start-ups as possible. As they tell it, the partners at Highland Capital simply thought they would benefit them by putting a petri dish of innovators—a sample population of the country's most talented young entrepreneurs—within a short walk of their offices.
That part of the experiment has succeeded—all involved will attest. Not that there's been a shortage of investment deals coming out of this arrangement. "We had eight teams the first year and it turns out we ended up seed investing in two of those teams," Gaiss says.
This year, Summer@Highland narrowed its focus to tech companies. They shaved a field of 225 applicants down to 10, and is hosting them in locations spread over the South of Market Street neighborhood of San Francisco, Kendall Square in Boston, and Silicon Valley.
By the first week of April, Highland had received applications with return addresses at Harvard Business School, Stanford, and Babson. They were apportioned out to reviewers familiar with the products or services involved. A minimum of five pairs of eyes saw each application before the pool was reduced to slightly fewer than 100 teams. Semi-finalists were asked to deliver their elevator pitch, describe how they think monetization will pan out, explain how their idea will scale. They were asked who their advisers are and whether they’d ever raised any angel cash before. Letters of recommendation were strongly recommended but not required. Finally, the partners tried to plumb the teams' ambition. As Gaiss puts it, they wanted to know how big the students could dream.
"We want teams who are going to be doing their start-up whether they get into our program or not," Gaiss says.
This year's crop of start-ups include Clinkle, a mobile payment platform; Type-U, a health platform for people with diabetes; and Waddle, a mobile photo journal.
Bell, a partner at Highland, says that by this time in mid-July, some of the Summer@Highland teams are preparing beta versions of their products to present to consumers, and that he and other Highland mentors make themselves available to teams that may need a word of advice. Bell says that if approached by a company with a beta version ready he might sit down with them for an informal consultation. "Maybe we can do a couple things," Bell says he might say to a team. "Can you take me through the product? Maybe let's slow down for a week, or maybe for a few days. Do you really think you should be talking to that set of customers? It seems like the product is maybe more of a midmarket play."
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Coburn says he’s been surprised by how accessible the Highland partners make themselves to the teams. "They're really busy, they're traveling all the time," he says, "but even the ones from California, when they come to Boston, they'll set up hour or half hour meetings to meet all the teams." Moreover, the program has hosted more than 40 forums and speakers for the incubator's start-up teams this summer, Gaiss says, and at one of them Casinelli met a programmer from the Massachusetts Institute of Technology who was able to talk him through a problem he was having.
Highland also offered all the teams free legal consultation with WilmerHale, a law firm with offices in Washington, D.C., London, and Boston. The firm's lawyers brought it to Thomas, Coburn, and Casinelli's attention in July that "Add It Up" is the name of a Bank of America program for credit and debit cards. To avoid future legal complications, the attorneys cautioned, they’d have to find a new name.
"We tried to mess around a while with a lot of things related to ads, earning money, and cash, but that didn't work. So we began thinking, let's come up with something catchy and clever," Coburn says. "It was my mom actually who came up to me and said, 'Why don’t you call it Jebbit?'"
Coburn warmed to the idea. He texted his teammates to see what they thought. They liked it. "Jeb had actually already thought of the name himself," Coburn says. "But he didn’t want to come out and say it because it would seem like he was naming it after himself."
The value of the relationships formed between teams and Highland partners at Summer@Highland has been borne out by real business opportunities. One company to go through the program and end up backed by Highland money is Gemvara, a custom jewelry site that received a vote of confidence in the form of $25 million of Highland's money. Gemvara was selected for Inc.'s 2011 30 Under 30 list.
"The recruiting partner at Highland continues to be someone I work with," Gemvara's founder, Matt Lauzon, says. "Rarely a week goes by when I'm not in touch with someone there." In March of this year, Matt Nichols, a principal at Highland who performed due diligence on Gemvara before Highland made its investment, left his venture capitalist job to join the jewelry company as a board member and executive vice president of operations.
In a little more than a month, summer will be over. Thomas, Coburn, and Casinelli will be back in their dorm rooms. Coburn will make a decision over whether to continue working on Jebbit. He'll decide how to respond to a letter from Tufts University informing him that he'd been accepted early into its medical program.