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STARTUP

The Man Who Would Launch 100 Businesses

Amway heir Rick DeVos wants to make Grand Rapids, Michigan, a start-up magnet--even if he has to give away $15 million to do it.

Grand Rapids, Michigan

Flickr photo courtesy of Gbozik

Grand Rapids, Michigan

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Sleepy, industrial Grand Rapids, Michigan, may be the last place that comes to mind when you think of the country's most dynamic start-up hubs. Rick DeVos wants it to be the first.

In order to make that happen, this year DeVos launched a $15 million investment fund called Start Garden, which will invest $5,000 in each of two business ideas every week. That's more than 100 ideas this year. The goal is to build a bigger start-up ecosystem in Grand Rapids, so that even if many of the ideas fail, at least the area's appetite for entrepreneurship will grow.

DeVos and his family members, who are backing Start Garden, have been akin to Grand Rapids royalty ever since Rick's grandfather and namesake, Richard DeVos, co-founded Amway, an $11 billion direct-selling company, in 1959. Since then, Rick and his family have put their dollars toward supporting the community and its businesses. In recent years, DeVos has founded a nonprofit called ArtPrize, which doles out cash awards to artists, as well as a start-up incubator called Momentum. It was in running Momentum that DeVos first developed the idea for Start Garden.

As a traditional seed-stage incubator of small companies, Momentum would invest $20,000 in a hand-selected batch of businesses, work with them over the summer, and host a demo day in front of investors at the end of three months. The problem was, DeVos says, "the demo days were greeted with crickets by investors. It's a real shortcoming of the West Michigan investment culture that we wanted to change."

So, he began looking into what makes entrepreneur-friendly places like New York City and Silicon Valley tick. What he found was they all had two things in common, which DeVos refers to as "visibility and flow." Not only was there a constant flow of capital into new businesses, but also there was plenty of hype surrounding those deals.

By contrast, in Western Michigan, DeVos says: "It's a more conservative mindset around early-stage investing. There's this engrained belief that everything at that level should be bootstrapped. Even when those checks are being written, it's done in an underground way, so no one is aware it's happening."

DeVos designed Start Garden specifically to solve that problem. Entrepreneurs submit their ideas on StartGarden.com, and every week, DeVos and his team select one idea to receive a $5,000 investment. That, DeVos says, helps with flow. Meanwhile, the public can also cast votes for the ideas they like best on StartGarden.com. Each week, the top scorer also receives a $5,000 investment. That, says DeVos, is where visibility comes in.

"Every participant who's looking for funding now has the incentive to carry the word out to their networks about Start Garden," he says. "Over time, we hope that broader awareness about these investments in early-stage ventures will make the ecosystem a more successful one."

Though $5,000 may not sound like much, DeVos says it's enough for scrappy entrepreneurs to perform initial tests and experiments. Then, within 90 days of receiving funding, entrepreneurs are eligible for more money after presenting their progress at one of Start Garden's monthly update nights, which are open to the public. DeVos calls this "social collateral," intended to help Start Garden keep track of its portfolio companies and, it hopes, generate excitement about the program in the broader Grand Rapids community.

On update night, entrepreneurs can get $20,000 to $50,000 in additional funding, which is decided by a Start Garden panel. The first update night was held at the end of July, and of the eight presenters, two landed additional investments.

Mike Miller was one of those lucky two, having received $50,000 to further develop his company NxtMile, which makes soccer cleat insoles for kids. Miller used the initial $5,000 to hire a search-engine-optimization expert to test whether SEO would drive traffic to his website. It did. Now, Miller says, he plans on using the $50,000 to develop youth baseball and basketball shoe insoles, as well.

Joe Johnston walked away from update night with $20,000 in funding. His company, One Second Epic, makes an app that allows users to take one-second-long videos, which it then blends together to create one "epic" video. Johnston, who plans on using the money to hire part-time developers, says he thinks the program has the potential to convince people who could be great entrepreneurs to take a chance.

"I know a lot of people here who have great ideas but are in corporate jobs they're afraid to walk away from," Johnston says. "This gives those people the little push to see where that idea might go."

So, what's in it for DeVos?

Though Start Garden's entrepreneurs don't give away any equity, they do agree to let Start Garden join future fundraising rounds. If they have a successful exit of some sort, that's when Start Garden's investors make money. So far, the fund has received hundreds of idea submissions, garnered tens of thousands of votes, and invested in 34 ideas since April.

DeVos says he knows most of those ideas won't pan out. But, he says, even a handful of successes will be a start.

"We need a whole bunch of people in this network to find anything worth investing in," DeVos says. "Even if some of our first $5,000 investments go absolutely nowhere, they're continuing to get the word out about Start Garden and the opportunity here."

IMAGE: Flickr photo courtesy of POM Studios
Last updated: Aug 20, 2012




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