ScaleWell: A New Model for Start-Up Funding?
As an entrepreneur in a locale not noted for being a hotbed of tech startup activity, you’re constantly faced with the chicken and egg problem. You have an idea, capable founders, but you don’t have a capital, or contacts to achieve traction. In many ways, a proof of concept can get you to the angel funding stage but where do you turn for the pre-Y-Combinator cash? In Chicago, there isn’t any Y-Combinator like programs.
Chicago-based “startup catalyst” Scalewell, aims to fill in this gap with their grant program. In the first installment, recipients receive $1,000, two months of co-working space, and mentorship from experienced local entrepreneurs. Money for the grant was derived from receiving $100 from ten established entrepreneurs with Chicago ties. One of the trustees, Sean Corbett, is a graduate of TechStars Boston and hopes to bring this micro-financing structure to Chicago.
The reason this is interesting is that the funding is derived from the community, not institutionally based. In many ways, it’s the recognition and capital for ideas that can be scalable at some point in time. It’s like crowdsourcing financing by the community, over time, can help the community. More entrepreneurs running around in co-located environment can pay dividends over time. It takes a couple decades to build a true, sustainable entrepreneurial community.
One of the complaints being in the Chicago tech community, which may be representative of most underserved entrepreneurial communities, is the disjoint between the companies starting out and those that have been successful. Perhaps this model could bridge that gap, and over time, more local companies get involved in contributing. In many ways, this could spawn a Y-Combinator/Techstars-like funding mechanism for the companies that found a way to gain some traction on just $1,000. When you’re able to have some limited success of $1,000 and then more traction with $15,000, an angel round looks pretty good. I hope that will be the new funding route, which is no different than a tranche for most institutional funds. It will be interesting to see how this evolves over time. Perhaps this is a peek into the future.
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