Accelerators key to tech startups, but scarce in NJ

Experts, however, see new efforts on the horizon

Jessica Perry//October 26, 2015

Accelerators key to tech startups, but scarce in NJ

Experts, however, see new efforts on the horizon

Jessica Perry//October 26, 2015

“We just didn’t have the track record or scale to qualify for a line of credit from a bank,” De Clercq said. “There was a problem in this market that was not being addressed if I couldn’t get financing for a $1 million business.”

When he saw his sister raise $20,000 for a ground-level business on Kickstarter, De Clercq got the idea to start a new venture called Kickfurther, a crowd funding site for established companies like CPG.

Harvey Prince Organics

  • Executive: Deepak Hathiramani, CEO
  • Description: E-commerce fragrance manufacturer of perfumes, bath, beauty and hair products that use fine quality essential oils and natural ingredients without huge associated costs.
  • Headquarters: Totowa
  • Founded: 2007
  • Employees: 12
  • First offer on Kickfurther: Raised over $10,000 in two weeks with a return of 7 percent for additional fragrances. “The people who invest in your company are people who are fans of your brand,” Karthik Aggarwal, public relations for the brand, said. “It’s a way to connect directly with customers.” The company paid its investors in just two and a half months – a month and a half before schedule.
  • Second offer on Kickfurther: Raised over $39,000 in one day with a return of 8 percent for brand-designed glass fragrance bottles. The offer closed in September; final payout will be in February.
  • Thoughts on Kickfurther: “The Kickfurther model is simple, streamlined, efficient and easy,” Aggarwal said. “It’s easier than getting a loan from a bank and a great alternative for businesses.”

But he needed the help of an accelerator to launch this new business. The only problem was that he couldn’t find the right fit here in the state.

And it’s not unique to De Clercq. Technology industry experts say New Jersey lags behind other markets when it comes to accelerators for budding businesses and entrepreneurs.

David Sorin, a managing partner with McCarter & English and head of the firm’s Venture Capital and Emerging Growth Companies practice, calls this climate a “commentary for the work to be done in the state so we lose as few of these companies as possible.”

“We do a lot, and it’s important to recognize that,” he said. “But while we do a lot, my fear is that it’s never enough, and there are several accelerators throughout the country who attract businesses and pull them away from the state.”

Sorin also echoed this concern: the accelerators that do exist within the state are not well known nationally.

“There are very good accelerators in New Jersey,” he said, “but they lack the national reputation for excellence and national contacts in the venture capitalist community.”

Jersey Shore Cosmetics

  • Executive: Jacquelyn Foster Quattro, founder and president
  • Description: Family-owned manufacturer of non-toxic, organic, cruelty-free beauty and bath products for both adults and children.
  • Headquarters: Flemington, with offices in Marlboro and Sea Bright
  • Founded: 2012
  • Employees: 4
  • First offer on Kickfurther: Raised over $6,000 in 7 minutes with a return of 4 percent for the Jersey Kids product line, including all-natural sunscreen and bug spray safe for infants. “De Clercq convinced me that I could get what I needed immediately,” Quattro said. The company just made its final payout this month after closing the offer in July.
  • Second offer on Kickfurther: Raised nearly $52,000 in one day with a return of 13 percent for a 200,000 purchase order of all-natural moisture rich hydrating lip balms for a “glam bag” partner. The offer just closed October 18th.
  • Thoughts on Kickfurther: “It’s nice to speak to the person behind the brand. I could ask him direct questions that were important to me,” Quattro said. “I thought I’d give it a try, and it worked wonderfully.”

Unlike incubators, which engage startups at an earlier stage and are less selective, accelerators place select companies on track toward pitching to investors. That means giving them a larger cash infusion and connecting them with mentors and other contacts — all on a structured schedule that lasts a few months.

Those are few and far between in New Jersey, but there is one high-profile new addition to the list this year, thanks largely to Audible.com. In July, the Newark-based audio book giant said it was launching Newark Venture Partners, a $50 million early-stage venture fund and 25,000-square-foot co-working space inside its headquarters building.

“I think the one in Newark was a significant development because it has a lot of funding,” said Dennis Bone, director of the Feliciano Center for Entrepreneurship at Montclair State University. “(Audible CEO) Don Katz, is involved as well as angel funders. It seems to have a very good start and I think that’s a good signal.”

It comes three years after the launch of two of the accelerators — Innovation Garden in Princeton and TechLauch in Kinnelon — that are well established but still suffer from a tepid technology sector in the state. And that’s not necessarily a reflection of the quality of those accelerators, Sorin said.

Skinny Tie Madness

  • Executive: Parth Sharma, founder and CEO
  • Description: Sells over 7,000 ties per month via popular sites such as JackThreads.com and Birchbox.com; in discussions with Nordstrom and Burlington Coat Factory retail outlets.
  • Headquarters: Lower Manhattan – shipped out of Moonachie until just this year.
  • Founded: 2012
  • Employees: Sharma is sole employee in New Jersey; manufactures in China.
  • First offer on Kickfurther: Raised over $10,000 in 32 minutes with a return of 20 percent for printed ties. “We wanted to make a splash with a high return rate. We wanted to be bold,” Sharma said. After having just received the shipment of ties in August, the company is almost entirely sold out.
  • Thoughts on Kickfurther: “It’s a super way for smaller companies to get the capital they need to grow,” Sharma said. “The press alone was worth it. It got our brand in front of new eyes.”

“New Jersey was relatively late to the game; (it’s) relatively new in the accelerator space,” he said. “If you are an accelerator-bound entrepreneur, your choices are limited.”

Startup and venture capitalist consultant Frank Vallese, CEO and president of ePhysics in Montville, said the need for accelerators is there, but the supply within the state is lacking. That’s especially when it’s compared with the proliferation of accelerators across the Hudson River, which are coming from unexpected places like BMW.

“If you look at New York City, the number of accelerators is growing very quickly and people you had no idea would be having an accelerator create one because it gives them access to startups,” he said.

And while new developments such as Newark Venture Partners may be a step in the right direction, Vallese isn’t sure that program has found a solution, either.

“I struggle with that one, because I’m looking at New Jersey and there are not a lot of accelerators that are coming in to the state and they’re coming up, which is great,” he said, “but who is asking the question, ‘Why aren’t there successful accelerators in New Jersey?’”

Despite all this, there’s a possible silver lining to De Clercq’s story: He hasn’t forgotten where he’s come from and he has said Kickfurther would “eventually like to open a corporate office in New Jersey or New York.”

That deal, however, is still up for grabs.