Startup incubator Upstart Labs adds new partners, looks to fill series A funding crunch

It sometimes feels like there’s a bit of incubator mania going on. In the past two weeks alone, we’ve written about two relatively new startup incubators in the Seattle area. Fledge specializes in getting socially-conscious companies off the ground, while 9Mile Labs is looking to make its mark by focusing on enterprise software startups.

Now, here comes another incubator, and this one just happens to be centered in 5,000 square feet of space in Portland’s hip Pearl District.

Upstart Labs today is announcing two new partners, as well as an alliance with Rogue Venture Partners. It also has accepted two new startups into the space, including music discovery service Juked and digital marketing analytics service Measureful. A total of seven startups are currently located at the incubator space, with companies typically outgrowing their welcome once they expand beyond the three allocated desks. Upstart Labs has backed 10 companies to date, with the firm typically investing in the range of $100,000 to $250,000. It plans to invest in about two companies per quarter.

Joining the Upstart Labs team are Kevin Tate, the former chief marketing officer at Madrona-backed ShopIgniter, and angel investor Joe Stump, a former developer at Digg who previously sold SimpleGeo to Urban Airship.

Kevin Tate

Tate explains that Upstart Labs is different than an accelerator since they are not taking in classes of startups and running them through a formal process. However, he added that recent graduates of TechStars or Y Combinator could be good candidates.

“Our speciality is taking companies from Demo Day to series A,” says Tate.

That’s an especially tricky time for a startup company. Much has been written about the so-called series A crunch — the idea that an increasingly large percentage of startup companies that raised early-stage seed funding are struggling to attract that all-important round of next capital.

Tate said that’s especially apparent in Portland where accelerators like PIE can kick in $25,000 accelerator-type investments and groups like Oregon Angel Fund or traditional venture capital firms invest between $850,000 and $1 million.

“There’s a pretty big gap,” he said. “It is really $100,000 to $500,000 funding level where we don’t see a lot of vehicles.” Upstart Labs typically invests via a convertible note, an investment in which the company valuation is set at the time of a later financing event.

Upstart Labs believes it can help fill that void. It plans to aid in that arena by offering hands-on assistance to startups, with partners working side-by-side with the entrepreneurs to design the product or land new customers.

The partnership with Rogue Venture Partners is an interesting one, since the Oregon venture capital firm has allocated a portion of its fund to bankroll companies moving through the Upstart Labs incubator. Rogue provides cash, while Upstart provides technical, design and marketing services. Tate declined to disclose how much money Rogue will invest into Upstart, but general partner Tom Sperry said he’s excited about the opportunity

“We want our early-stage companies to have the absolute best chance of success,” Sperry said. “By co-investing with Upstart Labs, we give our portfolio companies access to a team who will help them build their business for sustainable growth.”

Tate said he’s not quite sure whether they’ll expand the concept, but he certainly sees an opportunity as the winds of the funding climate shift. In his view, more “company building” needs to occur before startups go after their first venture round.

“It depends a bit on how far the pendulum continues to swing in terms of the shift in how money is going to work for early-stage companies. The last 12 months have shifted — from the traditional angel model in that $50,000 to $100,000 range. It has been pretty profound. It is almost like it has barbelled. It has gone toward the early-stage accelerators, and then VCs have been waiting a little longer for those series A. They want to see companies that have more traction, and market validation … and are more proven. If that continues, I think we are going to see a lot of money, and a lot of startups that want help during this proving ground.”

Previously on GeekWirePortland just isn’t where young people go to retire: It’s where they get VC money too

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  • http://twitter.com/Seattle_Startup Seattle Startup

    A bit of mania? This is CRAZY. It will bust soon. Hope the entrepreneurs don’t get left out in the cold when these go belly up