Joshua Baer is sitting at a small lounge table in Capital Factory's huge new events space on the first floor of the Omni Building. Around him, workers are cleaning up the last remnants of construction materials and spraying windex on the big panes of glass that separate this new space from the nearby hotel bar and lobby.
Light is pouring into a space that has been under wraps for months.
"Everything going on in here will be really visible," Baer said. "We'll be projecting things onto the glass and folks will be able to see what's going on in there."
The new space is prominent on the ground floor of the Omni, and it will be the most visible feature yet at Capital Factory, an already well-known accelerator and co-working space that regularly attracts top VCs, executives, politicians and celebrities for tours, discussions and pitch sessions. And it comes just as Capital Factory has changed how it invests in startups by now providing larger, direct investments of $100,000 to $250,000. (We'll get into that in a minute.)
Capital Factory's new high-tech lounge and events area has a room-scale stage for demonstrating virtual and augmented reality projects to a crowd of about 250. It also has five or six 10x10 VR stations, and an entry-way space with a garage door to provide an initial splash for big events and room for check-in lines and swag stations. The new space also has a walk-in fridge, a nice long bar and a mystery piece of art that will house a few beer taps. And there's more mystery art along the way.
Sneak peek of the stage coming together. Come tomorrow to see the unveiling! https://t.co/HLIbaGSXZX pic.twitter.com/u9SJjpoz9C
— Capital Factory (@CFCoworking) May 4, 2017
But it's mostly under warps until Friday when Capital Factory hosts its grand opening party, which will include a transportation-focused hackathon.
Overall, Capital Factory is opening 10,000-square-feet of new space that includes the large events area, several office spaces for VR startups and a few meeting rooms and classrooms for smaller events. That brings Capital Factory's footprint to 60,000 square feet. Last year, they hosted 837 events, which includes dozens of small meet ups as well as big parties, panel discussions and pitch events.
"Most places, if you had something like this, you'd have to charge a lot of money for it," Baer said as he showed me features of the primary events space. "And we got a really great deal with the building and our structure allows us to effectively give this away for free if we want to, which is most of the time for community stuff. If some big company wants to come rent it, they can. That'd be great. We don't mind money. But our priority is, just like upstairs, to make awesome stuff happen here."
Capital Factory initially secured its space on the 16th and 5th floors in 2012 at a cost of roughly $1.5 million, Baer said. That funding came from Baer and several other prominent startup founders. No one has gotten their money back -- so far.
"If anybody thinks anybody is getting rich off this place... nobody has made a dime off of it," Baer said. "Nobody is getting paid any big salaries or cashing in all this money from everyone paying rent here."
Capital Factory's new first floor build out is funded largely by tenant improvement money that comes along with signing a long-term lease in a high rise like the Omni.
And Baer said that when money comes in, Capital Factory tends to invest it in hiring new people.
Earlier this year, Capital Factory created several new positions aimed at assisting startups with marketing, networking and partnerships. It also added a position for VIP connections and tours, as well as a venture associate position to scout co-working spaces and accelerators for companies Capital Factory's fund may want to invest in.
It's part of a pileup of new activity.
A few other new additions
- A space for the MobilityX accelerator, which is a partnership between Capital Factory and Moovel North America that focuses on providing mentorship and connections for mobility-oriented companies helping improve transportation.
- A dedicated area for meetings with mentors -- and desks where mentors can hang out and work at before and after meetings.
- Rendering machines to save startups time and money when processing virtual reality content.
- A 3D printer that you can book to create a prototype. It otherwise churns out little robot figures throughout the day.
Changes to How Capital Factory Invests in Startups
Baer is in his element being amidst something being build right before his eyes. That's Capital Factory's thing. They help people build companies and connect them with partners, VCs, reporters and other accelerator programs. And as the ground floor is being built out for even more events, Capital Factory is also changing how it helps startups.
Capital Factory's new accelerator setup is designed to get startups get slightly larger initial funding commitments.
Too many companies aren't getting enough money. They're getting underfunded. - Joshua Baer
In the past, Capital Factory challenged its accelerator startups to convince two mentors to commit $25,000 each. That, in turn, would trigger a $50,000 investment from Capital Factory's investment pool. Now, that's gone. Instead, Capital Factory has decoupled its fund from the accelerator entirely. The fund can fish for what it wants inside and outside Capital Factory.
Investors have used some of the new money to back challenges, including one that asked for startups with big, game-changing ideas for a shot at a $100,000 prize and other benefits and another that challenged non-Austin startups to make a pitch to move to Austin.
But the lion's share of the fund will be dispersed through direct investments of $100,00 to $250,000. Baer now wants to focus on those bigger pre-seed rounds, instead of spreading funding thinner across more deals.
"I feel like when we were getting started... it was hard to raise a couple hundred thousand dollars," he said. "And now, it's not hard to raise a couple hundred thousand dollars. That's actually almost too easy."
Baer said he wants to help founders raise $500,000 to $1 million rounds -- or more. The idea is to have startups getting enough cash to focus on their work and plan out a year, as opposed to getting $25,000 at a time and you're always fundraising.
"One of my learnings out of that is that I wish half as many companies got twice as much money -- or got 10 times as much money. It's not like half of them weren't good or something. Too many companies aren't getting enough money. They're getting underfunded."
Capital Factory recently filed an SEC form indicating it plans to raise a $10 million fund. Baer said Capital Factory has already landed some of that and has already made 17 investments this year, often with companies that it wanted to invest with but couldn't until investors started filling the new investment pool.
"My expectation is that this year will be a significantly higher volume of investments than last year and more dollars, just based on what I've seen happening in the market."
