The Growth Factory accelerator is preparing to open its second cohort of coaching and funding for startup companies, with an April 15 application deadline.
The Rocklin-based incubator makes early-stage and seed investments into companies ranging from $25,000 to $50,000, with additional money held in reserve for future investments, said Monique Brown, co-founder and managing director of the Growth Factory, during a webinar put on by CleanStart, a Sacramento-based clean energy industry group.
The Growth Factory was launched in October by entrepreneur Mark Haney, and it began its first 16-week program with 15 companies.
The second cohort will likely be eight to 10 companies, Brown said.
The Growth Factory plans to invest $10 million into 100 local companies over four years.
As a condition of taking the investment, startup founders are required to go through the incubator’s 16 weeks of in-person programming and a year of mentoring.
Companies that didn’t make it into the first group are encouraged to reapply, Brown said. “If you are building a company in Sacramento, we want to meet you.”
The application is online. The program is open to a wide range of industries and at various stages. Some of its companies have raised multiple rounds of capital and others have raised none.
“What we are investing in is the people,” Brown said. “We invest in people who are learners and strivers. … People will figure it out.”
Growth Factory money is offered to the startups as a Simple Agreement for Future Equity, or SAFE, investment. That structure requires the companies to produce quarterly financial and progress reports.
“Any future investor is going to want to look at that,” said Gary Simon, chairman of CleanStart. He added that the early investment money is important to startups because it is often the most difficult money to get.
Brown said nearly all investment money is challenging to raise for small companies, even if they have previously raised some. “Founders grossly underestimate the amount of time it takes to raise money," she said. "It’s a long journey.”
The fund is backed by 99 local investors. It chose 99 because that is the maximum number of investors allowed by the Securities and Exchange Commission in a limited partnership. All investors must be accredited investors, which means they have ongoing annual income of more than $200,000 for more than two years, or a net worth of $1 million or more, not including the value of a residence.
Brown said the idea was to take a relatively small investment from many people to get more people engaged and also to ensure that the Growth Factory investment will only be a small part of the investors’ portfolios.
“We want people to sleep well at night,” she said, adding that the fund made it clear that their money could be tied up for a long time with no liquidity.
“These are very early stage companies,” she said, adding that it could be a journey of seven to 10 years.
About two-thirds of the investors are new to this asset class, she said.
