Jumpstart Foundry creates Healthcare fund, knocks accelerator model
Milt Capps last edited 0815 23 Jan. 2016
SINCE they were going to pivot from the Jumpstart Foundry accelerator to a fund that would operate akin to a VC, JSF owners reasoned that they could best inform the public and get the word out about their latest gambit by issuing a press release in which they pointedly used the word "boring" to describe "the accelerator game" they had just exited.
That's "boring," as in "the greatest sin." And "game," as in not a "business."
In the wake of what some viewed as Jumpstart's bumptious press release of Jan. 14, alternative theories about the style of Jumpstart's statement percolated in some quarters.
However, VNC is prepared to report that Jumpstart's owners indeed ARE personally and totally bored with the accelerator model in which they toiled the past six years, as well as the operational and financial realities behind it, and they wanted us to know it in no uncertain terms.
Jumpstart's founders Vic Gatto, 45, and Marcus Whitney, 40, asserted in their press release last week that too many accelerators are, in their view, turning out "mediocre" companies with less than spectacular results.
► Jumpstart's views on this got mixed reviews. We asked some executives, including Nashville Entrepreneur Center CEO Stuart McWhorter, for their views, right here.
In addition, we conducted several candid interviews with Jumpstart Foundry's co-founders.
VNC's sortie into the Boring Affair of 2016 wasn't exactly triggered by Gatto's comment. Though it's been a while, Gatto's comments seem pretty typical for Gatto and a number of other straight-from-the-shoulder experts. (See Mike Shmerling's reality check for entrepreneurs, right here.)
Indeed, Gatto's tough-love comments were plentiful long before he became involved in state-funded TNInvestco capital formation and in accelerator work that required strong partnerships with entrepreneurs. 'Pushover entrepreneurs need not apply' is but one example.
Nor did we wonder very long about any possible correlation between Gatto's new focus and the fact that Tennessee's early-stage capital programs, TNInvestco and INCITE, are aging or emptied, theoretically making raising Seed for native startups harder than ever.
Instead, based on conversations with Gatto and Whitney, it seems the latest shift is truly a result of their personal "boredom" about continuing to do the same thing each day, while expecting better results. That's the sort of thing entrepreneurs and investors who are hitting their Forties begin to think about, more purposefully.
So, apart from the accelerator commentary, it seems Jumpstart is simply pursuing more disruptive and competitive companies, while placing somewhat bigger bets and creating profitable lines of business within their own suite of services.
Despite having issued a release saying accelerators are getting boring, Gatto seemed mildly vexed to hear that opinions have varied among observers about the tone and substance of his perceived criticism.
Gatto cautioned against "taking the phrase 'boring' too literally. Of course I still like the JSF alumni and it isn't fair to classify individual companies or CEOs as boring. I was trying to make the point that the accelerator model is outdated..."
Gatto added that JSF has typically logged results that are "better than normal" for accelerators. But, he said that in his view JSF had to work inordinately hard to get those results.
Newly operating in what might be called a "micro-VC" mode, Jumpstart Foundry aims to raise $3MM-$5MM for 2016. Gatto has been raising money since last summer.
Via its first one-year "innovation fund" -- Jumpstart 2016 -- JSF will invest $150K each in "15 to 22" early-stage healthcare deals, Gatto told VNC. Of each startup investment, $50K is to be allocated to buy tailored Jumpstart venture growth and development services.
Jumpstart's investment secures its standard 7.5% share of each portfolio company's equity. Gatto noted that Jumpstart's model is similar to the Seed/Series A investment model of 500 Startups.
When asked, Gatto said he has "no plans" to raise a 10-year-type venture fund, nor does he have need to reintegrate his business under the Solidus umbrella, where he served prior to spinning-out Jumpstart.
Applications for JSF's open-ended program may be submitted at any time. Investments for 2016 are expected to be announced in May.
The portfolio is likely to be oriented toward digital health, healthcare services, medical devices, consumer-facing businesses, health/med retailing and deep-science opportunities. Perhaps a third of companies funded this year may be in the devices sector, said Gatto.
Simultaneously, under its Health:Further brand, Jumpstart is now holding quarterly events. The next is March 1 and focused on Telehealth. Gatto said the quarterly series is likely to reflect one of four priorities: Technology (e.g., Telehealth), Regulatory issues, Healthcare Delivery System dynamics, and Consumer issues.
The 2nd Health:Further annual conference will be Aug. 23-24, 2016, at the Music City Convention Center.
Health:Further memberships and ad hoc event tickets are available, and the company promises to issue members news, opinion, white papers and other content. Health:Further events are produced by Andre Blackman.
Jumpstart President and Chief Growth Officer Marcus Whitney will lead efforts to achieve organic growth for portfolio companies.
Gatto said that with Whitney's leadership he's confident that Jumpstart's ability to leverage the Nashville healthcare sector and the Jumpstart team's personal networks will ensure achieving market traction for JSF portfolio companies' healthcare products and services. And that, he said, will quickly set Jumpstart apart from its competitors.
Portfolio companies that need to raise additional capital will be supported in those efforts by Eller Malchock.
Efforts to help portfolio companies find the employees they need will be led by JSF's Daniel Oppong.
Though their gameplan seems set, we shouldn't rule-out further Jumpstart pivots by Gatto and Whitney. Both have proven quick to make business or career changes when it makes sense.
Gatto has a classic history of chances seized, including institutional investing, startups, pivots and reinvention.
Gatto might rightfully view his role as Solidus' Seed investment lead for investment in Change: Healthcare, which is now part of the former Emdeon, as a signal success.
In 1993, at age 24 and not long out of Amherst College with his Economics degree, Gatto joined Boston-based Infotech. Two years later, he wanted to move to Atlanta, negotiated to create a spin-out there with equity, and then sold the company in 1999.
He told VNC that in the course of selling his Atlanta software business, his dealings with Angels and others left him believing investors "had a better deal."
So, he set his compass for Vanderbilt University's Owen Graduate School of Management, where he earned his MBA in 2002.
Next, he joined VC Massey Burch in Nashville to support their fledging technology investments. Five years later, he joined Townes Duncan-led Solidus.
After seven years at Solidus, Gatto spun-out Jumpstart Foundry, which initially ran its own accelerator and provided operational support to the Entrepreneur Center.
Gatto and Whitney also founded a regional news site, SouthernAlpha. They soon sold it to Solidus-owned Southcomm, where the title seems largely warehoused, at the moment. JSF's own editorial production seems to have shifted to the Health:Further website.
Earlier, while with Solidus, Gatto not only proved he was willing to aggressively pursue success alongside entrepreneurs, but also that he would shut down a startup when it proved nonviable. See the 2008 example of Plumgood Foods.
That was also the case with one of his own failed initiatives, Venture Incite, a would-be intellectual property commercialization player.
The company's model "didn't work and we're not doing it anymore," Gatto said in 2014, announcing Venture Incite's cessation of operations. VNC