Thursday, October 27, 2011
Interview with Amir Banifatemi and Kai Tao, K5Launch
Last week, a group of four angel investors here announced their plans to create a new, accelerator program to spur the creation of an entrepreneurial community in the area around new startups. K5Launch (www.k5launch.com) is modeled after the successful Y-Combinator and TechStars acceleration programs, and invests equity, provides mentors, and runs a three month program to get very early stage startups off the ground. We spoke with two of the founder of K5Launch, Amir Banifatemi and Kai Tao, to learn more about their efforts to start up its accelerator here.
What is K5Launch?
Amir Banifatemi: K5Launch supports our larger vision, the K5 initiative, which was promoted last year to provide a more stable and vibrant community of entrepreneurship in Southern California, but mostly Orange County. We are in Orange County, but we're also focused more largely on Southern California. Our challenge is to help start, fund, improve, and grow 1000 companies in five years. We believe that challenge is obtainable, even though it is ambitious. Collectively, our four founders, and many other investors are betting that by putting some direct energy and close mentorship and tactical work at the early seed stage, we will promote the creation of new, value generating companies, and therefore, build a more vibrant community.
More specifically, K5Launch is an accelerator will take startup companies--both existing companies and those that are not yet fully funded--who would like to get to a Series A, and allow them to apply to become part of a boot camp program, which lasts three months, and enables them to build their product and validate the market of that product. There are many other outlets in the community providing mentorship, education, workshops, and networking, and many others supporting entrepreneurs, but we believe there is a void in the very early stages of formation. We're modeled after Y-Combinator and many other similar accelerator, in that we put a given amount of equity into those companies, and help them within those three months to basically build a sustainable, minimally viable product and validate their market space.
Obviously, as with many other accelerators, we provide mentorship and shared resources, and help with creating a company, access to public relations, and other resources like legal help. However, the main benefit is the one-on-one assistance of entrepreneurs, and access to capital. All of our mentors are investors as well. We end with a demo day, where the graduate companies from the accelerator will present to investors. We believe that this will help those entrepreneurs to get going and started, with both capital and close mentorship.
When is your first class, and how many companies are you going to include?
Amir Banifatemi: Our first class will be in winter, starting in 2012, most likely in January. We have not yet announced a date, but we will have a maximum of 15 companies, perhaps less. We are going to try to be quality focused initially, to build out the foundation of the program. We plan to have multiple classes, but we're going to grow slowly for now.
What inspired you to start this?
Kai Tao: What is common for all of the founders of this, and of our community, is that not all of us are originally from Orange County. We're transplants, and have seen and lived in places like Silicon Valley, and New York. But, Orange County is a wonderful place to live. However, what we've found is that in terms of innovation, our brethren in Northern California seems to have stolen the buzz, and lots of the engineering talent. Prior to my recent trips to Northern California, I thought it was Stanford University, but I now understand that the whole ecosystem and mentality is very different. There, entrepreneurs are set up for success, and encourages entrepreneurship, and encourages risk. I've talked with entrepreneurs and venture capitalists, and the biggest difference you see between Northern California and Southern California companies is that companies in Northern California are built from the ground up for growth, but not necessarily to be cash flow positive from day one. They're aimed at the big idea. Facebook would never have been created successfully in Southern California, if they had depended on having instant profitability from day one. I think what it really boils down to for us, selfishly, is we're living here in Orange County, and we see that it has all the components for success---a research university, a good quality of life, and basically all we need is some mentorship and an ecosystem of innovation. That's why the four of us got together, to provide the missing piece, to create something of value, to provide a service for our community and for ourselves, to make Orange County a center of innovation.
Are there specific kinds of companies you're hoping to see in the incubator?
Amir Banifatemi: Initially, we will try to focus on mobile infrastructure and services, but we're also looking at companies that have a component which is social and local. It's pretty much any software or IT-based project, where you can see some impact in three months. We'll take them under wing for three months, with intensive, 24/7 work, and will have to determine whether or not there is readiness within the industry and if we can help within a three month timeframe.
You mention Orange County is missing some elements to encourage entrepreneurship?
Kai Tao: Traditionally, the industries we've been very strong in Orange County have been real estate, very strong in home building, and in finance. In terms of technology presence, there are some strong gaming developers, and semiconductors and research is strong. In software, there are quite a few names that have located by choice here, like Filenet, Quest Software, and so on. But, in terms of new, entrepreneurial creation it's not the first place you think about when you are starting a business. Many people think about moving elsewhere to start their business, and then once they become a success they return to Orange County. That's a business model and concept we need to change. We've got lots of home grown talent in Los Angeles and Orange County, and they ought to stay in Southern California, rather than just come back later to enjoy our quality of lifestyle. By doing so, they can enjoy the quality of lifestyle, and create lots of value for everyone as well. New companies create jobs, create innovation, and they can do so while enjoying the lifestyle and year round, 72 degree weather. To me, that's like heaven. That's my selfish motivation, because I want to stay here, and also help create innovation and activity here.
Amir Banifatemi: I think why Orange County doesn't have the same vibe, and the fundamental difference, is the ability to engage with risk, and do that collectively. There are absolutely awesome and talented people and companies in Southern California, but our ecosystem has developed over the past decade differently. Part of that is because, as Kai mentioned, there are other industries like real estate here, and also because we didn't build up an environment where companies were concerned about being ahead of the game, and have been more interested in having a good balance sheet and solid financials. Many investors here have been looking at startups with the eyes of a banker. When we invest, I don't look at the balance sheet, I look at the big picture and vision, and how to compete, and how much value will be generated. I think that probably there are lots of people who think this way, but there are not enough. It's a culture of attitude towards accepting risk, and daring to do more.
What kinds of things are you doing to work on that issue?
Kai Tao: We are trying to recreate lots of the things that has made Northern California a hotbed of startup, especially in software and technology. The thing about software, is you don't need lots of capital, and you can easily validate if your model is going to work or not, based on your beta and alpha prototype, and testing with the market and users. What you do need, is an ecosystem. You can't deal with lawyers who want $50,000 or $100,000 to set up your company, you need to do what Silicon Valley does, which is find attorneys who provide their services on contingency. We have law firm partners here in Orange County and the rest of Southern California who have a similar, entrepreneurial mindset. Aside from professional services support, we also know that it's important for cities to provide the same kind of commitment and support. If you look at cities like Palo Alto, Mountain View, and Cupertino, they all understand that entrepreneurship creates jobs and benefits the community. The K5 approach, is we're working with lots of the cities in Orange County, to essentially participate in this, to help offer office space, and support the creation of new businesses in those cities, and the creation of jobs. We're now taking the pillars of innovation, and the support systems of Silicon Valley, and recreating that in Southern California and specifically Orange County, to encourage and increase the odds of success for entrepreneurs.
Finally, what would you like to see come out of your next year of effort on K5?
Kai Tao: First of all, we'd like to see the creation of a thousand companies in the next five years. So, one year in a measure of our success will be progress in both the initial class, and how many people in the community we can get involved with this initiative. If we recruit the right kind of mentors, the right kind of business leaders, and the right kind of entrepreneurs, I think we can encourage activity and establish a foothold, so that entrepreneurs will talk about coming down to Orange County, so they can leverage the resources that are available, and so that they can start their business, and validate their business in the real world. Attracing the right kind of entrepreneur is key, and the right support is key. We're trying to create a very entrepreneur-friendly environment, where we can leverage the experience of our founders and mentors, to get entrepreneurs excited about starting their business in Southern California and Orange County.
Thanks, and good luck!