Capital Factory’s program consists of Austin-based tech companies that have successfully secured $25,000 in investment from two different mentors. Capital Factory then matches that amount, giving those startups $100,000. But as of today, companies admitted to the program will get another $25,000 each from the aforementioned VC firms for a total of $150,000.
“$150,000 is that magic number where founders can justify quitting their day jobs, hiring a small team of people, and really focusing on the startup,” said Capital Factory cofounder Josh Baer in an interview with VentureBeat.
There’s already a huge opportunity for startups to thrive in Austin. The city’s population has surpassed that of San Francisco, according to projected data from the U.S. Census. And among that population is plenty of tech talent in the form of engineers, developers, entrepreneurs, and seasoned business executives. Yet, one big advantage Austin has over the West Coast is that the cost of living is much lower — meaning investment funds can often go further. (And as a resident of Austin, I can say that the Capital Factory has been instrumental to the growth of startup culture in the region.)
Baer told me the new VC partnerships will do more than just add another $50,000 to the total available investment one of its startups can bring in. He explained that the partnership will hopefully create an investing “snowball effect.” Capital Factory already requires two mentors from the tech industry to fund startups in its program, which helps connect entrepreneurs to others in the greater tech community. Silverton and Floodgate may do something similar since these companies will already have a hook into two major VC firms.
“The idea of a matching fund has been used by government a lot … but I don’t know of many other incubators or accelerators using a matching [system] like this,” Baer said. “I think it causes a deeper connection from the mentors because they’re the ones investing.”
Capital Factory added 40 companies to its incubator program last year and expects to add around 50 in 2014. Of those, Baer said he estimates about 20 startups will gain matching investments. Those that have already been admitted into Capital Factory’s program are eligible for the new investment deal unless they’ve received a matching investment previously.