EvoNexus, the startup incubator with offices in San Diego and Irvine, will require the next round of companies it admits to give up a stake in their business in exchange for EvoNexus’ services.
It’s a sea change for the organization, which has long marketed itself as a place where Southern California startups that make the cut could get office space, mentorship and access to capital at no cost.
EvoNexus is a nonprofit organization, which sets it apart from many of the big names in the West Coast’s vibrant ecosystem of incubators and accelerators, such as TechStars and Y Combinator, two well-known for-profit accelerators.
Incubators, such as EvoNexus, provide fledgling companies with time and resource to help them grow.
Average Stay 18 Months
Companies stay at EvoNexus for an average of 18 months. Accelerators typically operate on a fixed timetable and are for more mature companies, relatively speaking. Often, as a condition of acceptance into either type of program, companies are required to provide a stake to the organization so it will benefit from any upside its portfolio companies eventually experience.
Earlier this year, EvoNexus management decided to change the arrangement in a bid to ensure the organization’s long-term sustainability.
Startups that are accepted into the program for its August admittance cohort will have to give from 1 percent to 5 percent of the company to EvoNexus as a condition of participation.
The organization said the exact percentage will be determined during the due diligence phase of admission, and be based on the stage of the company and maturity of its leadership.
EvoNexus will remain a nonprofit organization, and put any money it receives from its equity stakes back into the organization in support of its companies, it said.
EvoNexus, founded in 2009, has been supported historically by corporate sponsors, which benefit from the opportunity to see promising new companies up close. Two big local companies, Viasat (Nasdaq: VSAT) and Qualcomm Inc. (Nasdaq: QCOM), are what EvoNexus calls “strategic funding partners” and offer startups in their respective areas of interest as much as $250,000 in seed capital. The Irvine Co. provides EvoNexus with real estate.
Since 2010, EvoNexus has accepted 186 companies into the program. Of those, 36 remain within EvoNexus; 21 have been acquired. Since inception, between financings and exits, companies in EvoNexus’ portfolio have had “funding and outcomes” worth $1.3 billion, according to the incubator.