PHILADELPHIA – The Redleaf Group Inc., a technology operating company, teamed with the University of Pennsylvania in August to form PenNetWorks, an on-campus Internet accelerator, said Mark Coticchia, senior director at Redleaf and general manager for the company’s dotDorm program.
The accelerator, which is owned by the University and managed on a day-to-day basis by Redleaf, will focus on businesses being developed by faculty, staff and students at the University of Pennsylvania, Coticchia said, although he added it is open to all schools in Philadelphia and the Delaware valley. “Traditionally, universities have focused on licensing technology developed in their labs, because they don’t have the gap funding or venture experience to develop businesses,” he said. “PenNetWorks will support business development at the idea stage.” Coticchia said he expects the bulk of the accelerator’s deal flow to come from the university’s technology transfer office, school of engineering and applied science and the Wharton School of business.
PenNetWorks will incubate any Internet-related company, though it will focus on e-commerce/e-business companies, Coticchia said. The accelerator’s goal is to prepare its portfolio companies for a first round of institutional funding, he added. PenNetWorks should be up and running by October 15, at which point Coticchia believes the accelerator should incubate 10 companies in its first year of operation. That number should grow to approximately 15 companies in year two and about 20 companies in year three, he added. The incubation period will be six to 12 months maximum, he said.
In exchange for a 5% equity stake, the accelerator will provide nascent companies with funding, office space, venture coaching and access to professional services firms for help with legal, financial and human resource issues, Coticchia said. The amount of funding provided to portfolio companies will range from $50,000 to several hundred thousand dollars, he added. The companies can then decide whether they want to use the funding they receive to pay for the professional services they need, or buy those services from the accelerator in exchange for more equity, he noted. PenNetWorks has 35 to 40 desktop spaces available for potential portfolio companies, he said.
Redleaf retains the right of first refusal when graduates of the accelerator seek their first round of funding, he said. The company is in the midst of raising a fund to have capital on hand for this purpose, he added. Coticchia declined to provide any details concerning the fund, beyond saying it would probably be about $10 million in size and would likely close in the fourth quarter of this year.
PenNetWorks is the first in a series of on-campus Internet accelerators that Redleaf hopes to launch. Coticchia said the company hopes to open 10 more accelerators over the next year. He declined to identify any other potential universities with which Redleaf hopes to partner, though he said the company is in the process of developing relationships with the top research institutions in the country. Redleaf is currently accepting business plans for companies wishing to enter the accelerator and PenNetWorks will soon have a Web site through which would-be entrepreneurs will also be able to apply. Coticchia did not explain the criteria the accelerator will use in selecting its portfolio companies.