🔒CI’s VentureClash pitch competition fades as startup incubators take on larger role

After four years, the state’s quasi-public venture capital arm is ending its $5-million annual pitch competition, which brought to Connecticut startups from more than a dozen countries.

Connecticut Innovations (CI) is expected to announce soon that it will not be hosting in 2020 its annual VentureClash contest, which allows startups to compete for investment offers of up to $1.5 million, said CI CEO Matt McCooe in a recent interview.

CI is ending the program due to the rise of various business accelerator programs in Hartford that are focused on recruiting and incubating global startups in major industries like insurance, health care and manufacturing, McCooe said.

CI wants those programs to do the global outreach and marketing that VentureClash required, soaking up “a huge amount of time and effort” for the 35-employee agency, McCooe said. Besides the VentureClash finals event held at Yale’s New Haven campus each fall, the program also entailed events and recruiting in Nigeria, Israel, Canada, Ireland, Germany, England and the Netherlands. Some CI personnel attended those events, but the agency also relied on various foreign partners to help.

CI isn’t done investing in promising new companies, McCooe stressed. It’s merely ceding more of the incubation work and global outreach.

“We are the state’s VC fund and I’m very happy for us to be in a support role rather than a lead role,” he said.

CI has approximately doubled its number of portfolio companies, to about 200, under McCooe’s leadership, and he expects to reach 300 in the not-too-distant future, he said.

A long-term play

As CI mothballs its VentureClash competition, it’s still too soon to judge whether it’s been successful, McCooe said.

That’s because an early stage investment can take 12 years to pay off (or not) through an acquisition or IPO.

Regardless, it did have some clear wins and losses.

“We entered this program with one major goal in mind — increasing the pipeline of international companies,” said CI Board Chairman Michael Cantor, of intellectual-property law firm Cantor Colburn. “What happened over the last four years was so much better than that.”

CI invested in about a dozen companies out of approximately 26 startups that placed in the money at VentureClash over the past four years. Those 12 startups have about 30 employees in Connecticut today, a number CI hopes will grow as the companies scale and mature, McCooe said.

VentureClash has also helped CI develop closer ties with major Connecticut corporations and institutions — including Travelers Cos., Unilever and Yale — that have been involved as competition sponsors and judges, sparked by their interest in up-and-coming technologies in their respective industries.

CI has also built new and stronger partnerships with venture firms in other states that have co-invested in its VentureClash deals, and the contest has, in general, increased global awareness of Connecticut’s startup ecosystem, said McCooe, who spearheaded the contest’s creation not long after CI hired him away from New York in 2015, where he had been a managing partner at venture capital firm Chart Venture Partners.

“I thought we needed more deal flow, we needed more companies to look at,” he recalled.

Now, cross-fertilization between CI and the various startup accelerator programs in Hartford — including Hartford Insurtech Hub, Upward Labs, Stanley+Techstars Accelerator, Nassau Re/Imagine and Digital Health CT — is benefitting companies they’ve attracted here.

It’s also brought CI new investment opportunities.

For example, Pineapple, founded in South Africa and provider of a peer-to-peer insurance app, won first place at the 2019 VentureClash after previously going through the Hartford InsurTech Hub accelerator.

“It makes the point that we can rely on the bootcamps to get a good deal flow for us,” McCooe said.

Another standout from VentureClash, McCooe said, is Covr Financial Technologies, a digital life insurance software developer previously based in Idaho that established a Hartford headquarters last year and now has 18 local employees.

Of course, there have been setbacks along the way. For example, the top two VentureClash winners in 2017 — hailing from the Netherlands and Israel — ultimately decided against moving to Connecticut.

One of those startups — Friss, which makes insurance-fraud detection software — opted to locate in another state.

McCooe said there were various reasons CI didn’t close deals with some VentureClash winners. Some companies’ long-term prospects didn’t look as rosy when more in-depth due diligence was done.

CI is also required to hold companies accountable for their Connecticut-based job-creation commitments, which has led to a few instances in which CI declined to do a follow on investment.

CI’s goal had been to invest in roughly half of VentureClash’s winning companies, McCooe said, and it fell just shy of that mark.

While he is confident that Connecticut industries and accelerators will continue to draw interest from global startups, he’s more worried about attracting new venture firms to the state and ensuring technology startups here are able find enough talent.

“CI needs to have a stronger hand in supporting these companies’ recruiting needs,” he said. “The companies have told us they have a hard time hiring people here.”

What can be done? McCooe said he has a few ideas he’s not yet ready to share. So, like figuring out VentureClash’s impact as it sunsets, stay tuned.