Betaspring co-founder and managing partner Allan Tear. (Photo by Scott Kirsner / BetaBoston)
Betaspring co-founder and managing partner Allan Tear. (Photo by Scott Kirsner / BetaBoston)

Betaspring is taking a breather.

The Providence-based accelerator graduated its most recent class of seven startups in June, but doesn’t plan to start a new cycle until next spring. Between now and then, they’ll need to raise a new pool of capital, and Betaspring managing partner Allan Tear tells me that he’s not expecting to get any support from public sources, which have provided substantial backing for Betaspring in the past.

“We’re taking the fall off,” says Tear. “We did ninety companies in a big rush, and we wanted a breather cycle. We wanted to go back and focus on our most active alumni startups, and see if we could spend a cycle figuring out what they needed, and how we could help them.” Translation: Betaspring is buffing up its portfolio, which has seen two acquisitions (Tracelytics and Digipop, both bought by private companies for stock.) “Ultimately, it doesn’t work out for anybody unless exits happen, or companies get on a solid path to profitability,” says Tear.

A recent MIT analysis that looked at the performance of accelerator programs, based on exits, startup survival rate, and the amount of capital raised by graduates, ranked Betaspring as #11. But as Betaspring seeks to raise more money to continue operation, it’ll be an interesting bellwether for other accelerators that aren’t the Harvards or Yales of the field (that would be Y Combinator and Techstars): Are there enough individual and corporate investors interested in backing a five-year old accelerator that hasn’t (yet) established a stellar track record?

Betaspring has received support in the past from the City of Providence, in the form of $50,000 convertible notes for some of its startups, and $2 million from the State Small Business Credit Initiative, part of the federal government’s stimulus program during the recent recession. (That $2 million has proven controversial because of how much went into Betaspring operating expenses versus equity investments in participating startups. A spokeswoman for Rhode Island Governor Lincoln Chaffee tells me the issue hasn’t yet been resolved.)

Tear says his plan is to raise all of Betaspring’s next fund from private investors. “We feel like we’ve got a good track record,” he says. Referring to the 25 or so companies that participate in the Boston-based Techstars program each year, he says, “We think there’s room for more than 25 tech-driven companies to be accelerated in New England.” Tear didn’t want to say what the current fundraising objective is, but Betaspring’s most recent fund was $4.25 million. Betaspring has provided between $15,000 and $20,000 in seed funding to chosen startups, but Tear says that both the funding amount and the length of the program (it has been about 13 weeks) could change in 2015.

“I’m a huge Betaspring fan,” says Saul Kaplan, founder of the Providence-based Business Innovation Factory and a former head of Rhode Island’s Economic Development Corp. “It has had a huge impact in our small pond in Rhode Island.” But the $2 million in federal stimulus funding helped fuel Betaspring for a time, Kaplan notes, “and that was never a sustainable funding source. Allan is absolutely right to look for private sector sources, whether that’s investment dollars or philanthropic dollars looking for a social return.” And some new financial support could come from big companies, which, Kaplan observes, “want to play in this sandbox and want some of that entrepreneurial dust to rub off on them. Allan is working hard to create some of those relationships.”

Some investors say that the quality of Betaspring companies has been on the upswing. “In my own opinion, the quality of the teams has continuously and markedly improved year over year,” Lee Hower of NextView Ventures writes via e-mail. An interactive toy startup, Sproutel, is currently running a successful Indiegogo campaign and the expense-sharing startup Splitwise seems to have good momentum. But the Betaspring alumnus that has had the most success from a funding and employment perspective isn’t in Betaspring’s portfolio, unfortunately. Teespring’s founders went to Brown University, and participated in Betaspring in 2010 with a startup focused on student jobs and internships called Jobzle. It didn’t fly, but they were later accepted by Y Combinator in Silicon Valley with a different idea. In January, they raised $20 million for their custom t-shirt site from Andreessen Horowitz. Teespring, still headquartered in Providence, has about 70 employees.

I’m hopeful that Betaspring will find supporters, since accelerators play an important role in grooming new entrepreneurs. But it’ll be a real test of whether investors are impressed by its track record so far, or persuaded by any changes Betaspring is proposing going forward. I covered a Betaspring investor showcase held in Boston in June, as well as the spring 2013 crop.

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