Democratic startup incubators are moving to rush money to companies offering solutions to COVID-related campaign issues. The move could help accelerate innovation on the left as the industry grapples with unprecedented challenges to campaigning.
Higher Ground Labs (HGL) wasn’t originally planning to do an investment round in 2020 but found the pandemic has opened up gaps in its side’s capabilities. HGL is now looking to plug those gaps with some targeted investments to its current portfolio and outside companies over the next few months.
It’s tolerance for risk isn’t the same as in midterm or off-year investment rounds. It’s eyeing companies that have a proven track record and a sustainable business model beyond 2020.
“We’re looking at tools that are addressing the COVID gap,” said Teddy Gold, vice president of investment at HGL. “We’re not doing a full accelerator, but we are in the diligence process with a group of companies that fit a more tailored focus with the hope of making an impact for the 2020 elections.”
He noted online events and vote by mail were two areas that they’re targeting.
“We think every American should have the ability to vote safely in 2020,” he said. “We’re are looking at tools that can support vote-by-mail outreach and vote-by-mail tools.”
HGL, which has put $15 million in equity stakes into 36 startups since 2017, hasn’t decided how many investments it’ll make or how big they’ll be during the COVID round. The question is, said Gold, “How can we get these tools in front of people as quickly as possible so they can bridge the gap?”
Meanwhile, a prominent incubator on the right is playing wait and see, noting the current environment remains volatile.
“It’s too early to make any long-term investments based on what we’ve seen in the last few months so we’re sticking with our original timeline of investing in another round of companies in 2021,” said Eric Wilson, managing partner of Startup Caucus.
“We certainly didn’t anticipate the pandemic, but the social distancing measures are accelerating trends we've been watching so our companies are well-positioned to help Republicans navigate 2020.”
New Media Ventures (NMV), like HGL, is also on the hunt for new investment opportunities. The progressive incubator, which also works with non-profits, normally invests $1-1.5 million in a cohort of 10-20 startups.
They’re targeting the same number this cycle, but hoping to invest $2 million from what NMV is calling its Crisis Innovation Fund, which currently has $600,000 in funding.
The group recently extended its application deadline for its open call from March 2 to May 4. “We’re looking for, frankly, startups that didn’t exist in February,” said Taren Stinebrickner-Kauffman, president of NMV.
She expects to consider about 600 applications for funding.
The group, which has channeled some $50 million in investment to more than 80 political and advocacy startups since 2010, is also hunting for vote-by-mail tools, and solutions to combat disinformation, as well as tools that elevate the voices of marginalized groups.
“A lot of the things we’re talking about can scale this year,” Stinebrickner-Kauffman said. “If it’s around providing master classes with best practices for candidates operating in a no-rallies, no-fundraising-events environment, that’s something you can scale and it can have a big impact.”
The money from this round could help sustain a company that otherwise wouldn’t have survived far beyond 2020. “We know it’s a really tough fundraising environment for the next two years,” said Stinebrickner-Kauffman.
NMV’s funding for non-profits with 501(c)(4) or 501(c)(3) status comes in the form of a grant. For companies that are for-profit, they largely do convertible notes.
“We are going to be moving some of the money faster than expected,” she added. “Some of the money being pushed out in May or June could have an impact — especially around narrative building. This is such shifting ground that narrative interventions will matter right up to the very end.”
Research has shown that during similar periods of economic turmoil, like the Great Depression, innovation has flourished. But as much as a crisis can drive progress, it can also be destructive. During the Depression, independent inventors filed fewer patents, a study showed. Instead, innovation moved inside to the R&D departments of large companies.