Will Plug and Play's NJ FAST Accelerator Bring More Access to VCs for Startups in the State

The "New Jersey Fintech Accelerator at Stevens Institute of Technology" (NJ FAST), announced by Governor Phil Murphy at Stevens in May, will hold a launch event on September 16 at the Stevens campus, in Hoboken.

The accelerator, which will also host insurance tech companies, will be powered by Plug and Play Tech Center (Sunnyvale, Calif.), a VC that has 112 programs across 63 cities around the world. NJ FAST is Plug and Play's first program on the East Coast.

Plug and Play will host two cohorts a year, with at least 10 companies per cohort. The companies will be recruited globally to participate in the program, but at least 20 percent of each cohort will be from New Jersey, and there will be a strong focus on diversity, equity and inclusion. Equity investments of up to $1 million will be made in at least 15 percent of the participating companies. The New Jersey Economic Development Authority (NJEDA) intends to invest up to $17.5 million in the fintech accelerator.

Plug and Play has an impressive list of more than 500 corporate partners, and it invests between $30 million and $50 million annually in startups that have been through their programs. Prudential Financial (Newark) became a founding corporate partner of NJ FAST, with others expected to follow.

During his May announcement, Murphy said, "With NJ FAST, we're not only doubling down on one of New Jersey's bedrock industries, we are also seizing a once-in-a-generation opportunity to reimagine fintech."

The launch event will present some of Plug and Play's success stories, to give the attendees an idea of what Plug and Play can do for fintech startups.

A Step Towards Solving New Jersey's 'Silicon Valley' Problem

With the launch event coming up, now seemed to be a good time to look back on the panel discussion that took place in May, directly after Governor Murphy's announcement. During that discussion, Michael Olmstead, partner and chief revenue officer at Plug and Play, discussed one of the ways in which the organization could help solve what is sometimes deemed an intractable problem for New Jersey innovative startups: that they must go to Silicon Valley to secure capital, and often have to leave New Jersey to be nearer their funders.

Plug and Play is not just about engaging the local corporations in New Jersey, he said. "It's about plugging into an already massive existing network … Fifty percent of venture capital is deployed from one road in Menlo Park, California: Sandhill Road. How do you build a bridge from New Jersey to that capital? We always hear that the best companies tend to leave and go to Silicon Valley to raise money. Well, there's a Silicon Valley partner here already," he said, referring to Plug and Play. And startups "don't need to leave anymore. In fact, we want to create a platform where startups are now attracted to land in New Jersey, because they know that they have this type of resource here on the East Coast."

A Unique Model in New Jersey

Commenting on the model being used at Stevens, Olmstead said, "What makes this partnership unique is we're bringing together public, private and academic partners to create the value chain and innovation. The university is undoubtedly going to create the next generation of entrepreneurs that we can invest in, the government is providing plenty of resources and support to help startups grow, and then Plug and Play will help run our open innovation model to help them scale."

Working with large corporations is Plug and Play's strong suit, Olmstead noted. Startups need large companies as customers, he said, and Plug and Play has "a deep understanding of the business challenges and problem statements of really large companies; so, directionally, we know where to look for the right companies. And then we're able to, through our format, bring them [the startups and companies] together in a valuable way, so that positive outcomes happen."

He noted that Plug and Play puts "our money where our mouth is! PitchBook named us the most active investor in the world. We're in New Jersey to invest. That's why we're here."

Stevens' Contribution to Plug and Play

In addition to Olmstead, Kathleen Coviello, chief economic transformation officer for the NJEDA, and Gregory Prastacos, then dean of the School of Business at Stevens, spoke to an enthusiastic crowd.

Stevens will contribute to the startups selected for Plug and Play in several ways, Prastacos said. "We want every startup, assuming they are willing to, to have two students working alongside the founders. And, in addition, the students will have an adviser who has deep expertise. So, that will give the startups additional growth capacity and give students" the ability to contribute ideas and learn as they work alongside the startups.

Stevens, which already has a deep commitment to fintech, also has equipment that can be used to develop, test and run AI fintech applications, including NVIDIA processors, and it will allow the startups to use them. That will expedite startup growth, he said. He expects Stevens to become more entrepreneurial because it will now have in-house expertise to take student and faculty ideas and innovations to commercialization. He believes that Stevens will attract more students who "have the vision to create something new."

Coviello asked a question about Plug and Play's corporate partnerships. They're not just logos on our website, Olmstead answered. "We have a deep understanding of the business units within those organizations and what their needs are … We know the types of technologies we need to look for, and then we bring them together." About 70 percent of the company's corporate partners are interested in running pilots or proofs of concepts from startups to help the large companies increase revenues and reduce costs. The remainder invest in startups through a corporate venture arm that Plug and Play has established.

"Our partners set the context of how they're looking to engage," Olmstead continued. "Our job is to make sure that we put the right startups in front of them. And I always like to say, if there's a startup that we can't find, it's because that startup doesn't exist yet. That's an opportunity for the founders to actually create new companies." He added that the startups at Stevens will have access to all of the corporate partners, not just Prudential.

Olmstead noted that, in a cohort of startups going through the three-month program, some 70 percent of them will typically raise additional funding, and almost all of them will land a pilot or a proof of concept with one of their corporate partners. "This is how we judge the success of the program. Are they raising money? Are they closing deals with our partners?"

Coviello on Innovation Hubs in New Jersey

Answering a general question about New Jersey's innovation hubs, Coviello provided some interesting perspectives. She noted that innovation hubs have been part of Murphy's vision since he first took office. He hired a consulting company to help him understand New Jersey's strengths and weaknesses. "And one of the things that comes up every single time as our weakness is that we don't have a major metropolitan area. But we benefit by being between Philadelphia and New York. And our failing is that we're between Philadelphia and New York. We have a serious identity crisis, right? So how do we create an identity for the state around innovation and make it a destination point, that it's long been for life science companies?"

Coviello noted that the governor had said, "We need to put pins on the map that we're going to focus around for these innovation centers." She added that the innovation center momentum started with the HELIX, in New Brunswick. "We know transportation is critical to what we do and connecting people in the state of New Jersey; a lot of us spend a lot of time on the road. But we're working hard to improve our transit system. And, so, having the HELIX literally coming out of the ground as we speak, on the center of the state in New Brunswick, at the edge of the Rutgers campus, was kind of the first testament to, 'Okay, we're going to do this.'"

Coviello noted that Joe Kelley, former New Jersey deputy chief of staff for economic growth, "wrangled a lot of people to get [the HELIX] going and sold a vision that no one believed in." Once the HELIX building started to rise from the ground, however, a lot of people wanted to be part of it, and Nokia Bell Labs decided to build its own headquarters next door.

During that time, the governor and the state legislators started to include these innovation centers in the state budget, she said. "Fortunately for us at the [NJ]EDA, it was a pretty broad-brush appropriation. Here are the parameters: It's got to be an innovation, it's got to be something that's strategic to the state, it's got to include equity … Every time we have these conversations, equity is really important because we want to have that long-minded partner arrangement. So, it's not a contract. We're not just hiring Plug and Play. We are equity partners, together forming a new venture. And we did the same with HAX, in Newark. And the same with DEVCO, in New Brunswick."

She continued, "We're a year and a half left in Governor Murphy's administration. We're inking these deals so that they are 10-year plus engagements, so that we're not going to have that churn when we have a new administration. For folks that don't know, I've been at the Economic Development Authority a little over 18 years now. So, you know that longevity, I think, and commitment to this is critical, [as is] the ability to structure this. And for each of these innovation centers that we build, we are looking for academic partners to play to the state's strengths. So, Stevens was the natural partner here. We want folks that have the vision of building the innovation economy in this particular segment of the state."

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