When I worked at Square 1 Ventures
, a big part of my job was hearing the pitches of VC fund
managers who wanted us to invest in their funds. We ultimately made nine investments, but met with over 100 funds. And whenever we'd meet with a manager
based in a market outside California, Boston or New York, there was a high likelihood of seeing a slide called "Underserved Geography" or something similar.
This slide, or series of slides, would go on to make the case that New Mexico, Kansas, or yes, even our own state of North Carolina was a huge opportunity and that the fund managers had access to the best deal
flow in the area. The more creative folks would put together some graph manipulating cherry-picked data points to demonstrate that Tennessee was in fact the ideal site for VC investment.
This tactic always cost presenters credibility points with me. If they wanted our money they should have told me how they were going to produce great returns DESPITE their geographic challenge - not sell me that this was actually a positive. If these areas actually were as attractive for investors as they claimed, other funds would be putting money to work there. Smart investors don't ignore areas out of spite. If enough high-growth companies sprout up somewhere, they take notice.
Here's an analogy - if you were at a job interview for a position that required more years of experience than you have, you wouldn't go in and say, "My lack of experience is actually a benefit, because I haven't developed all sorts of bad habits that I have to unlearn." At least I hope not. Instead you would probably try to make the case that despite your lack of desired experience, you are a really strong candidate because of your other abilities and focus the discussion there.
The reason I bring this issue up is because I see the same thing going on when people share puff
pieces about the Triangle, or Detroit or any other "up and coming" startup ecosystem. The author typically goes overboard and tries to make the case that it's actually BETTER here than anywhere else: "Screw Silicon Valley - Here's Why You Should Start
Your Company in Idaho."
You don't even have to read the article to know it's false, and credibility is lost before you open the link. Authors typically point to vague benefits of these locations
like "good talent pool" and "quality of life." Really? The talent pool and quality of life in the Valley are worse than ? Doubtful.
Paradoxically however, I actually do believe people should start companies in Idaho, Iowa, Detroit, Tennessee and yes, here in North Carolina. The reason isn't because we're the best place to do it (although we'd be a lot closer if legislators and politicians could get their act together), it's because we're getting better. We have a growing number of quality companies, improving resources in the form of office space, mentors, grant programs
, startup-friendly service providers, information sessions, meetups and other events, and an angel investor
community that I think (hope) is becoming more sophisticated and professional.
Technology helps too - sites like AngelList, FundersClub, and Seedrs enable people to learn about and invest in companies
based on concept, team and traction, and lets them set aside geography concerns. It's still very early in the adoption of these platforms,
but at least one local company (Spreedly
) was able to raise capital on AngelList
from a European investor in a few weeks, and as the kinks are worked out of the process, I expect activity will continue
to scale.Steve Case
and his fund Revolution Ventures is focused on what they call "The Rise of the Rest" and he has been traveling the country to promote startups in lower profile
areas. He was involved with the Google Demo Day competition won by local company Windsor Circle
earlier this year, and pledged to personally invest in all of the companies. Still, I couldn't help but feel like when Windsor Circle won, people in the local community forgot the point of the event. It's not a competition between Minnesota, Raleigh, Chicago and whatever other cities participated - it's about ALL of those cities winning and potential investors coming to realize that they need to start paying more attention to startups outside of the Valley.
For all the progress
that North Carolina has made, the fact remains we are still borderline irrelevant outside of the Southeast from an investor perspective. I met with plenty of folks when I was fundraising (at both Square 1 Ventures and my now-defunct startup Loyalese) who couldn't keep Charlotte and Raleigh straight. It's not an advantage to say your company is based in North Carolina - it's a hurdle.
The way it becomes less of a disadvantage, or at least not a conversation-ender, is for companies from more second and third tier markets to make it big. Rather than having a competitive mindset, we need to work cooperatively with these communities. We need to try to expand our conceptual footprint to include not just Charlotte and Wilmington, but Nashville, Columbia, Atlanta, and beyond.
There's so much (passive) in-fighting that goes on between the startup entities in Chapel Hill, Durham and Raleigh, and it drives me crazy as an entrepreneur-in-residence at one of them. We have a bunch of great groups, but no one wants to share information, best practices, resources, contacts, demo days, and so forth. I've suggested repeatedly having a monthly meetup for the leaders of these groups, and to include Wilmington and Charlotte groups while we're at it, but the belief seems to be that whoever tries to organize it will be viewed as trying to take the alpha dog role, so the others won't participate. Seriously.
Well I'm through trying to promote this idea behind the scenes and within the groups. I'm just publicly going to call for the groups to stop competing and start working together for the good of the whole area. If outsiders can view North Carolina (and eventually possibly even the Southeast) as one coherent and amalgamated startup operation, I think that will greatly accelerate their desire to allocate resources towards tracking activity and investing here.
In short, let's stop kidding ourselves and trying to spin our weakness as an advantage. Let's start working together to help North Carolina, the Southeast, and the "Rest" to all be well worth watching.