Last fall SPN caught up with Jeff Slobotski, co-founder of Silicon Prairie News and founder of Router Ventures, a Midwest-focused venture capital fund. Now with a few investments in his portfolio, we decided to check in with Slobotski to see what he’s been learning lately.
SPN: Tell us a bit about what’s happened with Router Ventures since you raised your fund.
JS: We’re now invested in five companies. We’ve got one outside the Midwest, and we’ve got four that are in the Midwest. We’ve plugged into companies that have a lot potential but just need seed capital to get going.
SPN: Who’s helping you?
JS: The investors in the fund are very experienced, and they can help look at what’s happening. I’m also working closely with other funds in the area like the guys at Detroit’s Ludlow Ventures, I talk and work with them a lot. They’ll say, “Hey, take a look at this.” Or I’ll say, “Hey, what do you guys think?”
There’s a fund, High Alpha, in Indianapolis–Kristian Andersen is one of the guys there–and they’ve been doing it for years, operating companies and investing. So a lot of it is sharing that knowledge base.
Officially on the team it’s just myself for now, but I’m not working in a vacuum.
SPN: We talked before about finding what your niche is. Are there any common themes in the companies you’ve invested in so far?
JS: Frankly, I think if anybody’s honest, you never come to a point where you know exactly 120%. There isn’t a theme necessarily. There isn’t a specific theme right now. One of our portfolio companies is in the real estate vertical. One is in drone technology. Another is in biomedicine for animals in Kansas City, REX Animal Health. So it’s varied at this point.
I think for me [I’m looking for] a unique product offering that’s still pretty early in the game. Not millions in revenue but there’s a semi-clear path to get there.
We don’t have a lot of serial entrepreneurs here. We have very few frankly that are back in the startup game. If David Graff from Hudl decided to launch a new startup, it would be like, “Whoa. OK. He’s got a track record.” You’d invest in whatever he does next. But [without that] you’re looking for a clear path to revenue and the overall strength of the team.
SPN: You mention on your site you’ve invested in LiveBy, based in Lincoln. What’s interesting to you about them?
JS: Interesting play in the real estate market. What I like about Cory [Scott] and the team is that they are wicked smart guys and dedicated. They’ve continued to show progress over the last few months. That’s one where I think it’s quasi-early, with decent revenue, and potential for expansion.
SPN: There’s a lot of talk nationally about the investment bubble bursting for startups. What’s been your sense talking to people across the country?
JS: There’s a tightening of the reins, tightening of the capital. Personally, I don’t think it’s that extreme. I think it’s a smart reassessment. It’s not like what we saw in the late 90’s, early 2000’s where we saw hundreds of companies with crazy valuations and no sales.
I do hear comments from companies in the Midwest that the tightening of funds on the coast has made it a little more risk-averse here. Investors in the Midwest are already a little more risk-averse. If anything, it’s made them unconsciously tighten things up.
I still believe there’s capital out there for good ideas, good concepts and good teams. It may be hard to come by, but I don’t think that’s an excuse any startup can use. This isn’t the 1930’s Dust Bowl, where there’s not a dollar in sight. There’s capital here.
SPN: When founders come and pitch to you, what’s the biggest thing that they can work on? What keeps you from investing?
JS: It might be needing to lay out the path more clearly. It’s not just saying, “We’ve got startup xyz, and it does this. We need money because we need to hire.” Or, “We need to market.” To me, that’s basic, right? Show me how you’re going to get multiples of return from my investment. What’s the path to get there?
The other thing is who they have surrounding them as mentors, as advisors. Really work hard to get those three or four people on your team. To me that shows you’ve done the work, you’ve sold the concept to others in that space. Like Cory at LiveBy. Does he have veterans in the real estate industry that he’s working with? He does. With Amado [Guloy] at REX. Does he have companies in animal health that he’s working with? Yes, he does. They function as quasi-advisors.
Even if you’re an early stage startup, find those couple of folks who are in that vertical that you’re working in and ask them to be advisors. That shows you’re doing the work. You’re not just going guns a’blazing, saying you’re going to turn the industry on its head. It’s like, “OK. Cool. But do you have folks that have validated that and are on the journey with you?”
Ryan Pendell is the Managing Editor of Silicon Prairie News.