With Firebrand Ventures’ $7 million VC fund, Techstars’ John Fein is on a mission to change startup investment across the Silicon Prairie.
After three years as Managing Director at Kansas City’s Sprint Accelerator powered by Techstars, John Fein noticed a recurring problem.
“It became very evident, especially after the second program that there was a pattern of very little early stage capital available in Kansas City,” said Fein. “I felt that, and my companies felt that first hand.”
Companies looking to raise $300,000-500,000 found nothing in Kansas City, according to Fein. As he traveled around, he noticed others cities dealing with a similar lack of funding.
“A lot people had been talking about it over the years, and I wanted to part of the solution,” said Fein. “I thought, ‘This is what Kansas City needs. This is what the greater Midwest needs.'”
In response, Fein launched Firebrand Ventures this year, which he sees as a huge financial opportunity to invest in a lot of promising companies in the region that are not getting capital.
“I think there’s plenty of capital in our communities—in Kansas City, Des Moines, Omaha and beyond,” said Fein. “There’s no lack of capital. The void is a comfort level of organizations and individuals to invest in early stage startups.”
He considers this distinctive to the Midwest.
“You really don’t have that same thing on the coasts. Culturally they are used to taking chances on early stage startups. They’re comfortable with that process. They understand what to look for and they understand the risks.”
Challenging the status quo
Midwest investors have a reputation for focusing more on early revenue.
“From a Midwest standpoint, investors typically push revenue because they understand that,” said Fein.
However, artificially forcing revenue at an early stage can sometimes be problematic, according to Fein, if it’s the wrong kind of revenue or a less than ideal product-market fit. Fein wants to be more aggressive by investing in companies at an even earlier stage.
“This is the world that Techstars plays in,” said Fein. “A typical company that comes into a Techstars program has a team, has a product, but they don’t have millions of dollars in revenue yet, typically.”
With experience evaluating over 1,000 startups at that early stage, Fein says he feels comfortable making those early calls. The fund plans to invest in 30 companies, with an average first check size of $150,000.
“We will reserve capital for some follow on investment in those companies,” said Fein.
He wants to invest in founders who are interested in building successful businesses over the long term.
“I’m looking for builders,” said Fein. “I’m not looking for entrepreneurs looking to flip a company in 18 months and sell it for $2 million.”
The Sprint legacy
The Sprint Accelerator has focused on mobile health and mobile more generally. Fein sees that as a strong vein to tap for the future.
“Mobile is king,” said Fein. “I think mobile is going to continue to grow at a huge rate. I’m a big proponent of that.”
Fein’s move comes at a time of change for the Sprint Accelerator itself, which ended its partnership with Techstars earlier this year. Techstars plans to find a group of corporate partners in order to launch another accelerator in Kansas City. Fein will be part of shepherding that new project.
“They’ve been hugely supportive of what I’ve been doing with Firebrand Ventures,” said Fein. “I am helping Techstars in Kansas City figure out what’s next for the accelerator in Kansas City and hire the next staff.”
Ryan Pendell is the Managing Editor of Silicon Prairie News.