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What matters: Insights from our venture network

This is the fourth of a multi-part series authored by The Startup Collaborative cofounding team: The Death (or Evolution) of Startup Accelerators and Incubators as We Know Them!

We are fresh off an investor roadshow to Chicago and St. Louis, thanks to the support of our partners at Husch Blackwell Omaha, Chicago and St. Louis offices!

Investor roadshows are essential to The Startup Collaborative’s mission of radically improving the odds through available growth capital. Call us bold, but we envision a region that has more fundable companies than available capital in the not-so-distant future. To meet that need, we need an expanded venture capital network!

We met with several pre-seed and seed stage funds and family offices between the two cities. The themes we heard from these VCs were consistent from those we heard when we initially pre-validated The Startup Collaborative…

For reputation’s sake, those consistent themes are listed below. Note, I’ve included direct quotes from investors in our network but left those anonymous intentionally out of respect.

    1. Traction matters. VCs don’t bet on concepts, they bet on traction. In fact, each person we met with instantly perked up once they realized we would not be introducing companies to them until they had proven customer growth — a minimum 25 active, paying customers for B2B SaaS startups. One VC even went onto say “What a relief, most accelerators hock every team in their portfolio with no vetting.”
    2. Vision and defensibility matter. We have heard this over and over again, the Midwest produces good execution plays. Rarely do we see sophisticated, emerging technology come from our region’s entrepreneurs. One challenge (opportunity) for our ecosystem is to truly leverage some of these emerging technologies as they relate to our core industries’ upcoming disruptions. In the world of venture, both your competitive advantage (execution) and your defensibility (technology) matter. Be sure you know what that moat is now and what the vision is for it to become.
    3. Founders matter. Your founding team is critical in funding decisions. “I have to see proof a founder can sell,” one VC told us. That was echoed by nearly all others in Chicago, St. Louis and even Austin earlier this year. Beyond sales capacity and early traction, investors want to see some domain expertise. A few of the investors in our network actually require it! And, no surprise here, investors want to see the holy grail combination of hustler and hacker.
    4. Unit economics matter. “Show me the formula for how you’ll grow $1 into $10.” Venture is growth capital. Entrepreneurs are going to be tested in pitches and especially in due diligence rounds on how that capital will go toward growth. As more and more investors review our expected outcomes, we hear consistent reactions to LEVEL 9 // Outbound Sales and LEVEL 10 // Inbound Marketing outcomes. Most come in as a sigh of relief. Know how you’ll grow $1 to $10 through outbound sales and inbound marketing. These should be reflected in your financial projections. Get closer to the bullseye on these traction channels so you can clearly articulate which – at the MVP stage – channels provide the most growth.
    5. Speed matters. Don’t assume you have all the time in the world to run out your concept. Your sense of urgency and bias toward action signal energy, passion, commitment and ability to scale to potential investors. Unfortunately, a major knock we hear from investors generally speaking on midwest deals is the slowness it takes for teams to find product-market fit. This is one of the main reasons we expedited LEVEL 1 through LEVEL 4 recently — we have to prevalidate faster and, as cliche as it sounds, fail faster. Eliminate the zombies.

 

 

 

One more roadshow planned to take us through the end of the year. Next up, Silicon Valley. Thankfully, these are expanding our investor network, increasing Nebraska fund-to-fund relations with other midwest VCs and improving the odds that midwest startups will succeed with the support of growth capital. Plug: we couldn’t curate this program without the support of Husch Blackwell. They ensure we have basecamps in each market and are helping us reach new markets in 2018.

Parting Thoughts

A cohort does not make strong deal flow. Rather, individual teams that have achieved serious outcomes and proven themselves do. As accelerators and incubators evolve, our hope is that we see a more tailored approach to venture deal flow instead of the one-size-fits-all approach many take now.

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No strangers to the venture space, this co-founding pair has both dealt with divvying out funds and receiving venture capital. Having what they would describe as extremely good role coverage, they have aligned the broader community to their ambitious goals for the startup region. Enjoy their radical vision for our region’s innovation economy!

NATHAN PREHEIM
A serial entrepreneur in every way, Nathan can’t help but concept new companies. Thankfully, he has become quite attuned to taking a concept through validation and eventually into scale. His experience in creating more than half a dozen companies led to the creation of The Startup Collaborative’s unique approach to company building.

Prior to The Startup Collaborative, Nathan is best known for co-founding MindMixer, a civic engagement startup that quickly scaled from 0 customers to nearly 1,000 in just two years. Eventually employing more than 75 employees across the Midwest.

Ironically, Nathan brought maturity and structure to wild-west style startups across the Silicon Valley, Silicon Beach and now back at Silicon Prairie.

A San Francisco expat, Creighton and UNO graduate and now Midwest community leader, Nathan is a fixture on the startup scene.

ERICA WASSINGER
Before launching The Startup Collaborative, Erica co-founded Omaha Startup Collaborative.

Best known for creating the elusive sense of density within the Omaha startup market, OSC quickly became home to more than 70 area startups and tech companies. Within just 18 months, OSC had been connected to the creation of a few hundred jobs, millions in venture funding and the inspiration of thousands of current and potential entrepreneurs.

Erica’s entrepreneurial insights have been quoted in publications like Forbes, Inc. Magazine and even on NPR.

Boomeranging back to Nebraska from Dallas where she worked with top civic leaders on pivotal public-private partnerships to change the trajectory of the city. Previously, Erica worked with a handpicked group of growth-seeking clients spanning the marketing, technology and startup companies.

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