Category: Blogs

I slept in this morning. Accidentally.

See, we’ve packed everything up to hit the road. We’re heading West to kick of the 2017 tech tour.

That means we’ve also packed up our Amazon Echo and Dot. Which we use every morning as an alarm.

So, we decided to use our iPhone as an alarm clock instead.

The problem: we didn’t pay attention to the phone’s battery level and it died overnight.

Anyway, I’m not trying to bore you with my inability to wake up at a reasonable time on a weekday. Messing around with my Echo and my iPhone got me thinking.

Amazon’s Alexa is so much easier to use than Apple’s Siri. Ultimately, it comes down to one thing: I don’t have to pause when I use Alexa.

For a moment, let’s put aside technical differences (Amazon’s devices are plugged into the wall while Apple’s devices are usually running on battery power) and privacy concerns (Amazon’s devices are always listening while Apple’s devices require a verbal prompt).

Here’s what the actual experience sounds like:

“Alexa, how’s the weather?”

VS

“Hey Siri. [PAUSE… and wait for the prompt] How’s the weather?”

That pause makes all the difference: I use Alexa multiple times a day (we have one at home and in the Airstream) and I might use Siri once a month (usually when I’m wearing gloves and dreading the cold).

My point is that friction matters, especially when you’re doing anything in the consumer space.

Also, keep your phone charged up. Especially when you’re depending on it.

“How do we unlock more capital across the Midwest?”

That, it turned out, was the main question Steve Case asked as I shared my experience of visiting 42 cities last year.

I shot a couple ideas off the hip but decided to take the weekend to really think it through.

If you’re reading this, you already know that not every company needs to raise venture capital. The vast majority of successful — large and small — businesses have never taken an investor’s money.

And, even though it seems like early stage capital is easier than ever to raise, one visit to anywhere outside of Silicon Valley, NYC or any other large city will quickly open your eyes to the fact that there are venture-scale businesses popping up everywhere else.

Not everyone wants to be in — or visit — Silicon Valley. And no, the big coastal VCs are not going to go hang out in the Midwest regularly.

So, here are a couple of things we need to do if we’re going to unlock capital through the Midwest:

Force more collisions. It’s not enough to just visit tech hubs, we need to force more collisions. In order to make that happen, we need to be pulling other entrepreneurs, investors and community leaders to visit their peers in other cities. Midwestern community leaders need to think bigger. And, if you’re interested in joining us — for free — as we visit other cities this year, just fill this form out to join us on tour and I’ll send you an email about once a month with all the information you need.

Make more investments. The most surprising part of my 2016 tour was that there was at least one venture-scale investment opportunity in at least 3/4 of all the cities I visited. The local investors either didn’t see it or didn’t have enough cash to support it and the coastal investors almost always thought the opportunity was too small. If we’re going to unlock capital across the Midwest, it starts by incentivizing Midwestern GPs to raise funds that are more aligned (read: small) with Midwestern startups.

And not just in venture-scale companies. People building “lifestyle” businesses get unnecessarily written off as being too small. That’s terrible. We met at least a hundred companies this year that were doing between $20K-$100K per month that didn’t want to go the venture route but that would have gladly taken $100K (or more) if it was structured a little differently. If we’re going to unlock more capital across the Midwest, it starts by helping more successful entrepreneurs get to the next level — even if it means they’re not going to return 10X on our fund (though they may still return 5X on our capital). We’re going to make more of these kinds of investments in 2017.

Educate more LPs. It’s not hard to see that there is a ton of money sitting on the sidelines all over the country. It’s not that they won’t invest in small funds or startups, it’s just that they don’t know that it’s an option. I’m going to do even more investor education workshops on every stop of the 2017 tour and Steve, if you’re reading this, I hope you’ll consider doing the same during your next Rise of the Rest tour.

Everywhere we go, people complain about how hard it is to start something.

They complain that all the money is in Silicon Valley.

They make excuses about all the time they don’t have available.

Are. You. Kidding. Me.

Starting a company is the easiest part of the process. In fact, it’s never been easier.

Here’s the thing that Silicon Valley has over you, your city and your community: it’s the mindset.

People in Silicon Valley don’t talk about doing something, they build a prototype. They talk to people. They iterate.

If you get to spend any time in Silicon Valley, you’ll quickly notice that there’s an incredible sense of urgency. (For better or for worse.)

They’re not smarter, richer or more connected than you. They just make things. Quickly.

Instead of worrying about how hard it is to start something, turn your attention to how hard it is to get past the stages you’ll need to conquer

• At $1 of revenue, you change from a startup into a business.
• At $1,000/mo of revenue, you’ve got a side hustle on your hands. THIS IS GOOD.
• At $10,000/mo of revenue, you’re a solopreneur and you’re probably ready to leave your day job (if you haven’t already).
• At $100,000/mo of revenue, you’re on your way to going big. GO YOU.

I’m not saying it’s going to be easy but you’re not doing yourself any favors complaining about local investors or anything else you think is slowing you down.

The only thing between you and your success is you.

If you’re excited by technical terms, we’re going to continue building an API to venture capital and functional expertise outside Silicon Valley and NYC. If you prefer plain english, here’s our plan for 2017.

Results Junkies = Tour + Content + Investments + Network

North American Tech Tour. We visited 42 cities, drove 26,141 miles in 2016, primarily focused on cities with less than 250,000 people and I learned a lot — personally and professionally — along the way. We’re going to do that again in 2017 and we’re going to reach 10X more people on the ground. I hope you’ll join us on the road.

Ramping up the content machine. We really dropped the ball on this in 2016 — we shook hands with over 20,000 interesting people. We should have been collecting more stories along the way and sharing them with you. We’re going to do this right in 2017: think blogs, vlogs and maybe even a book.

More investments. We closed only a handful of the ~40 investments I would have like to have made through 2016 and I was the bottleneck. I’m hopeful that we’ll still be able to close most of those deals this year (check your emails, founders!) but we’re going to streamline the investing process in 2017 (back the syndicate, investors!). Based on what we’ve seen this year, there are great companies emerging in the smaller cities around North America and I want us to be the most active early-stage investor in those regions.

The Network. One of the biggest learnings of the 2016 tour: most cities now have an intra-city network of entrepreneurial resources but there’s more we can do to connect them with their peers around the country. We’re going to build a series of weekly events and workshops that can be dropped into any coworking space or accelerator cohort around the country. There’s no reason that ambitious entrepreneurs in Tulsa, Butte, Grand Junction or anywhere else shouldn’t have access to the same level of resources as their peers in Silicon Valley or NYC.

So that’s the plan. We probably won’t get this right on the first try — or even the second try — but we’re going to make it happen.

I’ll share more details soon. 🙂

I’m convinced that becoming a better entrepreneur is similar to becoming a better athlete. You’ve got to do the work.

You don’t become a better runner by reading Runner’s World. You don’t become a better person by reading Men’s Health. You become better by doing the work.

If you want to be a better entrepreneur, here’s what you have to do: sell one thing to one person you don’t know.

It’s that simple.

You don’t have to quit your job first.

You don’t need to learn to code first.

You don’t need to get business cards first.

At the end of the day, entrepreneurship is about sales.

Just make one sale this week. It doesn’t matter whether it’s a product you’re thinking about building or if it’s a few hours of your consulting time.

Invest in yourself this year: learn how to sell things. Your future self (and career) is depending on you.

It’s nearly impossible to mix local geographic interests with venture-scale returns. That’s why the big brand name venture firms from Silicon Valley or NYC are unlikely to setup shop — or even visit — your small town.

The first step is to understand how investors make decisions. The second step is to realize that VCs aren’t incentivized to visit your town. Let’s take a quick look at how they get paid and then I’ll explain exactly why they’re not planning to visit you.

VCs are paid on management fees and carry — you’ll hear something called “the 2 and 20” to describe this. The first number is the management fee and the second is the carry.

Let’s pretend, for example’s sake, that I was the sole investing partner of a fund managing $10M. On a typical “2 and 20” model, I’m taking home 2% of the fund every year just to manage the fund and I get to keep 20% of any profits after I return the original $10M principal back to my LPs.

Let that sink in for just a minute.

…

When you’re getting paid on the standard 2% and 20% model, the overall incentive for a professional VC is to raise larger and larger funds. When they raise larger funds, the number of investable companies becomes smaller and smaller.

Still with me?

…

Here’s the bottom line: VCs paid on the typical model are incentivized to raise bigger and bigger funds. The problem, however, is that the average startup that survives long enough to build anything meaningful is more likely to get acquired for $20M-$100M instead of going public.

NEWS FLASH: Big VC firms don’t have to travel. Anyone building anything big is going to go visit them. Stop wasting your time, money and efforts trying to win those big funds over.

Here’s what you should do instead:

1. If you really want to bring VCs to town, aim for funds managing less than $75M.
2. Teach your founders to talk and act more like their coastal peers.
3. Recognize that there are great companies that will never fit the venture returns model and that’s OK. It’s better to have 10 companies making $1M/year consistently than it is to have one company hoping to make $100M/year.

As an aside, I believe there’s room for a new venture firm to completely dominate the early stage tech startup  scene across the Midwest. Here’s the sneak gist: raise a $10M fund, invest $100K into 30 companies, reserve the rest to follow on in the best of them and repeat this every six months.

Look, you’re either building a business or you aren’t.

There’s no in-between stage and this is true whether you decide to raise other people’s money or you choose to bootstrap things yourself.

When you say things like “doing a startup,” you’re undermining your own credibility.

If you can’t describe your exact customer in a sentence, you probably don’t know your customer at all. (Dead giveaway: “anyone that needs [X] will need us.”)

If you can’t figure out how to make your first $1 of revenue within the first 30 days, consider doing something else. (Dead giveaway: “we need to spend the next 6-12 months making the app and then we’ll launch big!)

If you’re reading this from a bigger tech hub — like SF or NYC — all of the above is obvious to you. If you’re reading this from anywhere else, please share this advice with every entrepreneur you meet.

The most common complaint I hear from local community leaders across North America is that they can’t get coastal investors to come to their cities and they can’t get the local investors to open their wallets. The problem isn’t the investors, it’s the founders.

If you want to make yourself more successful, pay attention to the details — all of them. If you want to make your community more successful, teach them the things that the coastal entrepreneurs are told every day.