“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.