After the Monetery event in March, Clay & Milk is working to keep the conversation moving forward and provide the type of expertise that was on display during that event.
So we’re connecting with venture capitalists around the Midwest to pick their brain and provide Iowans with insight into what they are looking for from entrepreneurs and companies.
After talking with John Fein of Firebrand Ventures in Kansas City, Clay & Milk reached out to Dundee Venture Capital in Omaha.
We spoke with Beth Engel, a partner at Dundee Venture Capital and Allie Esch, an analyst at Dundee Venture Capital.
After learning about the Dundee Venture Capital portfolio, Clay & Milk asked them what they look for in entrepreneurs, how active they are in Iowa and what other VC’s are saying about Iowa’s startup ecosystem.
Our conversation is below and has been edited for conciseness:
Dundee Venture Capital has a Midwest focus?
BE: We are lead seed investors.
We come into a company as the first institutional venture capital money. We broadly define the Midwest as Denver to Columbus and Minnesota to Tulsa.
While we haven’t done an Iowa investment, we would absolutely enjoy doing one and have tried to improve our partnerships with stakeholders in that area to keep our pulse on the great activity in Iowa.
How many companies are in the portfolio?
BE: We have eight investments in the fund three portfolios and 37 prior to that. SO a total of 45 investments since 2010.
Tech is certainly the industry we are most likely to back, we do have a portfolio of about two-thirds B2B software companies and one-third B2C businesses. We have a company we backed in Lincoln that started a subscription box and has evolved into more of a fulfillment business.
But technology for sure.
We have office locations in Minneapolis and Chicago but are headquartered in Omaha.
What are you looking for in entrepreneurs?
AE: We are pretty industry agnostic, we’ve made investments in B2B SaaS, marketing tech, real estate tech, e-commerce, the back end of retail, FinTech and InsurTech. There’s a lot of different business models we see and when we think about where we’ve made an investment versus where we’ve said no, the team is absolutely a distinguishing factor.
So when we think about a team, are they solving a problem and is the solution ten times better than what’s out there. When we look at companies in our portfolio we would agree that the solution is ten times better than incumbents or other competitors out there.
BE: To piggyback off Allie, there are great businesses being started everywhere and we also believe that many of those businesses would be great candidates for venture capital, but some might not be.
For us, the capital means that there’s a scalability into a big market at a which the founding team intends to go and wants to go. That can be fueled by the capital we can provide as well as the network and thoughtfulness that we try to bring to partnerships.
You mentioned trying to strengthen ties to Iowa, how have you gone about doing that?
BE: The timing of being able to deploy a fund, we are in find and seek mode of the best possible partnerships and I think that has meant we’ve spent more time in Iowa.
Events like the Ames Seed Fund, getting to know the NewBoCo group, clearly Next Level Ventures, we’ve seen lots of great companies from them in the last three to four months.
Geoff Wood in the community, that’s been really helpful to us as we’ve sought deals and looked for ways to become a good partner. It makes a lot of sense to continue playing offense and not just be waiting hands open…be out there forming relationships at the earliest stage. You never know when things are going to pop.
Mark (Hasebroock, founder of Dundee Venture Capital) and I had an Angel Fund a few years ago alongside Dundee Venture Capital and we have a business called WorkHound in Des Moines.
They are in our angel portfolio, they are a good example of a solid team, hustling, growing their business and great communicators to their investor group. They are the type of business we would like to continue to support.
How do other VC’s view Iowa and its startup ecosystem?
BE: Because people from the coasts can point to an example like Dwolla, I think that has helped Des Moines get on the map and Iowa in general.
Even an event that was pulled together in March—Monetery—I was at that event and thought it was an energized group of people who were thoughtful, smart and excited to be there. So if the only thing you thought about with Iowa startups was Dwolla, that would be a good green light for people.
Like Workiva…That’s a good example of a business that has grown—and grown quickly— that people enjoy working for and it makes them sit back and think I may be humble and helpful here but I have done well, I’ve created opportunities for employees.
And I think Iowa is strong in that regard.
They (Workiva) grew quickly and that is something that is a great perspective like we grew a company here, hired a lot of people and created something useful for our customers and a great place for our employees, while also putting dollars in our pockets to reinvest into the community.
What advice would you offer entrepreneurs looking to connect with Midwest VC’s?
AE: It’s always a good idea for entrepreneurs to get to know investors in and outside of their community sooner rather than later. Us as early-stage investors, we like to know the founders, a year or 18 months before they start raising. That allows you to build trust and build a relationship overtime instead of just getting to know someone a couple weeks before you write a check. That partnership doesn’t have time to blossom if you are reaching out right before you are raising.
And don’t raise institutional capital until you need it.
We always tell our founders that sales solves all and there is definitely a place for venture capital, but sometimes it’s good to grow methodically and in the direction that the entrepreneur sees their company going, verses of being pressured by an investor base or an angel investor who wants you to go faster than you are ready to.
But sometimes founders want to raise money faster than they need to.
BE: Getting ot know one another prior to closing a deal, because I think it allows the founder to think, if at some moment I want to raise $1 million, who are the people that I want to know around here?
And that’s where Dundee wants to play offense to get to know those founders. So when you are thinking of raisng a seed round, we want to be top of mind in that regard.
That’s the conversation we want to get rolling before we put cash in the bank.
I always think as a person who is more operational and less entrepreneurial, the energy and passion that founders bring to an idea in the midst of a lot of people having to tell them no all the time, I think is extraordinary.
The ways we can help our communities support people who are creating these youngest companies in our economy is something we hope to be able to do.