For me, 2018 has been a year of realizing more efficient ways to build a technology startup. But those realizations only started to occur when I thought critically about startup ecosystems playing not only to their strengths, but also being transparent about their weaknesses.
Below is a set of recaps, lessons learned, and resources which have helped guide me through being an Ames startup founder who is both proud and critical of their growing startup ecosystem.
2. Initiatives in 2018 (strength)
With President Wintersteen’s campus-wide support for entrepreneurship, you now have more Iowa State University students and faculty talking about problem solving and beginning to start businesses, as well as finding work opportunities with local startups.
From the Agricultural Entrepreneurship Initiative’s (AgEI) new program, Changemaker Academy, to the Pappajohn Center for Entrepreneurship expanding its team to include Tom Swartwood, more individuals are helping to encourage entrepreneurial activity in Ames.
Startup Ames provided ample amounts of meetup opportunities throughout the year, as well as new insight and collaborations within the arts community. The organizers have the right idea for this integral component of a startup ecosystem. If we are to recruit new team members for our startups, and expect them to move to Ames, we need to offer a vibrant arts scene, capable of celebrating all variations of artists.
Startup Factory welcomed Cohort IV and V to its 52-week program, and Cohort VI will kick off in January. The technologies coming into Startup Factory continue to inspire me. It’s exciting to see many academics and scientists begin to shape their applications into products and services, and to go in search of business model help.
Let’s continue to bring in new faces and new events.
2. Technology Startup Investment (weakness)
There are a handful of technology startup angel investors who plug into the initiatives listed above. Ag Startup Engine has been a leading supporter in early stage ag and food technology startups. But that’s essentially it for funding opportunities for technology startups, pre-series A, in Ames.
With so many initiatives helping individuals to launch startups from Ames, there is a major lack of funding for these startups.
Earlier this year, we set out to raise our 2nd round of investment for Nebullam. The first mistake I made was not solely focusing on fundraising. The second mistake I made was meeting with more traditional investors (real estate instead of technology startups). There were many other mistakes made during our fundraising process (which only just successfully closed on October 31). Some of them are mentioned briefly below:
- Fundraising cannot be a metric. If it’s a necessity for your company to raise capital, the CEO needs to execute, and then get back to work on what matters—likely team building and customers
- Knowing how local investors invest. We originally set out to raise capital via Simple Agreement for Future Equity (SAFE), to which few investors in the region were familiar with or accustomed to. We then moved onto Convertible Notes, to which some investors in the region were familiar with or accustomed to. These experiences led me to realize founders and investors need to help educate each other on new investment frameworks and expectations
- Only meeting with professional technology startup investors. This was a tough pill to swallow, as my pride for wanting to raise our investment round locally, drastically slowed our process. This realization forced me to make 3 trips to Silicon Valley throughout 2018 for us to close our round
- Understanding Expected Value (EV) of state and federal funding opportunities. While I’ve historically been supportive of startups pursuing state and federal funding, I believe the EV from going after state and federal funding may become too low for the average Ames-based startup to pursue. Going elsewhere (elsewhere likely being to the coast and VCs) may allow for more efficient timelines and processes for fundraising
- Timelines. We made the mistake of sharing our timelines for the investment round, instead of asking the investors for their timelines in making a yes or no decision. It took us being in due diligence for months with certain investors, before we finally realized we were being milked for every piece of information
- It only takes 1. I’m happy to share that contact was made with 327 investors before we were able to close this round of investment. Our 3rd and final investor in this round was #320. Sometimes the sample size and timeline required are longer than expected. Keep building
To improve Ames’ chances at strengthening early stage startup investment, there needs to be at least 1-2 more successful startup company exits in the coming 18-24 months. The best-case scenario would be for a local startup to be acquired, and its founding team to turn into local angel investors.
Another option would be for a micro fund to be established, with set terms and investment targets ranging from friends and family rounds, to pre-seed/angel rounds, for technology startups which go through CYstarters or Startup Factory.
A last suggestion would be to establish a Scout Program, like Spearhead (https://www.spearhead.co/). Founders backing founders. A VC helps create a fund, which then equips founders with full check writing authority, to go and invest in their most promising peers’ startups. Founders benefit from the mentoring of the VC firm, as well as having skin in the game on the fund’s portfolio. VCs benefit from founders finding the earliest possible deal flow, in new locations.
I have a feeling 1 of these options will come to fruition in 2019, in Ames.
3. Resources (you decide on their value)
I believe any full-time founder should be a community builder. One of the easiest ways for me to give back is to share podcasts and blogs I enjoy and gain value from, and to gift books.
Podcasts which can help founders at an early stage include How I Built This and Masters of Scale.
Podcasts which can help founders while they’re raising their first round of investment and team building include The Twenty Minute VC, Angel (Jason Calacanis), and Acquired (especially the LP Bonus Show).
The books I’ve gifted most this year are:
- Not Fade Away: A Short Life Well Lived (Barton)
- The Obstacle is the Way (Holiday)
- The Messy Middle (Belsky)
- The Hard Thing About Hard Things (Horowitz)
The one blog I’ve shared most this year is from Paul Graham, 2009: Maker’s Schedule, Manager’s Schedule (http://www.paulgraham.com/makersschedule.html). I wish I would have read it and understood it 4 years ago, when my startup journey began.
Closing Hope for Ames in 2019
Don’t play startup,
Launch your ugly prototype
It’ll get you through,
To who matters most;
Maybe investors on the coast.
Don’t celebrate fundraising,
More than sales.
One too many fails.
Build and build,
Grind it out.
Now go where is best for your company,
You’ll figure it out.