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SHOW NOTES/BLOG:

We’ve been meeting with lots of startup entrepreneurs. One recently sold his concept and had some opinions (GOOD AND BAD) about our startup community. We have attached his entire letter with our comments (in bold italics):

His Letter:

The State of Venture Capital in Louisville from a Startup’s Point of View

Before offering my viewpoints and experiences on the state of venture capital in Louisville, one has to first recognize two other important elements of the money hunt. First is the established and formal educational and support opportunities, and secondly, the network of professionals that enhance their effectiveness. This is where Louisville shines.

Few other cities approaching Louisville’s size have programs and commitments like those of GLI’s Enterprise Corp., the University of Louisville’s Nucleus program and Business School Entrepreneurial offerings.

(I agree.  We have great resources.)

Under the leadership of Lisa Bajorinas, GLI’s Enterprise Corp. creates and connects startups with resources that are valuable and effective. Some complain about the “revolving door of talent” at Enterprise Corp, but I see it differently, very smart and driven people are recruited, create opportunities for the community, and as a result are naturally sought by other organizations. Witness the recent departure of Terry Gill and Amelia Gandara, just two examples of high value talent, going forward to new challenges after demonstrating stellar performances locally. More than just creating programs of awards and recognition, Enterprise Corp connects, supports, and locally advocates for the startup community.

(Again, I agree.  There are great people and programs in Louisville that help our startup community.)

The University of Louisville has an internationally recognized program of support for health related startups, both internally licensing research as well as having impressive physical support facilities such as the Nucleus complex. Also, the University of Louisville’s Nucleus umbrella includes the Launch It program, (of which I am a graduate) that helps startups focus and accelerate the very hard but necessary work of creating a minimum viable product and customer discovery.

The Business School at the University of Louisville, especially the MBA Entrepreneurial program, repeatedly wins awards and real money, from the efforts of the students, and many go off to start their own businesses, or help larger organizations create opportunities internally. Other treasures for the startup community include Start Up Weekend, GE First Build, and Maker Spaces.

In addition, Louisville has a business savvy Mayor that supports the business community and startups in particular. An integral part of this network is the dedicated experts, coaches, and investors who give tirelessly and enthusiastically advice and support. People like Greg Langdon, Bob Saunders, and others support and connect start ups while never expecting anything in return, other than the satisfaction that they are nurturing and growing a vital start up community. Businesses like Mightily, and Execuity, help in marketing and strategy, and firms like Frost, Brown, & Todd give expert advice in the spirit of paying it forward.

(Agreed.)

Now for the ugly side.

Formal groups of investors, such as the Venture Connectors, are very risk adverse. In my opinion, despite the best efforts of the board of directors, Venture Connectors should be renamed the “Chickenshit Club. “ I know what you may be thinking, sour grapes from another founder that was not able to get funding locally, besides, it has been shouted from the rooftops many times, a good idea always get funded. I’d posit that a good idea always gets funded, but not necessarily funding from Louisville based venture capitalists. This is my personal opinion based on my experience, so if indeed I am jaded and cynical, then so be it. That is what I have experienced firsthand. I didn’t reach this conclusion lightly, but after being asked, more than once, to pay for an introduction to a wealthy investor. Also I attended meetings for more than a year. By the way, get rid of the bad actors, it really discourages start ups from having any faith in your organization.

(Again, I generally agree.  However, Venture Connectors, in my opinion, is no longer an investment group.  It may have started out with that intent, but people usually don’t find investors there.  It is a great networking community for people who are interested in startups.  However, it’s not a place to land funds.  I also disagree that great ideas always get funding.  Great ideas with great entrepreneurs who never give up get funding.  Usually, much of that funding comes from outside of Louisville.)

Venture Connectors would be much better served if they would increase the attendance fee to $ 50 per meeting for guests, and $100 for members (that should separate the wheat from the chaff). Allocate those fees after expenses and award seed money every month, not once a year. That’s an estimated $ 5,000 per month awarded.

(I don’t agree with this.  I think that Venture Connectors should remain as inexpensive as possible and remain a place for networking and learning.  To raise capital for startups, I believe that Venture Connectors, Enterprise Corp, and lots of other organizations should work together to get more people investing in startups and make it easier for them to invest in startups via crowdfunding.)

Programs like the Vogt Award are treasures, but honestly, there needs to be more funding available and more frequently. Often, the small amounts awarded to finalists are the kiss of death, it just keeps them lingering in hopes of more.

(Yes, there should be more funding for local companies; however, more organizations probably aren’t the way to do this.  The right way to get more funding for startups is to encourage more investors to get involved with very easy ways to invest via crowdfunding and to build an online community that supports this effort through Metro Startup Launcher.  If lots of people invest small amounts in many startups, more startups get started, and no one faces excessive risk.)

Other cities have robust angel investment and venture capital communities, Louisville does not. I know many wealthy people in Louisville, some are friends, and they seem not to be interested in participating locally, as much as they do in other areas of the country. This needs to change. Imagine the impact people like Schnatter could have, or for that part, where is that mass transfer of wealth created from the Humana acquisition going? Out of town as quickly as those restricted shares are cashed out. It’s not their fault, they are not inherently stingy; it is that they have no encouragement or outlet to so. (One exception is the Jones’ family, who are famously generous).

(I agree that other cities have robust angel investment and venture capital communities.  However, that’s not going to change any time soon in our area.  Louisville does not have a lot of entrepreneurs who have cashed out of $1 billion+ companies and now want to invest in startups.  Our angel investment community is small, and they can’t invest in enough startups to make our startup community flourish like other cities.  This is all the more reason to create a simple way for many more people to invest small amounts in startups via Metro Startup Launcher.)

From my perspective, if you are a health care or in some specific instances, a technology company, you have a chance of getting funding in Louisville. There is a big difference between an investor in the traditional sense, and venture capitalists, and an angel investor. They just don’t exist here. My advice for start ups? Don’t count on being funded locally, but do take advantage of all of the world class resources available to you. Your reputation is important, so be coachable and learn as much as you can, but be prepared to conduct the money hunt out of town.

(I totally understand how this guy feels.  It is very difficult to raise capital in Louisville.  However, we can change!  There are 1.3 million people in the Louisville area, and there should be 56,000 accredited households.  This is where we need to focus our attention – getting as many people to invest small amounts as possible.  Lots of small investors = low risk for each investor = more capital for startups = more startups = more jobs = more wealth!)

 

Music Credits: "Exhilarate" Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0 License
http://creativecommons.org/licenses/by/3.0/
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