Musings on Entrepreneurship and Innovation
Thursday, June 10, 2004Building Bridges to the World
The emergence of increasingly sophisticated local sources of "pre-seed," seed stage, and growth capital around the country is both necessary and encouraging. But, it strikes me that regional approaches aren't sufficient. The startup game is truly becoming global, and the paths to the world go through the established venture centers of Silicon Valley and Boston.
The geography of opportunity has expanded. Just this morning, a San Francisco technology investment banker was speaking wistfully to me about his bank's missing out on the underwriting of the IPO of RightNowTechnologies based, in of all places, Bozeman, Montana. As VC Sanjay Anandaram noted the other day, the game is changing. However, the support infrastructure outside of a handful of venture centers is being built in real time: We're laying the tracks about 10 feet ahead of a moving train!
I'm really excited about the emergence of serious and focused "pre-seed" and "near equity" efforts such as The Montana Fund, adVenture Fund, and ITEC as well as new, regionally oriented seed stage venture funds such as Highway 12 Ventures and Flywheel Ventures in places well outside of the traditional venture centers. Even so, local and regional networks, by themselves, aren't likely to be sufficient.
As Anandaram's analysis suggests, the phrase "world class" can no longer be an empty boast. Globalization brings opportunity, but it also means a growing standard of execution in order to be competitive. And, it seems to me, that to be competitive, your community and region has to be connected to truly world class capital, talent, and partners.
The prospect of building a completely integrated risk capital infrastructure on a regional basis is doubtful. After all, such infrastructures don't exist in New York, London, or San Francisco, and those places have a bit of a head start. The more likely answer is in cultivating relationships with people in those places while developing your own foundational infrastructure at home.
The work is being made easier by the increasing transparency and efficiency of the private equity markets. Information about, and receptivity to, ventures in the erstwhile hinterlands has improved considerably. That said, risk capital networks are built on more than information; they are built on trusted relationships. The ability to connect with the Silicon Valley and Boston-based VCs and others who can help connect your hometown entrepreneurs to the world will remain a function of a personal relationship or an introduction by a trusted third-party. Although the thoughtful use of technology can help us cultivate and utilize this kind of social capital, differentiated relationships remain a limited resource.
So, who are you going to call when one of your town's promising companies begins to fulfill its potential? What relationships are you cultivating that will enable such companies to really compete on the world stage? Do you know the people who know the people you'll need?
