Perhaps why Dallas doesn’t have many startups!
August 16, 2008
Would you be surprised to learn that Boulder, CO has fewer than 100,000 residents, but more than 80 active startups and 4 significant venture capital funds? The DFW area has more than 6,000,000 residents, but I would be hard pressed to name more than 18 active startups and 1 significant venture capital fund. Why?
When I wrote my first business plan I had no idea what I was doing. My second or third investor pitch was to STARTech Early Ventures, one of the few seed stage investment groups in North Texas. The group listened politely to my pitch and didn’t call me back for more than a year. I kept pitching until I had talked to every venture capital group in Texas who would meet with me. Next I flew to the West coast and began meeting with investors in San Francisco and Silicon Valley. I learned quite a bit about pitching after almost 100 meetings. By the end I think my pitch was perfectly suited for the market and I began to have conversations like, “so if we gave you a term sheet along these lines… would you accept it?” By the end four groups came very close to investing including one New York group, one Sand Hill Road group and two Texas funds (Sevin Rosen and Austin Ventures). I ultimately raised money from the group from New York and the rest is history. After we closed I finally heard back from STARTech who offered to allow our company to be part of their ‘portfolio’ for a small option grant.
The plan I pitched to STARTech WAS unfundable. I didn’t have a clue how to pitch. I didn’t have the answers investors were looking for. It took me 100 pitches to learn how to do pitch (I can be a slow learner sometimes). By the time I was ready the STARTech guys were interested, too bad they couldn’t have helped me ‘perfect my pitch’ 99 pitches earlier. There is a need for a group to help entrepreneurs ‘perfect their pitches’ in Dallas. Ironically the North Texas investment community is already helping entrepreneurs ‘perfect their pitches’ without realizing it. The only problem is that investors outside of Dallas are getting the fruit of that work. While we turn up our noses at naive and inexperienced entrepreneurs pitching their startups those same entrepreneurs are learning from their mistakes. By the time they run out of investors to pitch right here in our own backyard their pitches are getting pretty good. Of course there are even more entrepreneurs who simply give up, who don’t get on a plane and keep trying. They, wrongly, assume that it must be their deal that is bad, when it is really the market.
What if we had an angel group that instead of spending time on the frontend ’screening’ out the bad/unfundable startups, they spent time helping entrepreneurs learn how to pitch their ideas to investors? What if that were the ONLY cost of admission? My goal with the SpringStage angel/entrepreneur group is to become the FIRST place entrepreneurs from North Texas come. You may not raise the money you need, but hopefully you will learn the skills necessary to raise it right here in our backyard. I am holding our first organizational meeting on Monday at 4PM. If you are interested in helping build a more friendly entrepreneurial community in Dallas I invite you to attend.
