While startup and venture performance in the Bay Area is a valuable datapoint that provides meaningful insights into our industry, I recommend a different strategy for evaluating our respective ecosystems’ health. To get an actionable, not to mention less daunting, perspective of our performance, we must look beyond the Bay and across all of the country’s innovation communities.
The fund raising round, which closed last month, saw participation from Paul Buchheit, founder of Gmail, the world’s largest email service, Steve Chen, the cofounder of video sharing platform YouTube, Global Founders Capital, Venture Highway, Soma Capital, SCM Advisors and Boomerang Ventures.
Some businesses are just more capital efficient. While this is obvious in many cases, it’s not always so. Founders often have a sense for how much cash they’ll need to really prove things out and scale. Understanding when inflows and outlays hit the balance sheet is critically important.
Some of the biggest Heartland success stories in recent years, from Utah’s Qualtrics to Indiana’s ExactTarget, have been enterprise software companies. Middle America has a high concentration of Fortune 5000 companies, giving these startups crucial proximity to necessary customers while being able to keep costs low by operating in a cheaper part of the country.
Venture capital is the lifeblood of new business development. Venture capital investors provide the start-up funds that young businesses need in order to grow, hoping to identify tomorrow's leaders early in their histories and therefore maximize the long-term return on their investment. However, financing new businesses is risky, and so the U.S. Securities and Exchange Commission imposes some limitations on ordinary investors participating in venture capital funds. Therefore, if you want to invest in venture capital, you'll need to consider the following:
In addition to management fees, the process of reinvesting realized proceeds into new investments, or recycling, can also meaningfully impact net returns and alignment. While management fees cut into the dollars available for investment, recycling can have the opposite effect, increasing the investable pool of capital while offsetting a proportion of management fees. To illustrate this point, we revisit our $100 million fund example, and in this case show how recycling $15 million, equivalent to the fund’s management fee, positively impacts the fund.