How times have changed – for the better- for startups seeking money.
Entrepreneur’s struggling to raise capital may not realize it, but if you’ve got a great team and a great product, “It’s an entrepreneur’s market right now. You’re in the driver’s seat,” said Jamie Hamilton, managing partner of the Atlanta-based BIP early stage fund during the Seed+Angel Investment Dynamics in 2015 panel at the Southeast Venture Conference in Charlotte, las week.
“There is more money chasing deals, now,” Hamilton said.
Others on the panel agreed.
The panelists did express some doubts about the value of accelerators and incubators, particularly in “secondary cities.”
“I worry about the sheer number of them,” said Hamilton, While acknowledging that some have excellent reputations and can be extremely useful to entrepreneurs, some have better reputations than others.
He also warned that “Entrepreneurs need to be careful coming out of them and thinking that means they can demand a certain valuation.”
Joshua Siegel, general partner at Rubicon Venture Capital, based in San Francisco and New York, said, “The proliferation of them in secondary cities is great. It shows you can be an entrepreneur anywhere, but we don’t necessarily use it in qualifying a company. Just because you’ve been through it doesn’t mean you’re better than anyone else. Not all accelerators are created equal and not all companies coming out of them are. We evaluate deals on an individual basis.”
He noted that some people call accelerators “Day care for startups, and in a sense they are. In an accelerator, you’re in an environment with others who have the same challenges you have, funding challenges, coding challenges, onboarding. You can learn from each other.”
On to other topics, the venture capitalists agreed that the best way for an entrepreneur to approach them was via introductions from someone the VC knows.
“The best way is through an introduction from another entrepreneur or a fellow VC,” Siegel said. He added, “The entrepreneur needs to be able to articulate what the company does in a 12-14 page pitch. Don’t ask me to talk about myself. We know what we do. We want to know about you. All of us have a robust linked-in page or you can reach out to one of our portfolio companies and ask them about us.”
Asked if the so-called “Series A crunch” is real, Hamilton said, “I don’t believe it is. The sheer number of deals and opportunities to look at have increased. The dynamics are changing. Certainly not long ago in the Southeast and Atlanta the deals were slightly smaller. It’s a fine-line, deciding how much to raise. Is it too little or too much. You want to raise enough to attract that Series A and not come back into the market too soon.”
Lylan Masterman, principal with White Star Capital who focuses primarily on seed and Series A and B investments, said, “Raise the right amount of money and try to define success as early as possible. Then if you meet those metrics, great. Then you decide what to do next. If not, tell us and maybe we can fix it.”
Moderator Jason Caplain of Durham-based Bull City Venture Partners asked the panel how VCs from outside the region see the Southeast market.
Siegel said that “From Florida to DC, it’s been very impressive of late. There is a lot of capital coming in and talented entrepreneurs can break out. We met three companies at this conference we’re going to follow and events like this are great. There are some deficiencies in the market, a lack of technical talent, but there is great stuff coming out of the region.”
Masterman said, “We try to invest in companies that will be worth a billion dollars someday. We don’t care where they’re located. Tech talent is available everywhere, but in some secondary cities, there may be a lack of engineers who worked at a Google or Twitter and know how to smoothly scale, and there may be a lack of user experience and design talent. Primary cities have more talent there.”