The leadership of The Startup factory will be gathering for what’s being called a “wake” that’s being put on by a “bunch of very good friends” on Thursday evening at American Underground @Main, says TSF co-founder Chris Heivly.

‘Tis likely to be a mixture of fun and “what ifs” as the gathering marks the latest step toward the TSF’s demise.

“We REALLY want to smile, laugh and celebrate this awesome startup ecosystem that we dedicated 5+ years to,” Heivly wrote in an email.

As TSF continues the process of shutting down, Heivly talked with WRAL TechWire about the decision to shut down TSF, the factors that led to it, and whether his own outside interests helped contribute to the shutdown decision that was announced last week.

Here’s the question – one in a series – The Skinny posed to Heivly:

“Did your interest in other projects, from Big Top to blogs to book writing, take your own eye off the ball? Was the attention paid to outside interests a mistake, in retrospect?”

“Fair question but I do not think so,” Heivly responded.

“The book writing and blogging are marketing tools to drive awareness for TSF around the country,” he continued, then added points in favor of his efforts:

“Over 55% of our applications came from outside the state and one third of our 35 investments moved here for the 3-4 months.

“An analysis of our marketing efforts revealed that around 44 percent of all of our 35 companies first heard about us through speaking engagements.

“We all believe that this was an effective use of our time.”

Heivly and co-TSF managing director Dave Neal as well as team member Lizzy Hazeltine were involved in what Hazeltine described as a “full-time sprint” to raise a new round of fundraising. Instead of pushing on to close the round, the decision was made to shut TSF down after five years and 35 investments.

Heivly also wrote in his blog about taking a “sabbatical” from blogging shortly before the shutdown decision was disclosed.

During that time, Hevily also backed a Triangle tech-focused website, helped launch a festival called Paradoxos, wrote a book, launched job fairs, and was a very active blogger about entrepreneurship.

From funding to future plans

In the Q&A, Heivily discussed at length a variety of issues, from how the closure decision was communicated to portfolio companies to funding resources and much more.

  • What happened to make you decide the not close the deal? Was there no investor interest – or were the terms not appealing?

We set a very high bar in terms of the fund size ($25M) and an even higher minimum floor ($15M) as we felt that anything less would not be as effective. We got about 2/3 of the way to our minimum but stalled. In other words, the local investor interest (marketplace) was not able to meet our goal.

  • Are there sufficient funds left in your investment pool to cover all commitments to your portfolio startups, including the funding beyond the initial $50,000?

Our commitments have already been fulfilled ($50k at the start and a variable amount 3 months after they left. More than money, our time commitment remains and will as long as they are in operation.

  • Did you notify all the portfolio firms of the shutdown decision before you published the news in your blog? How did you communicate the news with them? Phone calls? Meetings?

Some by phone, some in person and some via email.

  • How did you assure them that TSF will remain an active and supportive investor – assuming of course that is your plan?

We explained what was happening and why and reassured them that we are here for them as they continue on their journey. In fact, that is the commitment we give them once they leave the program. At that point it is more up to them to follow up when needed though we do keep up to date with them via email, in person meetings and phone calls. We are more reactive once the program completes.

  • Will TSF remain the full-time focus of the 3 staff or will you each begin exploring other ventures?

We will all be exploring other ventures.​

  • While you say other options are available for startups in terms of funding, I’ve never heard anyone say that capital was sufficient, let alone plentiful, for startups. Has that situation now changed?

Startups always think there is not enough capital. 🙂 However, there is room for more capital as I believe that there are great investment opportunities available here and throughout the state. That being said, we were the only game in town for awhile and there are angel groups, university groups that are now organized to address the seed funding stage.

  • Were you getting pushback from startups who felt your TSF terms were not appealing – and that they also didn’t feel they needed to invest in mentoring? If so, what changed?

We never got any pushback from startups on our terms. I will say that some 1st time entrepreneurs do have mentor opportunities that did not exist 6 years ago. I can imagine that for some, they did not feel the need to utilize our capital/mentor program.

  • What will be your future time commitment to TSF?

Dave and I are both committed to running the TSF portfolio for many years to come.

(Note: Hazeltine is considering other options)’

Closing thoughts

“We had a great run and made good investments that hopefully will pan out for our investors,” hHivily noted.

“We also made a tremendous community impact. And we did it all with an attitude of openness, transparency and pay-it-forward. Our community now thrives on that.”

By the way, here are some statistics of TSF’s record as cited by Heivily in the closure announcement:

  • > 60% of our companies raised capital after they left TSF (double the national average)
  • > 60 different investors including west coast VC’s participated in those rounds
  • total capital raised was close to $20M
  • 1/3 of our companies had women founders
  • 1/3 of our companies had minority founders
  • 1/3 of our companies came to NC from out of state (mostly NY and DC) for at least the 3 months of the program.