The financial ecosystem involves constant change, which ushers out the old guard while ushering in the brand new. For entrepreneurs, the best change — and the best impact — occurs whenever a regional VC player falls. Regional VCs play an essential role locally — and that’s where people will feel the firm’s departure most acutely.
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One reason is that, at its core, venture investing is approximately relationships. So, if a significant fund disappears in your area, relationships will be everything you need to rebuild first.
Most venture firms aren’t just like the big banks that go on for half of a century. Regional venture investors know entrepreneurs and startups by name. That is why the entrepreneurial community feels a fund’s absence not only as a representation of money but as a connector in the ecosystem.
That is particularly apparent in smaller tech centers like Austin and Salt Lake City. When venture investors connect entrepreneurs with talent, guidance and community, the complete ecosystem benefits. Within Salt Lake City, people know they are able to call us if indeed they need advice or a resource.
I can’t overstate the importance of seated face-to-face with entrepreneurs and tackling challenges because they happen. Our impromptu breakfast meetings and office visits help us solve problems and uncover opportunities quicker than we could with a telephone call. These meetings also deepen our personal connections within the city, making our investment greater than a transactional one.
It may be easy to take the ecosystem in Silicon Valley for granted, however in smaller tech centers, every player matters. "People decisions" will be the hardest ones that entrepreneurs and investors need to make. But local investors can easily step in to greatly help. They know the surroundings well enough to create necessary introductions within the spot. Most also know where you can recruit outside talent, including the executives they’ve caused previously.
A company that intimately knows its community galvanizes the complete ecosystem. Outside funds invariably step into innovative regions and help entrepreneurs, but their expertise is beyond the city. Firms from elsewhere have the result of bringing new knowledge into an ecosystem instead of binding it together.
Austin Ventures acted as a community resource and strongly contributed to the broader spectral range of economic activity within Texas’ capital city, so its presence will be missed. The good thing, however, is that Austin is a thriving ecosystem. Other resources will eventually emerge to greatly help connect the neighborhood environment. Until then, entrepreneurs will be well-served to assess what they have lost with AV, and regulate how to bridge the gap.
There are action items for entrepreneurs to consider. If an area VC goes under, they could be tempted to hold back and see what else evolves. And, yes, eventually, a fresh fund may open its doors. But, based on your company’s own funding situation, that may not happen quickly enough or not be the type of fund your company needs. Listed below are three points to consider when you are in a void just because a fund has been eliminated:
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Austin Ventures was the only fund in Texas that specialized in taking startups completely to a big exit. Given that it really is gone, local startups no more have an all natural go-to for that role. Austin remains abundant with seed funding, but later-stage companies must either start exploring out-of-state options because of their bigger rounds, or consider the particular niches where remaining Texas VCs operate, to determine if there’s a match. Similarly, if among your region’s VCs must close, re-examine your neighborhood ecosystem and see where there could be gaps.
Your deck and growth strategy may be geared toward possible that is no more tenable. So, adapt your deck to handle the firms that are actually your priority. Do your homework and explore how exactly to best present you to ultimately these firms. Whom should you meet? Where should you be? Start the procedure now.
Even if the next round is a long way away, start networking now to be able to build the relationships that will aid you later on. You want yours to become a familiar name, and if your target fund is two states away, it might be worth spending a while and resources determining how to best make your self known.
Ultimately, be proactive. It may be tempting to respond to the closure of a VC by remaining silent, but that approach is like treading water and waiting until you’re exhausted before you choose a buoy. Take the reins and discover new solutions — this is one way you’ll win, over the short and long term, as a business owner.
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