The startup ecosystem is a living and growing organism that most cities are trying to add to their modern economic development strategy for job creation. The startup ecosystem is typically a very positive kumbaya environment. There are lots of smiles around town while people with rose colored glasses are selling more commercial and residential real estate with the improvement in the local economy.
Sometimes the community is cruising along Complacency Road and forget to notice that some aspects of the ecosystem have become stale and have stopped growing but the leaders are resting on the headlines from recent accomplishments of the entrepreneurs.
Wilmington, North Carolina has had tremendous success in the last seven years in the growth of the ecosystem. Live Oak Bank had spun out a startup called nCino and they now have a younger company called Apiture. George Taylor and his son Kurt had started an exciting beer and wine app called NextGlass. Others were able to raise smaller rounds of capital.
In 2020, three of the high profile startups “graduated”. nCino had a record breaking IPO on Wall Street, NextGlass / UnTappd made a huge deal with a private equity fund from Boston and in a smaller deal, PlayerSpace was acquired by a Texas based company. (We still have work to do to brand Wilmington as a webinar leader recently thanked us for joining the call from Delaware.)
Who are the next startups to keep up the momentum of the ecosystem?
Those earlier companies had raised significant venture capital and angel capital through decades of industry experience and contacts, learned how to overcome setbacks, great product development and startup success including exits.
First time entrepreneurs don’t have the reputation to simply make a few calls, get meetings and line up capital and clients quickly. When they do get investor meetings, they get the polite NO, which of course means the entrepreneurs have to take ALL of the risk to develop the product without outside investor capital.
First time entrepreneurs tend to only share their business ideas and practice their investor pitch with friends and families in the earliest stages. These friends and family of course do not want to rain on the parade and ruin holiday dinners by telling their entrepreneur friends that their startup is an “ugly baby”. By the way, bureaucrats in the community surrounding the ecosystem are in the same position. All startup babies are ugly, just some have more resources to buy makeup to hide the flaws. All startups have flaws, warts and scars. Good management can fix those flaws.
The fix for a complacent ecosystem is some “Tough Love” from outside sources
For the last 15 years, I have been holding one of my most unique events called my “Tough Love” or Uncle Curmudgeon event. I started this event in Asheville, NC and the event helped 4 early stage entrepreneurs raise millions of dollars in the next six months.
The entrepreneurs that participate in this event are in a variety of stages from pre – product, pre – revenue to ones that have graduated accelerator programs but have not been able to finish raising a round beyond the obligated family and friends. Entrepreneurs need to realize that it is not enough to be the best startup in your small city. Good connected investors see startup pitches from entrepreneurs from bigger cities in nearby regions.
There comes a time in the ecosystem when the new entrepreneurs have been pitching for 6-9 months with no positive outcomes and this is particularly painful in a young ecosystem in a smaller city where the young companies are more visible. This is a good time for this kind of event to change momentum. Good entrepreneurs have thick skin, are eager to learn and can put mentor advice through the filter of their own values. We just held this event on March 4th in Wilmington NC with 8 local and regional entrepreneurs with a working lunch.
The process of the “Tough Love” event is that you provide a standard 12 slide / 20 minute presentation format for ALL of the entrepreneurs to use. Of course an early test of the entrepreneur is if they use the provided format or if they ignore the request of the event organizer which in turn shows the entrepreneur may not be coachable. Red Flag #1
The key to the event is to bring in judges that are respected in other regional ecosystems to give the critical feedback required that the local people choose not to give due to the future awkward social situations if there is negative feedback about their startups.
Five insights from the most recent Tough Love Event (March 4th, 2021)
The investors have a good BS meter – The investor pitch is different from the marketing and sales pitch. The entrepreneurs need to realize that the goal of the initial investor pitch is to get the 2nd meeting for the more hard hitting due diligence questions. Don’t spend too much time explaining the great technology you developed. Share some validation points like clients, other notable investors, awards and headlines from articles.
The 8 second rule – The investors have a limited attention span. Your first couple of slides really need to grab their attention. If the early slides are unclear and you don’t seem to be presenting a true solution to a true pain point that someone is willing to pay for, the investors will check out.
The Bloated Elvis Slides – The presentations need to evolve as your company matures. Yes this sounds like common sense from Captain Obvious but you would be amazed that as companies start to achieve some milestones, they simply add these things to the presentations without taking out slides from older presentations and suddenly you have a BLOATED 40 slide deck.
The Investors likely did not make their money in YOUR industry
The entrepreneurs need to be careful about using the jargon of their specific industry. By using acronyms of products or organizations in the industry, you can not expect the audience of investors to keep up and make informed decisions because they don’t know what the hell you are talking about.
Less is more – The entrepreneurs can be so excited about their own startup and their own technology that they want to tell the audience everything.
– Stay with three bullet points per slide. Don’t have paragraphs that you read word for word on the slides.
– Don’t put EVERY competitor in the industry with 70 logos on the competition slide.
– Too many images you have on the slides can distract the investors from focusing on the important text information you need them to understand.
Again, this unique event goes against the norm of boosterism of putting entrepreneurs on a pedestal in the community but it hacks the ecosystem complacency and lack of momentum problem by potentially preventing the future NO from the investors where the entrepreneurs only get one chance to make a positive impression. After dusting themselves off and a bruised ego, the entrepreneurs are better off and their companies will have a better opportunity to succeed in the long run.
And who knows? There have been direct investments into the startups from the judges at these events from previous years. So the tough love really just makes the whole ecosystem stronger.
Jim Roberts has worked in entrepreneur development for 20 years in Charlotte, Asheville, Durham and Wilmington. Jim started the UNC Wilmington CIE as Founding Executive Director, started Network for Entrepreneurs in Wilmington (NEW), Wilmington Angels for Local Entrepreneurs (WALE). Jim also has his own podcast called 3 Sips of Advice.