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You can see from the data that investors are less likely to invest in a place where you have to get on two flights from San Francisco. So there is a study on this that says this is true. But I unfortunately, you know, think it shouldn’t be true and that we should be spending time getting to places because there’s so much wonderful talent. And it’s, you know, it’s kind of ridiculous. It’s not that hard to just get on two flights.
Jay Clouse 0:22
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them and discuss the upside of investing in them.
Jay Clouse 0:35
Welcome to upside.
Jay Clouse 0:50
Hello, hello, hello, and welcome to the upside podcast, the first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co host, Mr. Hacking Hacker News himself, Eric hornung.
Eric Hornung 1:02
you know, there are so many blog posts out there on how to get to the top of Hacker News. And none of them say the same thing. Like not one of them. They’re all like, oh, the best time to post is 7am right before the Russian Eastern Time Zone, or some of them say this other time, or some of them say this other thing. And it’s, here’s what it comes down to Jay it’s complete luck. My hacking was complete luck. What time did you post our article, I went with the 9am Post, because I figured, it seems like it’s going to be the most popular time, which means it’s the hardest to get to the front page. But if you hit you’re going to blow up, because 9am means that on eastern time, you essentially get the bulk of people’s Hacker News browsing central time, you’re going to kick in with them too. And then you’re also going to get the West Coast time if you make it to the top. Luckily, we made it to the top. And yeah, it just blew up.
Jay Clouse 1:54
So at the time of this recording, we are just after publishing the update, issue two. And we shared a piece from the update a guest contributed editorial from Kevin McArdle to Hacker News, Eric did that as I was out in the world, recording some other interview content. And I get back to my phone. And I see that we are number one on Hacker News, which I didn’t realize we’d even submitted to, and it came from Eric posting at 9am. Apparently,
Eric Hornung 2:23
it’s amazing because there are people who have spent a decade trying to get to the front page of Hacker News and just haven’t got there for one reason or the other. And at the time that my post hit Number one on Hacker News, I had had an account for 19 hours,
Jay Clouse 2:39
how’s your karma doing?
Eric Hornung 2:40
My karma is over to something, which is nice. But I have been a lot more active on the community since since I really started and I think that you’ll see a lot more content from upside on Hacker News, you’ll see a lot more content from me, certainly on Hacker News about the things I’m reading the things I’m thinking about. But yeah, I really enjoy just like, it’s almost like a I know they hate that the comparison to read it. But it’s almost like a subreddit, that’s has better manners, and more people aligned with what you’re thinking, love that
Jay Clouse 3:12
would love will both pushes spends more time, but you should definitely spend more time there. I’ve always felt like an outsider on Hacker News because it felt like a very Valley centric community to me, but I think that is me mostly projecting maybe demographically true. But I think from a interest standpoint, I think I’m projecting
Eric Hornung 3:30
I would say that you’re right. Because I’ve done in prep for posting some stuff on Hacker News, I wanted to see, hey, what, what does potential reception look like here? And there are very few high ranking conversations, or links or articles to things about the startup world outside of Silicon Valley. It is very rare that something really takes off. And I think we had the benefit of remote work being a hot topic right now. But it’s not the that’s not part of the narrative, I would say on Hacker News. From what I can tell.
Jay Clouse 4:05
Speaking of being an outsider to the valley. This week, we’re sharing a very unique episode, which was me riding a bus, the comeback cities bus, which was a bus load of Silicon Valley and New York. insiders checking out a few cities in the Midwest to understand the opportunity here. And what’s happening. Eric, how did we get connected to the comeback city store?
Eric Hornung 4:27
Well, Gary Buchanan from Omni Valley up in Wisconsin, connected us with Scott Shane, who actually was putting on the comeback conference. And Scott got us connected with Roy bought from Bloomberg beta, about this opportunity to hop on the bus and have Jay pontificate.
Jay Clouse 4:44
Yeah, yeah. You did all the legwork to getting me invited onto a bus. It was great.
Eric Hornung 4:49
Yeah. I you know, I was I was pretty jealous. I won’t lie, you got to go sit down with all of these people, all these intellectual people for two hours and have a stirring conversation. Both recorded and unrecorded and just kind of learn how they think. And meanwhile, I was I was sitting and I was I was just working, just just working, you know.
Jay Clouse 5:13
So I took a rental car one way from Columbus up to Cleveland, stayed overnight at the airport hotel and then rode the bus down the next morning and had a lot of great conversations stiring conversation. I hope you guys can be the judge of that will share with you the recorded conversation here from that bus ride with individuals from organizations that you may have heard of firms that you may have heard of, such as the 1517 fund 2048 betaworks ventures, Bloomberg beta combat capital, Casanova ventures, first round, Highbridge Venture Partners lightspeed Venture Partners starting line in Chicago as well as on the bus It was great to meet him in person after having him on the show here unshackled ventures and beyond HQ. So hopefully you guys enjoy this conversation as much as I did their questions, I think, and the way they think, is on full display. And I think you’ll really enjoy it. So please enjoy this conversation from the comeback cities bus.
Jay Clouse 6:15
I would love to hear what brought you to the store. So I’m sitting here on the comeback cities tour bus with a lot of great individuals here from all over the country who are about to take a tour of Columbus, and then Pittsburgh and then Youngstown. So I’d love to hear from some of you guys, what brought you on the bus today.
Patrick Mckenna 6:31
Patrick McKenna with Highbridge venture partners. And well, I think it’s really important to get out in the market, build the networks be, you know, you can do this kind of work. If you’re actually not in person meeting people. You know, it’s very easy to meet people via via email, even video. But until you actually get on the ground, and meet people where they are here, how they described themselves here, what the challenges are. And then most importantly, here, the opportunities is that when I do this investing outside of well anyplace really but specifically, when I look at investing outside of Silicon Valley, I have three key questions, right. Why this? I think everybody has that question when you’re looking at investment. Right? Why you? Right? So it’s always a team question. And the third one is why here? And when I’m looking to make an investment outside of Silicon Valley, it’s in Silicon Valley, the why here is very obvious. But when you’re looking at Columbus or Pittsburgh or Baltimore, and you say I want to invest in a company that should be here, it’s not only a great idea, and you’re the right team to do it. But this is the right place. It’s not because you didn’t want to move your family or you didn’t think it was too expensive or whatever. But there’s a reason why you’re in Columbus or in Pittsburgh, whether it’s a customer, it’s access to technology, there’s some specific technical talent that you think you can get more because we’re all looking for an edge advantage. And I think that that possibilities there. And for us to be successful investing in these places, then we need to answer those three questions. Very affirmatively,
Jay Clouse 7:53
where’s high ridge edge base
Patrick Mckenna 7:54
in San Francisco and Austin
Jay Clouse 7:56
Okay. Have you made investments outside of the valley so far?
Patrick Mckenna 7:59
Yeah. 34 company’s
Jay Clouse 8:00
34? And so are you going and doing like short term deployments, the cities and meeting entrepreneurs? Or how do you find and vet those companies.
Patrick Mckenna 8:09
But for me, the way it’s worked is, it’s each one of the cities that I’ve had the most success in kind of has like a super Angel, or a super network, that when you find that key node, and then you can start to know who’s doing what, where the credible partners are, where the sources of talent, and because one of the hardest things to do when you’re not there full time is to like see quality and also see things before everybody else sees them. And so like in Baltimore, which I paid for companies in Baltimore, finding that super angel who has written tons of checks, has advised tons of companies, and then getting his filter for what has worked, what hasn’t worked, get that history. And then the next thing is to actually be president, then you need to bring your advice, just start helping companies without the intention of necessarily investing. But now they see you as a person who can add value. Guess what happens next is the better stuff starts coming your direction. And I will say that, like a lot of places you mentioned in in Columbus, the need for more entrepreneurial networks, finding those, those kind of social networks is one of the best ways that I found to actually find the best the best opportunities, whether it’s somebody who’s sitting in a company who’s about to spin out, or they’re sitting in, in an incubator in Baltimore, they have fast board, which is a Hopkins associated incubator, a lot of people spinning things up and they’re not ready exactly sure when they’re going to make the step out. If you’re there talking to them, finding out what stage they’re in, and then giving them the confidence. And I know, you probably do, a lot of that is giving people that confidence to say, Hey, I’ll be there with that first check, or I’m going to help you build a syndicate to get you that that first level so you can get a product. That’s when you really think make the biggest opportunity. Yeah,
Jay Clouse 9:50
well, I have lots of questions, as I always do. But I’d love to hear from more folks here. And the seats, what brought you on the tour?
Courtney Buie Lipkin 9:56
Hi, I’m Courtney Buie Lipkin can from first round capital, and I’m based in San Francisco, but we have offices in New York and Philadelphia as well. We were actually founded in Philly. So we have an interesting relationship with that ecosystem, which I think is still not as much of a noted venture community. And as an investor, you know, I’ve been with first round for two and a half years. And I mentioned earlier that I’m still early in my career. And I do think over the arc of my career, venture capital will become more evenly distributed across the country. And I think, frankly, it needs to be in order to be sustainable as an industry long term. We talk a lot about talent being equally distributed, but opportunity not being equally distributed. And so I’m hopeful that I can be part of making opportunity more available. And just anecdotally, you know, I’ve been doing more work in the Midwest sourcing opportunities for our fund. And I keep hearing about Columbus specifically. So this is my first trip to Columbus. And I’m very excited to be here.
Jay Clouse 10:59
We you haven’t spoken anybody in Philadelphia on the show before So for the uninitiated, what should we know about Philadelphia as an ecosystem?
Courtney Buie Lipkin 11:06
Yeah, Phillies interesting place. So I actually went to undergrad at Penn. So I spent four years there in my early 20s. And, and I’ll say that, Philly, you know, it’s on the ecella. And so very accessible to New York, and Washington, DC, Baltimore. And it’s, I think, a desirable place for people to live for that reason. It’s a very distinguished American city, there’s a lot of history there a lot of civic engagement and cultural institutions. So it’s attractive for people to move to. But I think the thing that makes it compelling as an ecosystem, are the large research universities and some of the large corporations that are able to train talent over time. So Comcast is an example. And Comcast ventures is active in the city. And first round has a really strong relationship with Penn and also the hospital system at Penn. And we see a lot of interesting opportunities coming out of the the hospital system, particularly, I think, because it attracts healthcare talent. So finding those nodes, as Patrick said, I think it’s an important part of making an ecosystem more compelling.
Jay Clouse 12:12
When people are talking to you about Columbus as a place to check out in the Midwest. Did they mention anything specifically,
Courtney Buie Lipkin 12:18
they do mention the university. And so Ohio State University, I think, is a center of gravity for entrepreneurship, from what I can tell from my remote perspective. So I’m interested to see how that plays out in person. And also, I’ve heard that it’s a place where people are moving because of quality of life, because there is sort of a sense of destiny about the city. And that could be a narrative that’s being driven by the local investors or the companies that have popped up over time. But it could also be sort of more, more broadly about, you know, the city’s focus on smart city development, and the fact that it is the capital, but it maybe doesn’t have the identity to Cleveland, or Cincinnati did. And so it can created a fresh, modern take on itself.
Jay Clouse 13:04
Let’s keep passing the mic around and see who else we got. And what brought you here.
Janou Gordon 13:07
Hi, my name is Janou Gordon from lightspeed Venture Partners, we’re based in Silicon Valley, and San Francisco, super diverse offering of our offices. And we my colleague, Ashley’s here, too, and we are we focused on consumer investing, but our firm invests in enterprise infrastructure and consumer. on the consumer side, we think a lot about what’s interesting about consumer investing is the barrier for entry is a lot lower. So ideally, that means it’s a much more accessible space to enter as an entrepreneur. But we still, at least in our portfolio, are exclusively investing in the Bay Area, LA, New York, and now Chicago, which is a big jump for us. And that’s, that’s exciting. But there, it’s because there’s a low and ideally easier way to access consumer, we would like to match that with kind of being connected to not only entrepreneurs in other cities, but also college students universities thinking about and this is what first round has been a great leader in the space with the dorm room fund and having relationships early on, especially with consumer we see a lot of you know, the idea of consumer trends are often led by Gen Z. And that’s an important place to have relationships. And so many of these great universities are in the Midwest are in the south or outside of just the Bay Area. So something that we think about a lot is, especially on the consumer side is how to have relationships beyond just our our existing portfolio and kind of getting that pipeline going around the country.
Jay Clouse 14:33
What What do you know about existing consumer in the Midwest, because, you know, being from Columbus, we don’t get a ton of consumer plays in Columbus, the ones that we do get were like, Oh, that’s a consumer play. And and like, we’re really interested intellectually, but it’s slow to the uptake from an investment standpoint, because it’s so foreign. So what do you know? Or what do you what what do you think about consumer in the Midwest? Besides Yeah, we’re close to a ton of them for sure.
Janou Gordon 14:57
I think so. The most reason example an investment that we did and cameo which is based out of Chicago, the marketplace for celebrity and influencer videos,
Jay Clouse 15:08
saw a great Snoop Dogg video recently.
Janou Gordon 15:10
Pretty good, super exciting. And the idea video with consumer that, you know, consumer technology is driven by pop culture trends, pop culture is usually driven by young, young people, especially young women, there are young women all over this country, there are plenty and again, thinking about what is consumer mean, in the Midwest, I think traditionally, the idea that those trends or movements are started in just LA and New York is obviously not true. Chicago, Detroit, beyond the Midwest, looking at Miami, Atlanta, their culture is happening everywhere and cultures, I think something that’s really hard to tap into, if you’re only in your bubble, and only you know, with within your own echo chamber. So what is consumer look like in Columbus? The real answer is that I don’t know. And that’s why we need to kind of get out here more and have those conversations, have those real relationships be present with folks build those long term connections, which kind of like Patrick said, sometimes that won’t be an investment right away, that’ll just be having the relationship is adding value, making introductions for folks creating value before we can make the investment, I think we’re very aware that it will take a long time to build those relationships organically, to have an actual meaningful connection to these areas, rather than coming and dropping a check and leaving that’s that will that won’t serve anyone.
Ashley Brasier 16:22
So I’m Ashley Brasier, also from lightspeed venture partners here with my colleague Janou and yeah, I would say, you know, on the consumer angle, it’s interesting to see that there are a lot of big legacy consumer companies in Ohio or in the Midwest, Minneapolis, for example, has target. I think PNG is based in Ohio area. Yeah. And so I think that probably stems from, you know, sort of the Midwest being a center of manufacturing and having access to the Mississippi River and kind of getting goods out across the country. But I think it does highlight that there is some consumer DNA here and building products, understanding what the consumer needs and in bringing those to market. So, you know, I think like Janou said, I’m not super familiar with the consumer scene here, but excited to explore it more today and sort of understand how that legacy is manifesting in today’s society.
Jay Clouse 17:13
So for the groups that are, you know, in the Bay Area, if you’re thinking about making investments in the Midwest, how do you think about how you allocate your time or what would be a good way for Midwest or just anywhere else in the country entrepreneurs to get in front of you guys and make a good case that you should think about an investment in them
Nitin Pachisia 17:35
Nitin Pachisia unshackled ventures, so we’re a pre seed stage, investor, meaning in about half the cases, we incorporate the companies with founders and the other half cases, it’s pretty product pre revenue. You know, our goal has been to make ourselves as approachable and available as we possibly can. And I just mentioned that we look at everything that comes in cold, we don’t rely on intros alone, because we’re investing in founders, not even companies yet. And so I think the the trick for us has been going into the ecosystems where entrepreneurs are and building these grassroot relationships, a lot of that starts with universities, because the alma mater and the university connections are often the first ones that entrepreneurs go towards local angels, law firms, banks, local investors, oftentimes, you know, one of the things that it works really well for us is we’ve never said it’s too early for us. That’s just doesn’t exist. For us. We have some time said it’s too late for us. And so we’re not competitive with a lot of the local investors. We actually Patrick was mentioning this earlier, we look at what knowledge or just understanding of the vocabulary can we bring to the entrepreneurs and oftentimes, it’s it even goes into venture is not the right financing source for that company, which gets lost because venture is glamorized more than other ways of financing. And so everybody kind of gravitates towards venture, but a lot of times, it’s just figuring out what is the right source of financing for you and direct them towards that. And then venture is the right form? what role can we play with the entrepreneurs or help them just position themselves or their pitch in the right way? One of the things that we find in common with immigrant entrepreneurs and Midwest entrepreneurs is they don’t, they don’t create a lot of hype, they don’t start with, here’s the big thing and 20 years that my company’s going to do, they start very tactical. And sometimes it’s breaking that barrier of just just say, What are you really after? What is the big impact that you’re going to make in the world, if you’re successful, understanding 99% odds are against you. But if you succeed, what happens and that starts opening a lot of kind of that vision doors. So we’ve now I think, a third of our portfolio is non Silicon Valley. And a lot of those companies we invested not at the first time we met the founder, but we met gave a very direct sort of feedback. They worked on it iterated, came back, which also told us that these are very coachable, curious, focused type of founders, what that’s what we like to work with. And so I would say for, to your specific question about the approachability, it’s about find investors who really want to work with you. And don’t waste time with those who are only seeking social validation or sources of intros that are close and trusted to them. And there’s plenty of folks like of like us, who will take that cold email or not an intro source.
Patrick Mckenna 20:36
That was very, very, very insightful. And now what I’d like to add to that, is that just because you’re in Columbus or Pittsburgh, it doesn’t mean you don’t have access to the information. Right. I think as a, you know, we were used to seeing things presented to us in a certain way. And it’s efficient, right? When you get a pitch, you get a deck, you get some some presentation, you’re kind of looking for some certain things like vision, what’s your big thing that you want to do? Right, your you know, what is the problem you’re solving define your problem? You know, your solution, specifically, what is your solution? Who is your team? And I’m literally just saying the five things, you’d be surprised how many times you get a deck or you get something that doesn’t clearly say, here’s my vision, here’s the problem I’m solving, here’s why it’s a problem. Here’s my solution. Here’s how I address the solution. Here’s the team that we put in, this is what we’ve done on this amount of capital. And this is what I’m looking for. Here’s the uses. And this is how far I’m going to be able to go with these resources. And this milestone will mean this. I mean, I think he’s nodding their head, because that’s what you kind of want to see. And if you’re getting a pitch or meeting somebody for the first time, who isn’t in your normal, trusted network, and they start it’s their job, it’s your job as an entrepreneur, to actually speak our language at first, we will then learn to speak your life, which it goes both ways. And, and I am, I’m going to say I’m nothing. I’m incredibly impressed when I meet somebody in Milwaukee, where they lay the case out so clearly that it, it’s easy for me to say, Okay, I’m going to learn more, and take that next step now than I need to learn their language, just say, Okay, what is this entrepreneur thinking? And how do they see the world different. But if you don’t actually make that connective tissue kind of with us, then it’s going to be harder for us to evaluate. And the reason I want to emphasize that is because that’s very doable, very doable, and something that you should, as an entrepreneur do, right from the beginning, follow the growth playbook. I guess,
Jay Clouse 22:37
some of the stories that get told in areas outside of the valley, as it comes to, like Valley investors is often Well, they don’t want to get on a plane, they don’t want to come here, if there’s not a direct flight, they’re not going to come spend time here. And you guys are on a bus right now, going from Cleveland to Columbus to Pittsburgh. So do you see is that myth, or is that a changing trend?
Courtney Buie Lipkin 22:57
I was in a presentation about a year ago, and it had data on this, which was, you know, our investors more likely to invest in a place that has a direct flight, versus a place where they have to jump on two flights. And you actually, you can see from the data that investors are less likely to invest in a place where you have to get on two flights from San Francisco. So there is a study on this that says this is true. But I unfortunately, you know, think it shouldn’t be true, and that we should be spending time getting to places because there’s so much wonderful talent. And it’s, you know, it’s kind of ridiculous, it’s not that hard to just get on to flight. So personally, I’m from Durham, North Carolina, and would love to invest more there and in other places in the southeast, also lived in Atlanta and Washington, DC. And so, to me, it’s no problem to get on a couple of flights, because I think it’s worth the time investment of spending time with these people, companies, and you know, the places and the ecosystems that they live with him.
Ezra Galston 23:54
Hey, it’s Ezra Galston from starting line actually started a fund in chicago. And I took a I thought about this question a lot, like, hey, are people going to fly in? Are they not. And so whether I’m right or wrong, my approach was just to take a very non entitled opinion of the world, which is that my job, I believe, as an investor is to get to know everybody who I think can, ultimately follow on into the businesses that I’m partnering with. And I encourage the entrepreneurs to get on planes actively, as well. And I think that what you find is when you start to engage people, and they find a reason, or they find it compelling to find they will, and they’ll start to explore more opportunities. But, you know, there’s a lot of pay it forward in this business. But at the end of the day, it’s it’s venture capitalism, not venture altruism. And so I hope for the best and everyone, but I also think, a very practical and rational approach, which is that I need to get out there and show value and create value for people to take me seriously. My fund seriously are the places that, you know, we spend a lot of time seriously. So I think that again, it’s a I think the data makes a lot of sense to me, Ashley, but my approach has always been not to assume anything, and not to expect anything, and be pleasantly surprised when people do fly in and take an interest. I also think that I don’t know, some of the later stage investors may have an opinion on this. But we’re entering a time when a lot of venture firms are becoming so large, that their staffs are growing, their outbound activities are growing. And so my perception is that they are identifying a lot of interesting ideas, but are looking for some legitimacy in the signaling, to really get them to the next level of Hey, we should actually really dig in here. So I think that’s something that a lot of ecosystems need to think about is how do we get our local angels tapped in with that as well and really well respected so that when there is that spark of something, the signaling can then get to the next level,
Jay Clouse 25:51
to Patrick’s point about the angels, the super angels, being someone that can connect to these people, we find that even local media, if the ecosystem has local media covering technology, they’re also a really great place, but it’s not, it seems like you wanted to follow up on that a little bit,
Patrick Mckenna 26:04
I was going to say, the issue of the flying in and out. So I have a prediction. And my prediction is that you know, venture in the not too near future is going to be built around a hub of offices, because you have to actually be in the community, building those networks and be accessible. And as the balance moves, and there’s more opportunity that’s investable, it probably doesn’t make sense today. But as that market is growing, there’s going to be a huge advantage for you know, firms that are regional in the sense that they’ve mostly focused on Silicon Valley, to then be national, meaning that they’ll actually have persistent presences in kind of the, either regionally like hit out of Columbus doing the regional thing or, or out of Atlanta doing the regional thing. And that way, you can more easily get out there. And and what I found in my investing, and the reason I set up in Austin, as well as in San Francisco, is you have to get your head out of the bubble. Because it’s so easy. You can take the lunches with amazing and impressive entrepreneurs and coffees all day every day in the Bay Area, you really can, but then you’re really focused on that problem set, you have to actually once even just having my head outside of that for you know, half the time, then I see the world a bit different. And I think that’s that’s my prediction that national firms will open up offices, persistent offices in different regions.
Jay Clouse 27:24
In the interim, what do you think that looks like? This is gonna be my next question, you know, you get outside of the center of gravity of San Francisco. And if you’re going to visit Austin, you might as well be visit Columbus, you’re gonna visit Columbus, and you might as well visit Tampa, and you might as well visit Memphis. So how do you guys start to manage supporting entrepreneurs and ecosystems across the country, if not for having an actual office there,
Patrick Mckenna 27:46
I’ll pass it around. But my interim step on this is there are regional funds. So there’s there’s funds that are in the northwest, like the next frontier ventures is out of Bozeman, and, and will price there is he covers and everything that kind of happens Idaho, Montana, Western Washington, Western Oregon, all the way down to Boulder, and having a relationship with him. That opens that up. Scott Shane with combat capital, which is it was spun out of this trip, you know, he’s in Cleveland, but partners are in Pittsburgh, Cleveland, Detroit and Chicago, that gives you surface area there. And I think that there are these regional funds as a start is to build relationships there. So then they know that you can be that capital partner, maybe they’ll syndicate an early stage deal with you getting a look at the A or the B. So I think that’d be a first step that’s very actionable today, I don’t know if anybody else has strategies for that.
Courtney Buie Lipkin 28:37
Yeah, I can speak to that a little bit from first rounds perspective. So we are really focused on building a founder community and feedback we’ve gotten from founders over the course of our existence as a fund is that they learn a lot from investors, but entrepreneurs tend to learn a lot more from each other from their peers who are building companies and going through the same, you know, issues with scaling or hiring, opening up new offices, whatever it is, kind of at the same time, or maybe three to six months ahead of them. And so we work on building the in person communities in New York and San Francisco specifically. But we’re thinking more about how to scale that community virtually. And we’ve built tools for our portfolio to connect with each other. But I think that there’s really an opportunity to build online communities around, you know, the larger funds that are coastal and have sort of established portfolios. So as we reach out into communities outside, you know, the 50 mile radius of our offices, I think, thinking about online forums and tools for connectivity.
Jay Clouse 29:45
And first round historically has just done an amazing job from a content side of things. How much of a strategy or how important is that to you, as you think about areas outside of your typical investing geography?
Courtney Buie Lipkin 29:56
Yeah, the first round reviews is an incredible tool for us to read people outside of our immediate network. And I think it’s something that, you know, with social media, and with our brand, we try to promote learning across the entire United States. So it’ll it’ll continue to be something that we’re really focused on. And, yeah, hopefully, we try to be very tactical with our content. And so hopefully, that’s something that can be shared in local communities.
Jay Clouse 30:23
What do you guys think is a false perception of Valley entrepreneurs Valley investors for people who aren’t there,
Nitin Pachisia 30:32
Nitin Pachisia unshackled ventures, the first false perception is Valley investors, there’s, there’s no, you can generalize a community of 400 venture funds and thousands of VCs, as one Valley investors, I think, the one thing I’ve learned as, as we’ve started working more outside the valley is there’s within the same firm, you’ll find partners or principals or associates who want to hustle more than others in the same farm or funds as themselves are hustling more. And so I think if you’re in an ecosystem, if you’re outside the Silicon Valley ecosystem, you want to you want to identify folks who are hustling for the right opportunity. It is a very capitalistic, it’s a venture capital, right? It is a capitalistic play, greed drives everything and so I think it’s the Patrick mentioned is the the right opportunity presented the right way. And and that will attract folks now. I don’t think entrepreneurs will gain anything by trying to educate people who are not interested in following that opportunity on Oh, you should come to Columbus and do it. People self identify and and those who want to pursue that hit an opportunity will come now, if entrepreneurs can identify those, obviously, we have to play a role in making ourselves available to that identification, that time is well spent. And and so I think you want to break it down between the part of the valley that is that is happy to be contained in a wall in and wants to see things the same way that’s happened versus, there’s the part of the VC community at large that wants to hustle and get outside and do new things. And I think you’re seeing that in a lot of younger VCs younger funds that are that are trying to build their brand that are trying to to find that thing that Patrick said nobody else is looking at Wells that others are not drinking from. And that’s where the opportunities for the upcoming ecosystems are.
Patrick Mckenna 32:28
It’s funny because one misconception that from outside inside is that anybody on the inside is from the inside. There’s this reality that, you know, half the people in Silicon Valley are from other parts of the United States and the other half are from other other countries. And so that’s an opportunity, right, because that just means there’s, there’s there’s a foothold, there’s a there’s a handle in there, there’s somebody who’s like you, from your town, from your school from something that you’re interested in. It’s not like there’s this mono cultural, everybody’s exactly the same. in Silicon Valley, you can find somebody who has some background connection to you is a great way to start. If you’re looking for a way to just get somebody to hear your story for the first time and you’re in Columbus, or you’re in Pittsburgh, you’re going to be able to find somebody as in said, like, somebody who is already kind of raised their hand is done on a trip like this, or has made an investment. That’s a key one, what firms have actually invested outside of Silicon Valley, had they invested anything and you that’s your homework, that’s your job, go and find and there are firms that in first rounds, a good example that definitely raises their hand on, on deals outside. And so when you reach in who was the partner, who was the specific partner who did that deal, because they’re the ones who actually got on the plane, and you can make that connection. So I think that that’s kind of the misconception that I’d want to put on the table that actually there are a lot of handholds, and everybody’s from everywhere, even if they’re now located in that, you know, whatever that we call that a 20 mile 30 miles. It’s a pretty tight pretty small region.
Jay Clouse 33:55
So as you guys go, and you visit Columbus today, and then Pittsburgh, and then all the way to Youngstown, what types of questions are you guys going to be talking the people asking the people that you’re meeting with to learn about those ecosystems?
Courtney Buie Lipkin 34:08
I think we’re always whether we’re talking with founders in the Bay Area, New York, LA, or in Youngstown. I think we’re always asking what is your unique advantage. And I think there’s an interesting story about what the unique advantages regionally, it could be access to a fortune 500 company that’s based in the Midwest, it could be access to a proprietary talent pool out of a major university based here, it could be a new perspective on an industry. And so I’d love to hear what the unique advantages of the entrepreneurs that we’re meeting with,
Nitin Pachisia 34:48
I think the unique advantage not just from for the entrepreneurs, but for the ecosystem as a whole right? How How can we work better with the ecosystem in terms of identifying on entrepreneurs who who we can support or work with, there are usually pulls from a talent perspective, or corporate buyer’s perspective. And so I was in Akron yesterday, and and talking to the folks there about the potential enterprises that our customers for our portfolio companies, and we invest a lot in software being sold to industrial enterprises. And so you look at just in the room, there were 25 or so people, but there were people representing hundred million to billions of dollars, revenue enterprises. And so there’s, there’s a lot of buying power in terms of enterprises that would buy software from our portfolio companies. And that’s an advantage that I can take back to my portfolio company, part of that learning experiences, understanding what they are, and then being able to communicate them in a way that they are, if I just blanket say, you know, look at Columbus as a place to for your second office, that makes no sense. Nobody’s going to pay any attention to it. But if I can say, here’s a list of, you know, X number of billion dollar plus companies, and here’s the kind of the problems that are looking to solve instantaneously becomes a lot more appealing to a lot of these portfolio companies. So it’s, it’s more about and I think the themes from the past tours has been kind of similar is what’s unique about this ecosystem? How can we package that?
Peter Rojas 36:16
Peter Rojas from betaworks ventures, but to be honest, I wasn’t planning to ask substantially different questions that I would ask any set of founders from anywhere. I mean, we get pitched from, you know, founders from startups based, you know, all over the country already, obviously, primarily on the coasts, but we’re always looking at deal flows from everywhere. And, you know, for me, I think we’re going to ask the same set of questions, largely, which is around how you think about the product? How are you planning to build this? What are you doing to differentiate yourself from your competition, I think, because at the end of the day, I mean, they’re not competing against other startups from Ohio. They’re competing against startups from everywhere, and or non startups from everywhere. And so I think if they’re good planning to build in there, somebody that’s going to grow longer term, I want to think about them in the same way I think about any opportunity that we’ve got to invest in,
Jay Clouse 37:04
Roy can I kind of put you on the spot,
Roy Bahat 37:06
you can put me on the spot, most dangerous places between me and a microphone. So I was just trying to make sure to distract myself, so everybody else can talk.
Jay Clouse 37:14
Just to sort of wrap things up here. Can you talk about why you put this together and what a successful trip looks like to you?
Roy Bahat 37:19
Sure. So I’m Roy Bahat from Bloomberg beta. And this is one of the tours that we organize, of VCs going around and visiting. And I think any unexpected outcome is a real success. Because in a way, we’re all in the entropy business. And so yeah, we’ll find places that I’m sure would make good expansion offices for startups in which we invested, and customers for startups in which we’ve invested and maybe some new companies, and maybe some new funds in which to invest. But I’m most excited for whatever it is that I don’t quite know, might come.
Jay Clouse 37:54
Very final question. Is there anything that I’m not asking that you guys think I should be asking?
Roy Bahat 37:59
I think it would be helpful to get, maybe provoke us a little bit, and we can, you know, respond to it on what is the view of Silicon Valley, VC x, from a founder, who is in Columbus, or Pittsburgh, or Youngstown or somewhere else?
Jay Clouse 38:18
Well, you know, like I mentioned, a lot of times founders that I talked to, really, really try very, very hard to find partners and investment in their local region. One, because of course, that’s going to be most convenient. But also, they just don’t have super high hopes that going to Valley investors is going to pan out for them. And so you know, as a founder, you’re in the business of time. And so they really try to avoid it when they can. And so I think hearing, you know, any more perspective on what a founder can do to set themselves up for success, if they do, you know, reach out and try to go down that way, some people think that that means they will have to move with, from what I’ve heard so far. Sounds like that’s not necessarily true. So I’d love to hear any of that perspective.
Roy Bahat 39:05
Yeah, I mean, I think it used to be more true and is less true, as you’ve been hearing, you know, one way of looking at is vaguely obnoxious to just be a vendor of capital, and ask somebody to uproot their entire life, because you think it might be better for them. And I think if there’s one lesson that the whole startup industry is taught us all over the last decades, it’s all other things being equal founders know best. And investors, while very well intentioned, are supporting cast. So I think that’s part of it. And I also think, and I think some others alluded to this earlier, the quote on quote, experts in Silicon Valley, we’re all doubtful of our own judgment. And a question one way we ask ourselves a question is, if this was a great company, how would I know? Really, and one of the reasons that it takes real investment of time to invest in a place you’re not familiar to is you just don’t have the same knows the language? The context? Oh, they were in such and such major at this college? Well, actually, it turns out that majors surprisingly hard. And they took that class with that professor who turns out to have, you know, been a mentor to many wonderful startups and all that language. You know, I think that Peter had used the phrase earlier this morning of fluency, that fluency, it goes both ways, which is we also don’t necessarily know how to speak the signals of places we’re not familiar with.
Jay Clouse 40:28
Awesome. Well, I want to thank the Bloomberg beta team, and Scott Shane, for introducing us here, combat capital getting us on this bus. We’re going to wrap this up, but thanks to everyone who participate, participate in the discussion, and we’ll talk to you next week.
This conversation took place on the third Comeback Cities tour on May 15, 2019, aimed at connecting venture capitalists from the East and West Coasts with investment opportunities in the heartland. It also had stops in Columbus, Pittsburgh, and Youngstown.
This conversation includes:
Ashley Brasier and Janou Gordon from Lightspeed Ventures Partners, a Bay Area VC firm focusing on early stage investments in the enterprise technology and consumer space.
Learn more about Lightspeed: https://lsvp.com/
Courtney Buie Lipkin from First Round Capital, a Bay Area and Philadelphia based early stage VC fund specializing in technology based around real estate, manufacturing, logistics, agriculture, and transportation, among other industries.
Learn more about First Round: https://firstround.com
Ezra Galston from Starting Line Ventures, an early stage Chicago based Venture Capital fund investing in premier consumer startups & brands.
Learn more about Starting Line: https://www.startingline.vc/
Nitin Pachisia from Unshackled Ventures, a Bay Area based early stage venture capital fund for immigrant founded startups.
Learn more about Unshackled Ventures: https://www.unshackledvc.com/
Patrick McKenna from HighRidge Venture Partners, which invests in early stage companies and focuses on tech startups bases outside of Silicon Valley
Learn more about HighRidge: https://www.highridgevp.com/
Peter Rojas from Betaworks Ventures, a seed stage venture capital fund based in New York and the Bay Area investing in network-focused, consumer-facing media businesses.
Learn more about Betaworks Ventures: https://betaworksventures.com
Roy Bahat from Bloomberg Beta, an early stage venture capital fund based in the Bay Area and New York focused on investing in the future of work.
Learn more about Bloomberg Beta: https://bloombergbeta.com
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