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More on the Indiana investment environment....
It all got me thinking about a big problem with funding here. Are we trying to mimic the way we think it works in "The Valley"? Forget them....we have some specific characteristics that make Indiana really different from San Francisco. As we tell our kids: "Don't try and be something you are not". If we focus on our strengths we find that we actually have some significant advantages here.
First we have a great pool of educated people. I often meet people from Ohio who are completely insane for OSU. When I ask why this is I get an answer that tinges on envy. "Well...it's all we have." "You guys have IU, Perdue, Ball State & Notre Dame...all almost as big as OSU. The point is that we have a terrific pool of talent hitting our streets every year.
Second is cost. My friends out west joke about us as India-ana because our costs are so low. I'm talking about costs across the board. We do lot's of benchmarking with our west coast peers and a we are about 60% less here on everything from rents to employees.
A friend of mine with a pre-product startup (but a great team) just got $6.5 mm from an A-list VC (Benchmark). I called him right away to congratulate him, but really...it was to ask: Why?? Why did you need to get underwater with a VC right out of the gate and bring in such a large amount. The answer was of course: Because he had to!
His rent's are 4x mine. His employees are all over 6 figures...he even has to have a full time recruiter just because he has such a hard time finding decent employees. Say what you will, Indiana is a much better place to start a company.
The other advantage of low cost is that we need less money to get started.
So this is about money...if you have continued to read this far, here is the big point: When you think about fund raising you have to take advantage of what we do best here in Indiana.
We are friendly, we have strong families and we value reputation and relationships. That is the mid-west ethic and makes us better than every other society place. It's an advantage.
The best way to raise money for a startup isn't to get one big check from a VC or some other bigwig that will steal your soul. The best way to raise money for a startup is to leverage your friends, your family and your broader network to invest small amounts that collectively adds up to what you need.
Think this won't work for you? Think you are not dialed in enough? I was a bankrupt dry-cleaner when we did this with ExactTarget. We raised $5,000 checks from everyone we ever met, from neighbors to people we knew in college that we hadn't spoken to in years. And for those that know Compendium, you know that success hasn't changed my tune on this. Compendium is funded the exact same way.
This is a tactic that would be nearly impossible to do out west, and one that causes them to envy our advantages for a change.
Private Placements are easy, inexpensive and highly effective. See Steve Humke at Ice Miller or Dave Castor at Alerding Castor, they can tell you how easy this is.
Last thing on the out of town money comment. Yes. There is lot's of out of town money that comes to good companies here. The coastal VC have teams of telemarketers cold calling Indiana entrepreneurs every day. For the most part, name a successful company here that took professional money and that money came from out of state.
But that money doesn't come to unproven startups. It comes to companies who have proven some points first. Do your friends and family rounds...prove some points, you will find yourself becoming annoyed by how many calls you get asking if you need any money :-)
Tags: blog, blogging, blogware, business, compendium, corporate, indianapolis, software, startup, startups
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