After The Gold Rush

”Money is better than poverty, if only for financial reasons.” — Woody Allen 

I’m trying not to be pessimistic these days. I still see lots of business plans, of course, and I usually try hard to find at least one good sentence or two before I dump them in the trash, knowing many have no chance of ever getting funded. But it wasn't always that way. Ten years ago, and then again two years ago, we joked that anyone with a good story and a high-resolution projector could get funded. That wasn’t always the case either, but it was closer to the truth than we care to admit now that the gold rush is over.  

Then, a little over a year ago, we had to put our straight faces back on and pretend we were glad the crash happened. “Finally some sanity will return to the process,” we clucked. “The pendulum has swung too far the other way.” And, of course, we dug into our old B-school course notes and started sprinkling the phrase “path to profitability” into our conversations like some verbal talisman sure to ward off the inevitable down round.  

But let’s be honest. We all secretly LIKED it when a business plan written in crayon was a sign of untapped genius—when you could spend money like a consultant on retainer, and every freshly minted MBA could play CxO dress-up until the bills came due.  

I Spilled Latte On My New Tie  

Alas, you once again need solid management, a crack technical team, and a defensible market position before anyone will return your phone calls. As depressing as it sounds, you have to do it the old fashioned way again—generate revenues, hit milestones, and create something of lasting value. You might even have to jettison casual 24/7/365 and put on a tie. 

The problem, of course, is that a company can’t do all that without first getting some small money in the door; $200K here, $500K there is usually just enough to buy a CFO, hire that hot-shot technical expert, and get the product out there to score some bellwether wins in the marketplace. So just like it was when all us grownups were growing up, the single biggest challenge a new technology-based company faces is finding that first slug of cash to get going.  

When The Going Gets Tough  

And in case you hadn’t noticed, it’s really tough right now to find seed capital. According to most people I talk to around town, it's as tough as it’s ever been. But being the chronic optimist I am, I’m prepared to offer a few whimsical what ifs that might amuse our faithful half-full readers. What if …  

• a new administration in Richmond worked with the General Assembly to put some money into a real seed capital fund for Virginia technology companies like they do in Michigan, Pennsylvania, and elsewhere?   
• our leading local investors and fund managers got together on a small seed fund? It probably wouldn’t make a big return directly, but it would help grow our small companies into teams that are really ready for major investment (and, I happen to know a local investor that just cashed out a $38M deal – sure, it would have been 5 times that if he hadn’t been asleep at the switch for the last two years, but still …);   
• our local municipalities either started their own funds aimed at local technology companies or threw in with those aforementioned investors and fund managers? Think taxes and higher paying jobs …   
• NASA, our local defense establishments, the Jefferson Laboratory, our local universities, our regional economic development folks, and the folks in Richmond found a way to get Boeing, Lockheed, Intel, Motorola, Ford, IBM, and other multinational technology leaders to take a good hard look at the emerging technology companies here in our region? Surely some of them would see mutual benefit in partnering with our local hot-shots.   
• the Fortune 1000 companies already in the region took a more proactive role in partnering with our best and brightest technology companies?   

In other words, what if our local startups had ten times as many options for strategic partnerships, another handful of local sources for early stage capital, and a statewide program modeled on the best practices of other parts of the country?  Maybe I’m being optimistic.  Maybe I’m just annoyed that I never got to put in a scooter track at my previous employer. But wouldn’t it be nice to start a little gold rush of our own? You’d be surprised how little gold it takes to get it going.  

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Marty Kaszubowski is President of General Ideas, a Norfolk-based technology venture consultancy, helping early stage companies and solo entrepreneurs figure out what they want to be when they grow up.  Marty is the former Director of the Hampton Roads Technology Incubator and a former President of the Hampton Roads Technology Council, and is a long-time participant in the on-going, regional efforts to promote a more robust entrepreneurial culture here in Hampton Roads.  Marty can be reached at Marty@General-Ideas.com. 

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