Kelli N. Jones, Roger Lee and Erik Robinson joined us on March 11th to discuss ways startups can raise money, the different investment types that exist, how to start conversations even if you’re early-stage, and more.
There are a ton of resources for entrepreneurs to raise funding in South Central Indiana. In our webinar, we discussed the three most common sources for early stage startups: venture capital, angel investing and grants. The following is a paraphrased transcript of our event:
Kelli Jones joined us from Sixty8 Capital. Sixty8 Capital is a seed-stage venture capital fund out of Indianapolis for BIPOC, LGBT and female entrepreneurs. Kelli has led the transformation of a more diverse tech ecosystem in Indiana, through her organization Be Nimble Foundation. Since starting Be Nimble, she has trained 45+ Black and LatinX founders through her accelerator and has invested nearly $500k in capital.
Who is a good fit for venture capital? What do you look for in a startup?
Any sort of company that can take on equity based capital and are looking to scale. The real focus for us is finding diverse entrepreneurs and founders and being able to enfuse capital into those companies. Someone who’s looking to transform our ecosystem.
I’m looking at almost any kind of company right now. There’s tons of exciting emerging industries that haven’t seen a lot of invesment here in the past that have a ton of opportunity.
How do you recommend startups and entrepreneurs get in front of venture capitalists or get ready to reach out to them?
Reach out before you’re ready, because it is all about relationship building. When you’re in that stage when you have an MVP, that’s the best time to get in touch with someone like me so you can figure out what I’m looking for. That way, when you reach back out to me a month or so later with an update, I’m already engaged and know what you’re building. Now, too, I know for me, I reply to every email that I receieve. I’m gonna meet with you even if I’m not sure yet if I’m interested because it’s helpful.
Are there specific metrics you look for in startups? Do they have to have revenue?
That’s exactly what we look for. We look for things like sales, interest in the product, an indication of product-market-fit, a really solid team. There’s a lot of unknowns and guesses, but a combination of those things is what we’re looking for.
What kind of value does working with a VC offer a startup besides money?
A VC firm is often made up of a team with a ton of different backgrounds in addition to entrepreneurial experience. Entrepreneurs have to take on a lot of roles and core competencies, strategie planning, operations, marketing. Working with people with this experience can bring you a lot of value beyond money.
Erik has a wealth of knowledge in the healthcare and medical device space. He has attempted to commercialize his Ph.D. thesis work into the medical device company, Sintact Medical Systems, Inc. Through founding Sintact, Dr. Robinson attained $1.5 million in funding through dilutive and SBIR funding mechanisms. At Sintact he took the technology from ideation, writing, and obtaining two US patents, licensing this technology from Northwestern University, interfacing with investors, and the FDA.
Eric, can you fill us in on the world of grants?
Grants are a great to utilize if you’re a good fit for them- meaning there needs to be some kind of pretty cool technical development. Or it could be simple- something to do with data. I think first and foremost look at everything. Every government agency by law has to have an SBIR program, it’s few and far between a department or agency won’t have one.
To start, think about ‘What am I doing and why is it special?’ There needs to be some kind of special, never-been-done-before new way of doing something or a repurposing of something else, that drives the grant process. It still is a lengthy process, you’re looking at about 6 months from application sent to money in hand, and it can take a couple months to prepare an application. You also must spend the money on the development or research of your product.
Does an entrepreneur need to think about every single governmental arm when applying?
So you have to kind of think, will this be a good fit? Sometimes it can help to talk about your product to someone else and see if it sparks any thoughts of “Well have you thought about this instead?” A grant consultant is great for this. But you can always apply to as many grants as you’d like. SBIR.gov has an entire list that you can sort through.
Sometimes, there are people who’s sole job is to answer questions from potential grant applicants. You can send them your executive summary and they can let you know if you’d be a good fit before you spend time applying. Working with them is a great way to save yourself some time and find the right grant for you.
Do you have to have a connection to an academic institution to get grants?
For SBIR, no. But depending on the agency/department and the product, it may be more helpful. Usually, with a medical or clinical device it’s helpful to have an academic point of contact.
How do SBIR matches work in Indiana?
Elevate Ventures/ the state of Indiana will match SBIR funding .50 of every dollar up to $50,000 with a lifetime maximum match of $150,000 per company.
Roger Lee, CFA is the Senior Research Analyst for Columbus, Indiana based investment manager, Kirr Marbach. Previously, Roger picked stocks for Pacific View Asset Management in San Francisco. Roger has mentored and invested in local startups through the TechStars and Gener8tor accelerators. Roger is an early investor in a few notable Indiana-based startups including Encamp, Conversight and Qualifi.
What’s the difference between working with a VC and working with an angel investor?
Angel investing is much smaller checks, think 25K-30K at a time, from individuals like me. If you’re working with an angel investor, you’re in the early early stage. You might have an idea on a napkin or maybe you’ve already found product market fit, but now you need a little bit of money to prove it out.
Do angel investors expect the same returns a VC firm does?
Since you’re investing so early, you’re going to be in there with the company longer. And as an angel investor, the mortality of your bets is going to be significantly higher, so you’re going to need significantly higher returns.
Can angel investors help me with the technical know-how needed while building a company?
Yes, a VC firm will probably not be in the weeds helping you with that. If I think a person has a cool idea and I see their passion I’ll connect them with resources in our community and help them. But today, there’s so many no-code or low-code ways to build a site and put out a MVP (minimal viable product), that often the best way to figure things out is to do them yourself.
What’s the difference between being an individual angel investor and a member managed angel investor group?
An individual makes the investing decisions on their own and then writes a check. An angel group hears a pitch and votes to decide whether they’ll invest or not, then the majority rules. So even if you don’t want to invest, the investment goes through anyway. But this can be a good thing, you end up having a lot of experts in your angel groups who may know about a certain field or market more than you and find you a great investment that you wouldn’t otherwise know about.
Do you have a personal investment thesis?
I always say bet the jockey. The finished product of a startup is never what is pitched to you as an investor initially. So the whole key is can they pivot? Can they be dynamic? Can they have that tenacity to make it through to something bigger? It’s always about finding that right founder that you also have chemistry with and can engage with personally.
What’s the best way to get in front of an individual angel investor?
I’ve had one on ones with startups usually through accelerators. So you want to network organically in your ecosystem or at an accelerator and get some kind of warm introduction. It’s much easier to get connected with an investor through an introduction and then they’ll know they aren’t wasting their time and to take you seriously.
For more resources available for entrepreneurs looking to fundraise, check out our services page.
Watch the full webinar below: