AUSTIN – The fundraising arena is changing very quickly and the high costs of starting and growing companies in places such as Silicon Valley are leading investors to look for venture-building companies in places like Fort Worth, Booster Fuels CEO Frank Mycroft told guests at a Fort Worth Now house seminar held recently at South by Southwest.
The panel members for the Creating a Venture Capital Eco-System program discussed how Texas in general and Fort Worth in particular are in a unique position with their potential in the venture capital ecosystem.
Fort Worth Now is a joint effort of Visit Fort Worth (formerly the Fort Worth Convention & Visitors Bureau), the Fort Worth Chamber of Commerce, the City of Fort Worth, Bell Helicopter, Lockheed Martin, Hillwood Properties, Niles City Sound, Firestone & Robertson Whiskey, Hear Fort Worth and the Fort Worth Film Commission to present the city’s first-ever two-day Fort Worth exhibition at SXSW in Austin.
The concept follows the city’s first strategic economic development plan, which suggests that Fort Worth needs to increase its visibility to attract more businesses. Visit Fort Worth’s strategic plan suggests the same thing and the chamber is involved in a strategic reorganization to bring greater focus to the issue.
The discussion on March 13 highlighted Business to Business works and driving capital and entrepreneurial success in the region. It was moderated by Robert Sturns, the city’s director of economic development. Panelists were Perot Jain LP partner Joe Beard, Mycroft and Pickup founder Brenda Stoner.
Each industry expert spoke on developing not only a successful venture capital ecosystem in a region, but how to maintain good investor-entrepreneur relations.
Beard represented the investor’s point of view and Stoner and Mycroft represented the entrepreneur’s point of view. Sturns asked Beard what he and other investors and venture capitalists look for when deciding whether to invest in a particular company.
“It all starts with the entrepreneur,” Beard said. “I need a ninja. They’ve got to be smart, driven and passionate. Then, the second thing is we’re looking for a big problem [to solve]. And the last factor is it has to be an idea we can add value to — that’s one of the ways we mitigate our risk.”
Creating a successful business is all about partnerships, panelists said. Partnerships not only bring money and other capital and material resources, but they also provide opportunities for mentorship and counsel.
Mycroft explained how Booster Fuels’ and Hillwood’s partnership has been an invaluable experience for the company, as has their work with Perot Jain.
“I can’t say enough about the importance of an incubating partnership,” Mycroft said. “Hillwood brought us to Fort Worth and … what we did with Fort Worth and PJ and Hillwood is embed ourselves with customers.”
He explained that it’s not always necessary to look for partnerships and investor opportunities in places where seed money has a history of being available.
“Don’t think about building your company just where the money is located. There’s a lot of things involved in building a company outside the money,” Mycroft said.
“And Fort Worth is a great place for that. Fort Worth is pretty special in that it’s an incredibly high-growth city. That creates a lot of opportunities to do different things and grow a customer base before anyone else is there,” Mycroft said.
“In Fort Worth, there’s no shortage of capital. The issue is the capital is tied up in businesses outside venture capital, tech, etc.,” Beard said. “If you’re solving a real-world problem, though, those are things these businesses understand. You have to find common ground with these family offices.”
Beard said that to keep both investors and businesses coming to a community, in addition to having successes, it’s necessary to have the talent pool of passionate, driven entrepreneurs these investors are looking for.
“You have to create an environment where entrepreneurs feel they can be successful. The kid that’s a freshman at SMU right now has to know that he has the resources to build a company,” Beard said.
“I think it’s also how we carry ourselves in the community,” he said. “We try to build a business based on values, integrity, doing things the right way. If we can lead by example on that front, parents and students will be more comfortable with entrepreneurship and know there is an ecosystem to support them.”
Once the budding entrepreneurs know they have the community of support and a successful ecosystem behind them, the only thing left is for them to come up with the next great idea — easy, right?
And, says Beard, it starts in the schools.
“In the early 2000s, I had kids calling me every day that wanted to be investment bankers, and that has changed. … Kids are wanting to take their fate in their own hands,” he said. “But if kids aren’t exposed to things early, they don’t know that they don’t know — and they need to know that entrepreneurship is an option.
“If we can impact just one or two kids in a room that say, ‘I think I can go build a company,’ then I think it was worth our time,” Beard said.
These industry experts have some advice for budding entrepreneurs.
Stoner stressed the importance of not taking “No” for an answer. “Resistance is met with persistence,” she said. But, she said, it’s not always a black and white situation.
“In the case of many investors, they don’t tell you yes or no, they just let you drift,” Stoner said. “So not getting a yes doesn’t mean no, and not getting a no doesn’t mean yes. It’s an ambiguous industry.”
Patience and relationship building are incredibly important when working with potential investors, Mycroft said.
“When I look at all our leading investors, we built a relationship over a year in some capacity with someone on their investment team,” he said
To think an entrepreneur can pitch an idea to someone he or she does not know and get a check is unrealistic, he said, but persistence is important.
“I think one of the things that makes you driven as an entrepreneur is the belief that you have to succeed,” Mycroft said.
“As an entrepreneur, sometimes you have to risk it all and go to the edge,” Beard said. “No one is going to believe in you as much as you believe in yourself.”