Capital Access for Startups in New Orleans

This post has been coming together for a while, and I’m excited that I am finally getting a chance to share the coming capital options for startups in NOLA.  My feeling for a while has been that the seed capital gap and lack of VC in general in Louisiana has been one of the biggest challenges facing startups.  The Receivables Exchange had to go raise its capital outside of Louisiana.

As far as local angel funding, here’s what I wrote to Ben Rosen after his visit to New Orleans last week during Launch Fest:

The next step is to develop a strong, active, angel community to fund these companies, and keep them in New Orleans, rather than needing to go to Austin, NY, Boulder or the Valley for capital & talent.

A big part of our mission at Launch Pad is getting the investment community familiar and comfortable with these types of investments, which may be non-traditional for the region where wealth has traditionally been generated through oil and gas and the port.

It appears that we are on the verge of a tidal shift in the availability of capital for startups locally (fingers crossed).  Here are some of the things that are happening now and on the horizon.

  • Idea Village – open – an eight year old non-profit that provides grant funding & educational curriculum. The 2010 class has just completed, and the application process for 2011 will be open towards the end of this summer.
  • Leap Frog Ventures – projected launch Q3 2010 – a non-profit evergreen fund that Leslie Jacobs, Rick Rees, and Ben Allen are putting together in conjunction with GNO Inc.  The fund is based on the JumpStart program in Cleveland OH. Projected to raise $5-8 million from public and private sources and make seed investments of $250,000 – $500,000.
  • GNO, Inc Opportunity Fund – projected launch Q3 2010 – this is a fund that will package CDFI funds from local banks into an evergreen investment fund that will make low interest convertible debt loans to local startups.  I am unsure of projected raise, the average size of loans is likely to be around $250,000.
  • South Coast Angels – open, currently accepting pitches – this is a local angel fund managed by Clayton White and Choose Taurman.  This is a member managed angel fund, so it is different than an angel network like the events we do at Launch Pad.  My understanding is that they have $2-3 million committed and they are currently seeking investment opportunities of $250,000 to $500,000. They are using AngelSoft software to manage the application process and you can find out about it here.
  • National VC Activity – starting – one of the best opportunities I see is to build strong ties to the national VC community, particularly NY, Boston & Austin.  The Kraft Group investment in NakedPizza led to Steve Schlafman’s participation in Launch Fest.  In addition, David Safaii of Windspeed Ventures came to Launch Fest and is getting connected with the local community.  Nurturing and strengthening these ties is critical.
  • Barrett Vernon Montgomery LLC – open - Disclosure: Investor in Launch Pad.  Currently managing two funds.  Funds under management: $30 million. General size of investments are seed investments of $100,000 to $300,000 with follow on capital of up to $3 million.
  • Long Branch Ventures – open – Michelle Oaks has been an active angel investor in the New Orleans community over the last two years.  Long Branch invests in early stage companies with an investment criteria that includes the company be based in Orleans Parish.
  • Trumpet Ventures – open – Spun off from Trumpet Group in 2009, Trumpet Ventures invests financially and also by providing services in exchange for equity.
  • Launch Pad Angel Network – open – We host quarterly angel pitch events at Launch Pad at the IP.  We hosted the last one during Launch Fest where we had ten 5 minute pitches by entrepreneurs.  70% of the startups were invited to contact an investor following the pitches.  Range of capital has been early stage prototype to seed capital.
  • Voodoo Ventures – open – Voodoo recently made an investment in Jackson Square Group.  I am open to other strategic investment opportunities.

I am particularly excited about the new funding sources coming online listed above.  While I still believe that we’d benefit greatly from a seed accelerator program, and Launch Pad has some things underway to launch one, I think the capital is going to be flowing locally in the next 6 months to a year looking for deals.  If you have a startup idea, now is the time to get your business plan, or better yet, prototype together.

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The importance of co-founders

Yesterday I was reflecting on the inclusion of Launch Pad in this NYTimes article.

Meanwhile, LaunchPad — a k a  LaunchPadNola — which was started by Chris Schultz, offers co-working space and business classes in New Orleans. It has 43 tenants today.

As much as it’s great to be recognized, it does piss me off that it says I started Launch Pad.  I didn’t.  I co-founded it. With Barre Tanguis and Will Donaldson.

One of the most important lessons I’ve learned as an entrepreneur is not to go it alone.  It’s too lonely of a game to try to start a company yourself. And there is evidence that shows that having co-founders is much more likely to lead to business success. As a serial entrepreneur, I’ve embraced the fact that I like to have different things going on, its what gets me fired up, and I’ve been able to pull my passions together under Voodoo Ventures.  I very deliberately have made a decision that unless I have a strong partner or co-founder on a project, I won’t do it.  It is the only way I scale.

I’m proud of my partnerships and acknowledge the fact that my endeavors wouldn’t be where they are without them.

  • Flatsourcing – Oleg Kurnosov, Timur Vafin, Alex Mamaev, Peter Bodenheimer
  • Launch Pad – Barre Tanguis & Will Donaldson
  • TribeCon – Tiffany Starnes
  • Even my recent investment in Jackson Square Group is reflective of this.  Patrick Comer brought me on as a co-founder, alongside his brother Walton Comer.

It took me a while to get to this point.  Having a partner can be hard.  One of the most serious strains on a personal relationship I’ve ever had came when I faced challenges with my partner  and best friend in the first company I ever started.

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Fast Company: Why You Should Start a Company in New Orleans

Fast Company interviewed me for part 8 of their series “Why you should start a company in….” where they have been profiling the best startup cities around the country.  It was a privilege to speak on behalf of so many great entrepreneurs in New Orleans.

If you haven’t seen it, why not give it a read.  Here are my thoughts on “Why New Orleans is different or better than other cities?”

In a lot of ways, New Orleans is the city for our times, it fits the post-financial-crisis world. We dealt with our knockout blow in 2005 and the people here literally have rebuilt and re-imagined the city. We are ahead of the rest of the country that is just now dealing with the financial crisis. We’re already well into recovery and growth mode, so it’s an exciting time.  There’s something kind of magical that’s going on right now and it’s that gelling at the very beginning of an uprising where things really become a movement.

This really is a great time to start a business in New Orleans.  Here are a few places to dig a little deeper:

I’d love to hear your thoughts on what makes New Orleans such a great place to start a company right now.

Aaron Patzer of Mint.com – Idea to $170mil aquisition in 3 years @ FOWA

Aaron Patzer from Mint.com @ FOWAAaron Patzer – Mint.com – How to Take Your Startup to the Next Level @ FOWA 2010

Idea to $170 mil acquisition in 3 years.

3 Phases of a Startup

  1. Garage – <$100k in funding
    • Validate and idea
    • Create a prototype
  2. Seed < $1mil
    • Launch and alpha product
  3. Scale > $1mil

Garage – Rapidly Validate an Idea
Original Idea: Goal setting software

Talk to as many people as possible.  Don’t keep your business idea inside.  Don’t worry about stealing the idea.  Talked to 50-80 people.  He found that the money component really resonated.  People had issue with existing tools like Quicken & Microsoft Money.  Customer feedback before even building the app.
Solve a real problem that exists now and 5-10 years from now.  Don’t build a feature, build a business.  In 5 years, will this problem still exist.  Is it a transitional problem?

Garage: Goal = Prototype
Pre-revenue Valuation solver:

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Fred Wilson @ FOWA – 10 Golden Principles of Web Apps

Fred Wilson @ FOWAI’m at FOWA in Miami today w/ Peter and Alex from Flatsourcing.  The first presentation was from Fred Wilson who makes amazing investments in great companies:

Fred Wilson – 10 Golden Principles of Web Apps

  1. Speed – The most important feature, if its not fast, users will leave.  Early adopters are forgiving, the mainstream is not.
  2. Instant Utility – It has to give people something immediately.  If you have to spend an hour loading data into the app before you can actually do something, people will leave.
  3. Have a Voice – Stand for something, have a voice, don’t be bland.  The Twitter Fail Whale ending up on t-shirts, meant that something about their voice was connecting w/ society.  It sounded like a human being talking.
  4. Less is More – Start by being simplistic. Delicious was a great example. People used it every day.  You do one little thing but you do it all day, its quick, easy and fast.
  5. Programmable – Make your app programmable.  Make it possible for others to add to and build on top of your application.  If your API is not read/write its not an API, its RSS.  When people can add value to your application, they can add energy to your app, more data, and more richness.
  6. Personal – Infuse your application w/ your users energy.  People feel more ownership when your app is personal for everyone.  Backgrounds, avatars, user generated content.   Makes people care about your app.
  7. RESTful – In a REST architecture, your resources have a URL, and can be called by that URL.  Make the entire application have a clean URL.  Every component has its own URL that people can remember and type in.   Everyone can understand what a URL stands for, and it also is crawlable by search engines.  The web can get access to your app in deep ways.
  8. Discoverable – When you launch a web app, its a needle in a haystack.  How is anyone going to find yours.  You must understand SEO, and build your application from the ground up to be optimized for Google.  It also needs to be optimized for social media, meaning virality.  The product itself must push itself out into the web and social media.
  9. Clean – The application itself must be clean on the page.  Whitespace.  Big fonts.  Not too much functionality on each page.  Anyone landing on the page should know immediately what to do. (Tumblr login.) People underestimate how important it is to be efficient w/ the features on each page.
  10. Playful – The ability to play in an application is important.  The game dynamic is something you can use to get users to do what you want.  Weight Watchers is a good example.  Set goals, and get rewarded for meeting goals.  Create a game dynamic in all apps to make it “fun to play.” Foursquare uses game dynamic as a way to power the development of a local information service.  Users will have more fun, and you can incent the kind of behavior you want in the application.

The marketing for an app has to be in the product.  Don’t hire a marketing team.  Guerrilla, street, or stunt marketing.  It’s not a coincidence that two of Union Square Ventures  apps (Twitter and Foursquare) broke out at SXSW.   It’s authentic, and not expensive.

The Union Square Ventures, five of the six keywords they believe in: Mobile, Social, Global, Playful, Intelligent.

Here are his slides:

The 10 Golden Principles for Successful Web Apps

View more presentations from fredwilson.

Fred emphasized that these are his 10 principles, but there is a lively discussion going on over on his blog, where many other opinions are being expressed about what core tenants are important to an successful app.

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