My startup, Phenom, recently left our home base in Cleveland for San Francisco in order to join 500 Startups. Our decision to move sparked quite a bit of debate over whether it was a positive or negative move and over whether we should be celebrated or scorned. In fact, VentureBeat ran a story on the topic just last week by Jumpstart CEO Ray Leach: “My city just lost a startup to Silicon Valley. Tell me again why that’s a bad thing.”
So I think it’s finally time that I weighed in on this conversation. Not only am I fascinated with the topic, but I care deeply about my hometown and I feel like it is my responsibility to provide the perspective of an entrepreneur from Cleveland, and more specifically, the perspective of the CEO of Phenom.
The truth is, it is a problem that we left Cleveland. We should have been able to find funding at the level and speed that would allow a promising startup to grow and compete. And while we did get some local backing, the funding ecosystem at large is so bureaucratic and slow-moving that it’s more likely to kill than nurture startups.
That may sound harsh, but it’s time we all had a zero-bullshit conversation about the struggles of starting a company in a market with little appetite for risk. And I want to lead that conversation. The entrepreneurs in Cleveland deserve a voice, and city residents and council members need to hear the truth: Until we reform the current model dominated by public/private “funds” and establish a real ecosystem of early stage investors, we will perpetuate a broken system that, at the end of the day, hurts everyone involved.
In his post last week, Leach asked detractors of our move to San Francisco, “Why brood when you can build?” But I’m concerned that’s hollow talk. I’m not convinced the current environment in Cleveland enables startups to build — when “building,” in the context of tech startups, means moving very quickly with all the resources and support you need.
The one metric that matters for Cleveland
My biggest takeaway from the 500 Startups experience is that you need to distill everything down to the most simple level and find the one metric that matters to your business.
I’d argue that there’s also one underlying metric that matters in the context of Cleveland’s quest to become a globally relevant startup community: We need to back our best innovators.
There’s a brain drain that plagues Midwest communities like Cleveland. Until we adopt a mindset where we value every single talented young professional and do everything in our power to keep him or her within the Cleveland city limits, then in my opinion we have failed. This doesn’t mean that a business like Phenom shouldn’t look outside of the region for funding, talent, or resources, but it is imperative that more investors in Cleveland empower smart young entrepreneurs who have the intelligence and drive, but not the means, to build a great company.
500 Startups’ Dave McClure’s investment thesis goes like this: “Find smart people and give them money.” It is virtually impossible to completely de-risk an early stage investment, but 500 Startups has had a lot of success with this simple approach. And I think it’s exactly the approach we need in Cleveland.
What does success look like in Cleveland?
Success, much like product development, is an iterative process. In many cases it requires failing over and over and over again. For Cleveland to succeed in building a community of innovators, it needs to believe that failure is okay and to create a level of confidence among investors and entrepreneurs alike that, in order to win big, you have to go for it all.
Acting with speed and conviction, betting on great people, and trusting your gut, is paramount.
Success is making lots of bets in great people, with the mindset that over time, and after a series of wins, we will cultivate a real ecosystem of early stage investors that can re-seed the community time and time again.
Success is the fear of being average. To be the best, we must think world class.
Most importantly, success is doing. As companies, we aren’t building pitches or decks; we learn best and show progress by actually doing. You become so much more sophisticated over time; build, measure, build again, measure again, refine the process, and get the right people in place, perfect the model, and then replicate over and over and over again.
Cleveland, let’s get it done. Find smart people and give them money.
Brian Verne is CEO and cofounder of Phenom, a mobile community where athletes can share stories about their accomplishments and a 500 Startups Batch 16 company.