“Hey, I’ve got this great idea for a startup! You live in Silicon Valley, can you help me get venture capital funding?”
This is a common request that I get from people that live outside of Silicon Valley. Unfortunately, raising money is hard regardless of if you want to start a company in the Midwest or Silicon Valley. Can I get funding based off of an idea? Nope… Can I get funding based off of a business plan? Nope… Can I get funding if I have an app built? Depends… Can I get funding for an app that has over a million downloads? Now you are talking… Can I get funding if I have an app with a million downloads, a rockstar team, and I sold my previous company to Microsoft? Yes!
The perception of funding and VC is so skewed because of the tech media and shows like Silicon Valley, especially for folks living outside of Silicon Valley. The reality is, you can’t just move to Silicon Valley, turn over a rock and find money.
While it is true that venture funding and even angel funding is much more available in Silicon Valley vs. Minneapolis (where I’m from), it doesn’t necessarily mean it is easier to raise money in Silicon Valley especially for a first-time founder.
So, what is the path to getting venture capital funding if you live in the Midwest? Basically, you have two options:
- Build relationships with great investors in the Midwest such as Drive Capital, based out of Columbus, Ohio, or Matchstick Ventures, based out of Minneapolis.
- Build relationships with great investors out in Silicon Valley.
But most importantly, the question shouldn’t be “what is the path to getting funding”, but rather asking yourself, “what is the path to building value,” and thus being able to prove the model which will eventually get you funding.”
I had a chance to meet Mitch Coopet, CEO of Aftercode, a Minneapolis based startup. With co-founders Brian Bispala, COO and Josh Cutler, CTO, they recently raised a $2.1 million seed round from Drive Capital (Columbus, Ohio), Hyde Park Venture Partners (Chicago), and Dundee VC (Omaha,Nebraska)
At the time of the raise, their product Rambl, which uses AI to extract notes and follow-ups from phone calls, was simply a mocked-up prototype. How did they succeed in their fund raising?
First, they were targeting a big market opportunity by applying AI to voice conversations. Second, they had a great team with prior startup experience. Finally, both Mitch and Brian had co-founded Code42, an enterprise data security company and one of the hottest tech startups in Minneapolis, by bootstrapping.
In fact, when Code42 started, Mitch didn’t even know what venture capital was. A self-taught programmer at an early-age, he dropped out of college, teamed up with his co-founders, Brian Bispala and Matthew Dornquast, and built a company that has eclipsed $100 million in revenue and has over 47,000 business customers.
After growing Code42 from 3 guys in a basement to a 500-plus person enterprise, he left to work on his new venture, Aftercode. Though Code42 had completed Series A and Series B investment rounds with notable Silicon Valley VC firms such as NEA and Accel Partners, he opted to raise from VCs in the Midwest.
“When starting Aftercode, I was a bit torn as to whether or not I wanted to do this as a Midwest startup or a Valley startup. I realized the hidden opportunity was to continue growing the tech community here in Minnesota and subsequently the Midwest. There’s plenty of talent, the community is super supportive, and everyone is hungry for more wins. Partnering with Midwest based VC firms meant we would be able to meet in-person and often. This is critical for building healthy, trusting relationships especially at early stages when you need the freedom to experiment.”
In speaking with Mitch, he gave three pieces of advice to first-time founders in the Midwest:
- Be proactive about networking “It never ceases to amaze me how many people will lean on startup advice from people who have never done a startup, Mitch says. “Each stage of business is unique and has it’s own challenges – it’s important to have team members and advisors with experience in the stage of growth you’re in.”
- Get as much data as you can. “There is no such thing as right or wrong, only more data,” Mitch says. He says that his CTO, Josh Cutler was crucial in reminding him that unexpected outcomes can be the best learning opportunities.
- Make sure you prioritize chemistry when picking a venture capitalist “You want to team up with people you can see yourself learning from and having fun celebrating wins with,” Mitch says.
Ahmed Siddiqui is VP, Product Management at Marqeta, a Payments Technology Startup, and was formerly the San Francisco Bay Area Leader for Startup Weekend.