By Joe Serrano
Last week I had a coffee with a Minnesota angel investor and we began talking about Instagram and its recent $1b exit to Facebook. I gathered that he had not heard of Instagram prior to the acquisition announcement, which really got me thinking:
If Instagram had been started in Minnesota, what would the experience of raising capital from our local investors have looked like?
First, let me set the stage. I have read commentary on the Minnesota investment ecosystem and heard from angels and venture capitalists, all of which collectively summarize that Minnesota entrepreneurs are: (a) naïve, (b) not prepared to ask for money, and ( C), not putting in the hard work.
After all, ‘Good ideas will always get funded’ – right?
Well, I’ll say it: Minnesota angel investors are not thinking big enough.
It seems the vast majority of (the few) active tech angel investors are only playing for bunts and singles – the safest of bets – that will never really move the needle in the way that a smash hit, like Instragram, can. You can’t win a championship without first thinking big and the reality is there are entrepreneurs right here and now, that are fighting tooth and nail to get that shot from Minnesota. Local entrepreneurs who seriously want to crush it.
The over reliance on early stage due diligence is the proverbial stuffed animal a toddler needs before they can go to sleep at night. On the surface, it’s comforting, but the risk of losing every dime invested is marginally different, while the potential upside is radically different.
I have concern with angel investors who are Minnesota nice enough to show up and dip their toes in, but downright counterproductive when it comes to jumping in with the confidence that they themselves can swim. This conservatism is contagious and demoralizing to big swinging entrepreneurs.
If entrepreneurs are going to aim past the fences, it helps they not only to have the right mindset and training, but also the right backing. While we are preparing the often required (but rarely feasible) detailed business plan at the mercy of potential investors, hungry investors in different parts of the country are stacking their lineups with entrepreneur after entrepreneur ready to tear the hide off entire industries based on sheer will alone. They are more concerned with intention and less focused on the nuances of trying to have it all figured out from the start. As a result, our entrepreneurial competition is playing with juiced bats.
If Minnesota angel investors feel that Minnesota’s tech entrepreneurs are not prepared, I think they need to take a good look in the mirror.
You don’t know the mobile space? Never heard of Instragram? Can’t fathom why they were acquired for a billion dollars? Rather than fearing what is not understood and retrenching, do the hard work that it takes to become a savvy investor in today’s world.
Place your relatively sure bets now and then, but by all means when you see ambition, passion and desire from that entrepreneur sitting across from you, don’t get scared – get turned on.
“The biggest startup ideas are terrifying” — Paul Graham
Less emphasis on the relic that is a business plan and more emphasis on the opportunity will better serve your desired outcome while enabling entrepreneurs to do what they are here to do — figure it out as they go along. Business plans don’t predict success at the start; often times, they limit necessary creative exploration and waste critical execution time. Building a business is more art than science. Have some courage and faith!
When I met with a well known Silicon Valley character a few weeks ago, she scolded my business partner and I for being too “midwesternized” — or in other words, small minded.
How awkward. I’ve become a product of my environment.
She said we needed to be more brash and bold in how we were going to create an entirely new industry. We needed to unapologetically state that we were here to lead this company as a game-changer.
The message applies equally same for Minnesota investors. We have more than enough talent, money, and connections here to make it happen. Let’s stop apologizing for being in Minnesota. Shed this insecurity. Embrace fear and take big bold risks.
Let’s work together on overcoming these barriers, because as entrepreneurs, we have them too.
We need you, Mr. angel investor, to commit to being best in class. Once considered ‘Money-apolis’, we were an envied business hub just a generation ago. It’s time to put Minnesota on the map again. Stop half-assing it and get behind your big swingers before they’re poached or pushed away.
And should I ever become complacent from success, if my biggest issue becomes where to dock my boat on Lake Minnetonka and I start asking to see detailed financials for seed stage companies, belittling and berating entrepreneurs who should not have it figured out yet, I hope that a young upstart finds this piece and holds my feet to the fire. I hope she looks at me with a big smile and says: “Joe, you once said that the best way to predict the future was to create it. Do you remember that? You actually did it, but not alone.”
Join your entrepreneurs — the creators, makers and doers of the future — in this heavy lifting.