The South Should Follow Suit

Posted: January 31, 2011 in Direct Thoughts

 

Well leave it up to the crew on the left coast to create something –  well overwhelming.  Muri Milner and Ron Conway are teaming together to offer EVERY Y-Combinator startup – 40 of them – all of them – investment money.  Here are some of the terms:

They haven’t even seen most of the startups yet. This is a bet on the quality of Y Combinator startups in general.

All of the new Y Combinator entrepreneurs gathered at Y Combinator headquarters in Mountain View California on Friday evening to hear about the offer, They weren’t told why they were supposed to be there, just that something important was happening. The SV Angel team was there in person. Milner joined from Europe by video conference.

The terms? $150,000 in convertible debt. With no cap and no discount. If you’re an investor you know exactly what that means and you just shuddered a little. Those aren’t terms that most angels can match.

Ok I can hear it now.  Well they have had a head start they can afford it.  Guess what I am tired of that parrot talk.  You know what?  There is some of the oldest and most money in the South and North for that matter.  Let me change this – EAST COAST should follow suit.  Yet they will not.  its too compartmentalized over here on the “right coast”.  Let me illustrate:

1. New York – Ad mafia folks.  Good money but once again always looking for ad related tech.

2. Boston – if your across the river from MIT forget it.

3. Washington, DC. – contractor and skunkwerks

4. Atlanta, GA – trying to be the epicenter of the SE

and really that is about it.  How do I know?  Over the years I have probably been in direct contact with over 90 VCs ranging from so called seed to growth funding. Really the biggest and best investment I have seen lately come out of the right coast is from Brian O’Kelly’s shop AppNexus and rightfully so yet think about the magnitude of what Milner and Conway are going to create.  I know for a fact and will not illustrate here that there is a ton of money on the right coast.  Further there is a ton of money in the South.  Couple that with our quality life and Charleston, SC could be an epicenter for technology.  Yet a long time ago in a land faraway I was criticized for saying that the Seed money on the east coast is like Series A on the west coast as far as timelines.

I am worried that the left coast is going to come get all the talent on the right coast and especially in The South and call it INSHORING.

Maybe I’ll save that for another blog.

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Comments
  1. Alex says:

    Years ago, I happened to be privy to (I was working at) a conference of local leaders who were brainstorming ideas to bring technology companies here. It was the start of the “digital corridor” idea. Never, at that time or at any other, have I heard any mention of fostering venture capital as a viable option.

    Given the controversy over tax breaks for film production – which is guaranteed money – VC is probably considered too speculative. The fundamental issue with the East Coast vs. the West Coast is that the East (and especially the South) is conservative, and the West is progressive. Family values might be comfortable on the social front, but they go hand-in-hand with rigid, good-old-boy, we’ve-always-done-it-this-way, let’s-not-rock-the-boar fiscal policy. Farmers here grow marijuana, but it’s political suicide to suggest that it be legalized. It’s all part and parcel of the same mentality. Quality of life, yes. Quality of innovation, no.

  2. CreateSCjobs says:

    Actually there are numerous private investors ahead of the banks and the vulture -oops community that are funding through debt, equity or a combination arrangements that can collateralize or not in some cases – particularly in Charleston

    • SCStartups says:

      CreateSCjobs, in my experience the investors you allude to are happy to window shop and waste valuable entrepreneurial time but rarely come forth with the cash to back their claims of support for, and interest in, new or disruptive technologies. Traditional brick and mortar turned IT service maybe–nice and safe, especially if their good buddy Bob is once again at the helm and it fits into the existing “areas of economic focus”. As for the “vultures” you speak of, I’d welcome a real one in the area, at least that would mean the game is on. My experience with local, self-proclaimed angels and VCs included being offered a convertible note that expected to set its Series A preferred conversion price and a term sheet with no fund to back it up at the 11th hour. If this is Charleston’s idea of being startup and founder friendly, I would encourage all to read the letter from Ron Conway (that’s the Ron Conway who made angel investments in Google, Mint.com, Foursquare, PayPal, Twitter and a host of others) to the super angels of Silicon Valley. I quote: “The Free Enterprise system is very efficient …..why not let the marketplace demands decide on these issues, its worked for many many years. These startups are binary …they succeed or fail so why waste time on deal structures, terms, vc’s, and valuations etc and just help entrepreneurs build their companies.” With all the bright, talented people here in Charleston and all their amazing ideas, if the private investors you speak of followed Conway’s advice and helped our entrepreneurs build companies rather worry about EBITDA we would have a much more vibrant, *disruptive* startup ecosystem than we do today. A startup ecosystem, I predict, that could give the west a run for it’s money. So, I challenge you CreateSCJobs, where is this private investment community and why haven’t they stepped forth to organize an event to make their intentions know openly to the startup community? Why not a bold move, like investing a base amount in an entire class of Charleston startups? Where’s the commitment, where is the vision, where’s the willingness to buck the status quo for the future of Charleston and South Carolina? You show me THAT and I guarantee I’ll sit up and listen. Hey, better yet, I’ll give them the opportunity to fund my startup.

  3. Ted Tanner says:

    hello CreateSCJobs:

    I know of several startups in the area looking for angel funds as well as series A funding. Not to mention the person above. What venue does one go to and how does one obtain real angel funding – not 6 months for 200k? If there are private investors then they should form more high profile endeavors which would greatly amplify the area and stop people from leaving to go raise funds and companies elsewhere – digitalsmiths being a prime example of a loss not to mention several other entrepreneurs. So how does one “meetup” with said investors and at what level are they engaged?

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