Portland’s startup dilemma – how do we get investor money to flow toward the start-up? I agree with David Hornick of August Capital in the recent TechCrunch article, http://tcrn.ch/dNP7oN, that you first need to establish a solid local ecosystem that is all about launching new technology-driven enterprises. This is the critical mass that Silicon Valley has had for decades now. Portland leaders, in both public and private sectors, have advanced great ideas about what needs to occur to better enable economic recovery through building new businesses within the Software Cluster; one thing that is mission critical to make this happen is to have a robust community of interest that creates this ecosystem of services facilitation focused on launching new software-driven enterprises.
Portland does have a strong community of interest via OEN, SAO, PDC, PSBA, OTBC, BizOr and the likes; Portland does also have an established investor community in several forms with funds targeted at the Seed, Angel and traditional VC phases. Given all of this, we still seem to lack the critical mass needed to gain the level of traction and trajectory required to put us on the map. I am as frustrated as anyone to continually read the stories about the great leaders of influence in the start-up community investing their energies in other geographies. And our situation is not because of our tax attitude toward business; we have a healthy tax environment for business, especially when you compare Oregon to Silicon Valley.
What is missing? Portland would benefit greatly from more ‘second generation’ entrepreneurs catering to the launch community. The second gen leaders are the people that have experienced the entrepreneurial exercise of creating companies and brought them through to their appropriate exit point. We need more seasoned leaders in this space to make more sweat equity investment helping build critical mass within the Portland ecosystem for building durable sustaining enterprises. The software industry segment, driven to a great degree by startups, will become one of the great ways that we recover the Oregon economy. My comments about Portland do indeed apply statewide, and Region-wide.
Building Portland’s momentum within the Software Cluster is going to require a lot of energy from people committed to creating jobs and restoring a healthy economy; it is going to require people with financial resources to take greater risks with new investments than what we have traditionally seen in this community; and it is going to take economic development leadership in the public sector to continually advance the ball by providing a great proactive example in supporting innovation through local startup enterprises.
In doing research recently on funding mechanisms available to startups, I found a publication of the National Science Foundation, Division of Industrial Innovation & Partnerships; their programs, Small Business Innovation Research (SBIR) & Small Business Technology Transfer (STTR), makes grant awards of $150,000 in Phase I and up to $1 Million in Phase II to startups. The IIP Vision is to be the preeminent federal resource driving the expansion of our nation’s innovation capacity by stimulating partnerships among industry, academe, investors, government and other stakeholders. In addition, the IIP mission is to enhance our nation’s economic competitiveness by catalyzing the transformation of discovery into societal benefits through stimulating partnerships and promoting learning environments for innovators. The strategy for the SBIR/STTR Program is to invest in cutting-edge, high risk, high quality applied research in science, engineering and education with a clear goal of innovation that benefits society and the nation through commercialization. I found one submission/award from the University of Oregon and one for a Portland software company; there is money available through this federal program and I am not sure this is something that is being pursued aggressively through local public-private partnership efforts; I plan to find out more about local efforts around this federal program.
From my point of view, the top priority today and one that is very actionable is strengthening and scaling-up our entrepreneurial ecosystem as the mechanism that fosters the creation and development of new enterprises that have innovation through technology as a mission. Anyone who has lived within the circle of Intel knows what is meant by the term ecosystem; this is the fundamental and influential process to building the foundation for creating a community of thought that drives investment and business activity to form around a hopeful breakthrough innovation; it moves the sphere of thought leadership around desired specifications, and it creates the leap in intellectual market-share that digs the moat. It creates the critical mass needed to build momentum required for commercialization.
We need to build upon the great progress the organizations within the Portland technology community have made over the past decade in advancing capability and competency in this area and take it to the next level; we can do this by building a more robust ecosystem that improves the success rate of Portland area start-ups. How do we do this? It is not scientific but here are a few general common sense ideas:
1. Build up the network of service providers that serve this industry; this will enable the connections between creative engineers, business managers and investors to happen more fluidly; this is private sector activity for entrepreneurs that want to build their business in this services space. Seed the idea space through networking and reinforcing the positive outcomes of healthy economies by supporting development of an ecosystem for startup incubation.
2. Drive awareness of the importance of job creation through outreach programs and market development efforts facilitated by public sector leaders focused on economic development; the recent work of the PDC can really help build momentum if sustaining.
3. Mentor, mentor, mentor; bring seasoned ‘second generation’ proven entrepreneurs to the forefront and enable the ‘give back’ to occur; passing on the knowledge and experience to help foster the ideas of those just starting out. We can do this by continuing the good work of the organizations working in this space that bring people together that want to help rebuild the Oregon economy (i.e OEN, SAO, PDC, PSBA, OTBC, BizOr etc). Augment this with private sector services support.
4. Persist in applying personal and group creative energies toward building commerce around taking great ideas for breakthrough innovations, advancing their enterprise form and substance. This means always being entrepreneurial and not giving up on your ideas; just refine them based on discovery and always work to give your efforts true business form.
5. Always complete your due diligence as the basis for making good decisions; this is what flushes out the hidden risks; once risks are known, it is easier to define the problem and create a solution. Decisions are what makes or breaks new business.
Once we have reached a greater level of sustained inertia than we have today in driving this ecosystem, I believe investor money will more readily step in. I believe this because I also believe that the process of how money gets invested will transform to become more efficient in response to demands of the market. Like all things technology, the cycle times in our new economy for producing compelling value are shortening; this applies to investment opportunities in the new enterprises that will become the superstars of tomorrow in driving innovative breakthroughs via disruptive technology products. The good bets for investors will require the smart money to step in much earlier in the evolution cycle of an enterprise; I believe this will shift the traditional cycle of investment toward taking investment positions in promising ventures sooner, and this will be based on the enhanced level of investor confidence that is based on Portland’s expression of critical mass within the ecosystem that supports the start-up community for enterprises that have innovative technology as a mission.
If we build the foundation as a robust ecosystem supporting the technology startup community, and we persist with the energies needed to build momentum, the investment dollars will find its way.