Jerry Nemorin is a first-generation college student who grew up with a family that, like 50% of America, experienced deep debt. While in business school at the University of Virginia, Jerry developed a company, LendStreet, that helps Americans refinance their personal debt. Despite a great idea and a lot of potential, Jerry couldn’t get off the ground, striking out after contacting hundreds of investors. When I asked Jerry what his struggles were, he said, “venture capital is all about pattern recognition. As a black guy, in Central Virginia, solving poor people’s problems — I was 0 for 3!”
In 2016, the Kauffman Index ranked Virginia the #1 place in the country to grow a startup. Yet despite favorable and booming conditions, Virginia ranked in the middle of the pack — #22 — in new firm creation.
What’s holding back passionate entrepreneurs with high potential from realizing success? The Kauffman Foundation estimates it costs $30,000 to start a business-and many companies need much more capital than that to grow. If you come from a wealthy family, go to an Ivy-league school, or are connected to someone with money, you likely can find it.
But most people don’t: 78% of startup investment goes to just three states (and Virginia isn’t one of them); only 2% of startup investment goes to women; only 1% goes to African-Americans and Latinos, and less than 1% goes to rural areas.
There’s good news: Jerry ultimately got his initial $500,000 investment from Kapor Capital, a Bay Area firm. Three years later, he’s raised over $100 million to refinance the debts of working-class Americans. The bad news: Jerry had to move to California to raise the investment. In a place like Virginia (or the 47 states where venture funding is rare), there are thousands of Jerrys who either can’t get off the ground, or leave, in order to build their company.
How do we help turn the potential of the future LendStreets — and thousands more like them — into success in our communities, no matter where we live?
Yesterday, we were proud to join Virginia Senator Mark Warner, Governor of the Commonwealth Terry McAuliffe, Governor-Elect Ralph Northam, and over 100 entrepreneurs and investors across Virginia to announce Virginia is for Entrepreneurs, a first-of-its-kind collaborative effort to help entrepreneurs, regardless of background, location, or industry, access the capital and other resources they need to grow.
Born out of a need to unify the capital funding in Virginia, Virginia is for Entrepreneurs brings together founders and funders from across the Commonwealth from Alexandria to Danville to Blacksburg, to Hampton Roads and beyond to support the expansion of Virginia’s entrepreneurial ecosystem.
The initiative grew out of convenings initiated by Senator Warner, Governor McAuliffe, and Karen Jackson, the Secretary of Technology for the Commonwealth, and engaged a working group of private sector leaders across Virginia: Village Capital (NOVA), NRV (Richmond), 757 Angels (Hampton Roads), Shenandoah Valley Angel Investors (Harrisonburg), I.Lab at UVA (Charlottesville), LaunchPlace (Danville); UVA-Wise (Wise); APEX Center at Virginia Tech (Blacksburg); Virginia Tech Research Center (Newport News).
“The Investment Marketplace”: unifying capital from Abingdon to Arlington
Yesterday, December 11th, we rolled out out the “Investment Marketplace,” is a web-based “common application” focused on unifying the capital stack in Virginia. On the simple web interface, any entrepreneur in Virginia can apply for funding — and be connected with over 75 pilot investment partners. The initiative is the first of its kind in the country, trying to make access to capital transparent and clear for entrepreneurs, regardless of their background.
As a member of the working group, we at Village Capital built the pilot platform in a collaborative six-month process with hundreds of entrepreneurs and investors across the Commonwealth of Virginia. After having successfully launched tests at both the TomTom Festival in Charlottesville in April, and with the Roanoke-Blacksburg Technology Council this past November in Roanoke, the platform went live here today, December 11th.
The initiative will help build strategic sectors in Virginia — for example, the Secretary of Technology and the Governor’s Office has funded, through statewide organization CIT- Center for Innovative Technology, an initial pilot of the technology to promote the growth of early stage unmanned aerial systems companies, a sector of competitive advantage in Virginia.
And the initiative can help capital in places collaborate better — for example, in a soft launch with the Roanoke-Blacksburg Technology Council, we convened 40 entrepreneurs and investors in one room, and 96% of participants said they were connected to a source of capital — or promising idea — they hadn’t met in their backyard.
To get an idea of how the marketplace works, let’s look at Sam English, a Roanoke-based founder who started a company called Attention Point. Sam’s figured out a way to make a more effective online assessment for ADHD.
Sam’s made a lot of progress, but like any entrepreneur, he’s had a hard time raising money. He’s getting a few “Nos” and many more unreturned calls and emails.
This summer, Sam had a different kind of investor meeting, with Paul Nolde, a director at NRV, an early-stage venture capital fund based in Richmond. Sam and Paul used a pilot version of the Investment Marketplace to explore funding. The Marketplace uses the VIRAL Pathway, developed by Village Capital, to go point-by-point through an assessment of Sam’s business, helping get on the same page on categories like Team, Problem and Vision, and Business Model.
VIRAL is a methodology that categorizes the entrepreneurial journey from Level 1 (a dreamer with an idea on paper) to Level 9 (a wildly profitable large company), and matches entrepreneurs with people who can help them at every step of the way.
Sam learned that he was a Level 5 entrepreneur, while Paul communicated that NRV tends to invest at Level 6 and 7. What would have been a “no” in the past instead turned into a conversation about milestones: Paul was able to say “not today,” but highlighted what Sam would need to do to be a great candidate for NRV investment one day.
“This process helped me take what could have been a multistep process and made it much more streamlined,” Sam said. “We met for half hour, and I left with a clear sense of what steps we’d have to take to become a good investment for them. It saved us a lot of time. Now I know when to reach back out to them again.”
From Paul’s perspective, the process helped him add value beyond money. “I hate saying no to founders who are too early-stage,” said Paul. “Being able to talk with Sam and Attention Point using the same levels of development helped me give him clear feedback on how he needed to grow his business, and conditions under which we would be excited to invest.”
Paul added that while NRV uses its own assessment scorecard developed internally as a company enters formal diligence with them, the VIRAL pathway that the Marketplace uses helps NRV better sort through “top of the funnel,” adding more value for both investor and entrepreneur, creating a common language that makes initial conversations more efficient and substantive. “Ultimately I see this as somewhat of an automation and directional tool for the top of the deal funnel, which mitigates the opportunity cost of raising funds for both parties.”
By speaking the same language, Paul and Sam went from opposing sides of the table to being on the same team.
If you’re a founder in the Commonwealth of Virginia (or would like to move here!) visit va4e.org, and in five short minutes, you can be connected with investors across Virginia who are interested in helping your company grow.
If you’re an investor anywhere in the world interested in backing startups in Virginia, go to va4e.org and take the basic diagnostic, and be connected with great opportunities. Join the great group of investors who have participated in the pilot, named below, as we grow better companies together.
And if you’d like to trial a version of the Investment Marketplace in your community, contact Emily Edwards at firstname.lastname@example.org to see how we can work together.
Thanks to our pilot investor participants: