Upstate Venture CEO Survey

I am on the board of a non-profit called Upstate Venture Connect.  Nasir Ali, a good friend of mine, heads the organization.  Here is a guest post from Nasir sharing summary findings from a recently completely survey of upstate NY CEOs.  Enjoy!

Seeds of Growth are All Around Us

This year’s Global Entrepreneurship Week follows an election season where economic anxiety weighed heavily on American voters.  Nearly a decade of research from the Kauffman Foundation and other sources has confirmed that young, high-growth businesses create almost all the net new jobs. While Upstate NY leaders were busy trying to save (or attract) industrial era giants, a new generation of world-beating founders grew up in our midst, then left to launch companies like Android, airbnb, Priceline, Nvidia, etc. in more startup friendly communities.

As the head of Upstate Venture Connect (uvc.org), I am committed to building Upstate NY’s startup ecosystem. I meet incredibly talented and ambitious founders in every part of Upstate, proof that our region continues to produce high growth entrepreneurs. Yet, these emerging companies are still invisible in their home communities and business leaders and policymakers miss their economic impact.

This fall, UVC commissioned Rochester based Center for Governmental Research to conduct the first ever Upstate Venture CEO Survey. We wanted to hear from high growth founders and, in one month, 115 CEOs responded. Half of the companies were less than 6 years old and nearly all (90%) were targeting national/global customers. Below are three key findings from the survey and their implications for UVC and other Upstate NY ecosystem builders.

High growth companies are everywhere and disrupting everything.  The 115 respondents fall into 47 different industry codes. Our future is not going to be a single cluster per city, but a super-regional community that values and encourages out of the box thinking and a fast growth orientation. Emerging founders today often have peers that are a few highway exits away instead of being across the street.

High-paying jobs are available, especially for college graduates. Seventy-five percent of companies paid workers more than $40,000 on average. Forty percent reported an average payroll of more than $75,000/year. Three out of four companies said that 80% of their staff holds college degrees.

The economic impact is significant and growing: Taken together, the firms account for 4,700 direct jobs (70% in NY) and 4,400 additional jobs creating more than $450 million in annual wages for NYS. When asked for five year projections, the CEOs collectively are planning to add 9,600 direct jobs. If these jobs are in NYS, there could be as many as 12,800 new jobs created with $1.4 billion in payroll.

The data clearly shows that the seeds of growth are all around us. That is why UVC is doubling down on its efforts to raise awareness of the intrepid founders creating a path to the future. In the year to come, we will be highlighting the most exciting companies in each Upstate community via our online Ecosystem Map, Events Calendar, UNY Pulse e-newsletter and blog/social media activity. We will also continue to work with leaders in each community to form new angel investment funds, accelerate the growth of existing businesses, and showcase entrepreneurial career opportunities for ambitious and talented college grads.

To see how you can play a role in building Upstate NY’s new economy, please visit http://uvc.org and join our growing network of startup founders and supporters today. The full survey report and summary data can be viewed and downloaded at http://uvc.org/upstate-venture-ceo-report/.

New Podcast – Public Service Announcement

A colleague of mine recently told me about a new podcast called “How I Built This”.  It goes into the stories of famous entrepreneurs and innovators.  Guy Raz (well known radio host at National Public Radio) interviews founders, etc., and turns the interviews into compelling ~30 minutes narratives.  GREAT for car rides.  I just drove home from Maryland and listened to about 5 of them.  I think my 14 year old daughter even enjoyed.  I forced her to listen to one so she would better understand what I do with startups.

GREAT stories.  Enjoy.  Available on iTunes, etc.

Calling BS

Vanity Fair recently published a expose on Theranos.  It is worth reading.  Like a mini “page turner” novel.

It reminded me of one of my personal themes in investing:  “if you don’t understand the technology then don’t invest.”  The understanding can definitely be acquired.  In fact, I rarely understand the technology when we first meet with a company.  But over our months of due diligence the understanding grows.  And sometimes my partners’ understanding is a good proxy.  BTW, understanding does not mean being an expert.

So, how about these words that Vanity Fair wrote about Elizabeth Holmes, the CEO of Theranos:  “She took the money on the condition that she would not divulge to investors how her technology actually worked, and that she had final say and control over every aspect of her company.”   All I can say is OMG.   Are you kidding me?  Who would invest into a black hole and control freak?  Not sure what else to say.  Granted that this is all hearsay.  I have no proof that this is what actually happened.  All I will say is that if you get whiffs of this type of attitude you should run the other way.   And now that I think about it more, we actually did get caught in a similar situation once, but by no means as blatant.  It is not working out well!!

The Vanity Fair article also offered up an interesting synopsis of venture capital:

“It generally works like this: the venture capitalists (who are mostly white men) don’t really know what they’re doing with any certainty—it’s impossible, after all, to truly predict the next big thing—so they bet a little bit on every company that they can with the hope that one of them hits it big. The entrepreneurs (also mostly white men) often work on a lot of meaningless stuff, like using code to deliver frozen yogurt more expeditiously or apps that let you say “Yo!” (and only “Yo!”) to your friends. The entrepreneurs generally glorify their efforts by saying that their innovation could change the world, which tends to appease the venture capitalists, because they can also pretend they’re not there only to make money. And this also helps seduce the tech press (also largely comprised of white men), which is often ready to play a game of access in exchange for a few more page views of their story about the company that is trying to change the world by getting frozen yogurt to customers more expeditiously. The financial rewards speak for themselves. Silicon Valley, which is 50 square miles, has created more wealth than any place in human history. In the end, it isn’t in anyone’s interest to call bullshit.”

My reaction that synopsis, which definitely made me chuckle:

  1.  The white men comments are true.  Change is happening at a slow pace.
  2. Good VCs typically do know what they are doing, but some are so full of themselves that they come across as very pompous.  But most VCs I deal with are good people with lots of brain power.
  3. Most companies I see are not working on meaningless stuff.  But we focus on upstate NY!!
  4. There is nothing wrong with a “Change the World” CEO as long as they are realistic and focus on building a big company that will make money.
  5. VC is definitely about making money.
  6. It is in EVERYONE’S interest to call bullshit.  Please do just that all the time!

 

Immigration Issues

Guest post today from Steve Yale-Loehr, a leading immigration law expert who lives in Ithaca.  Steve teaches at Cornell Law School and is a partner at Miller Mayer, LLP (a law firm in Ithaca).   Steve sent me this email today, which I thought was perfect for a post.  Immigration hurdles are a serious issue for startups.  The proposed rules are a step in the right direction.  Here you go:

Zach: Today the U.S. Citizenship and Immigration Services (USCIS) issued a proposed rule to allow certain international entrepreneurs to be considered for parole (temporary permission to be in the United States) so they may start or scale their businesses in the United States.

The proposed rule would allow the USCIS to use its existing discretionary statutory parole authority for entrepreneurs of startup entities whose stay in the United States would provide a “significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation.” Under the proposed rule, the USCIS may parole, on a case-by-case basis, eligible entrepreneurs of startup enterprises:

  • Who have a significant ownership interest in the startup (at least 15 percent) and have an active and central role to its operations;
  • Whose startup was formed in the United States within the past three years; and
  • Whose startup has substantial and demonstrated potential for rapid business growth and job creation, as evidenced by:

–      Receiving significant investment of capital (at least $345,000) from certain qualified U.S. investors with established records of successful investments;

–      Receiving significant awards or grants (at least $100,000) from certain federal, state, or local government entities; or

–      Partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the startup entity’s substantial potential for rapid growth and job creation.

Under the proposed rule, entrepreneurs may be granted an initial stay of up to two years to oversee and grow their startup entities in the United States. A subsequent request for re-parole (for up to three additional years) would be considered if the entrepreneur and the startup entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue, or job creation.

The U.S. Alliance for International Entrepreneurs (USAIE) has written the attached summary (usaie-comments-on-proposed-immigrant-entrepreneur-rule-1 ) and initial analysis of the proposed rule.  It is also on the USAIE website at http://usaie.org/uscis-proposes-international-entrepreneur-rule-usaie-summary/.

I am a founding member of USAIE, and helped draft the summary and analysis.  Please forward to interested international entrepreneurs.

USAIE will draft a model comment on the proposed rule.  Please let me know if you or anyone else at Cornell would like to receive that model comment to help you submit your own comments on the rule.

Thanks, Steve

Team, Team, Team

You all likely know that most VCs consider the management team to be the top measure of potential success of the venture.  This post is not about that point, at least not directly.

I want to instead focus on the importance of the entire team (not just management) and the importance of making sure that the team can play together.   I am going to use my past weekend’s soccer experience as an analogy.

I organized and played on an Over 40 soccer team this past weekend in a small tournament in Ithaca.   There was no Over 50 bracket or I would have played in that!   So, there were 4 total teams in the Over 40 bracket.  Two teams from Ithaca (one of which was mine) and then one team from Vermont and one from Binghamton.  You are going to have to trust me that no matter how in good shape you might be, playing 4 soccer games in one weekend when you are over 40 means that you can barely walk come Monday.  Advil turns into candy.

When organizing the team, I managed to get this one guy who is an exceptional player – better than anyone else on the team.   I will call him Jim for purposes of this post.  On Saturday, we tied both of our games (against Vermont and Binghamton).  The catch was that Jim could not play on Sunday.  I knew this going in.  And to make things even more interesting, Vermont outplayed us and we literally tied the score on a questionable call that resulted in us getting a penalty kick, which Jim converted.   Time ran out and we tied 2-2.  Vermont team was pissed, but that is soccer.   We knew that the top 2 teams in the group would play for the championship Sunday afternoon.

Well, you guessed it…..the top 2 teams were mine and Vermont.  Vermont wanted revenge, clearly.  We were without Jim.  I was a bit concerned.  But we ended up playing exceptionally well – better without Jim!  We won 2-0.  It was kind of unbelievable.

Relating back to startups – it is not good to rely on one person.  Not the CEO, not the head of engineering, not the head of sales.  You get the point.  Playing together as a team is the path to the best results.  CEOs who don’t realize this will often get fired or just fail.  I think one of the primary roles of the CEO is to make sure that the team dynamics are as good as possible and get the entire company pulling in the same direction.  This is not to say that there cannot be stars on the team, but it is WAY better if the stars end up rotating around.  The larger the group of people that feel like they contributed to a win, the better off the company will perform.  And the successes will keep coming.

My entire Over 40 soccer team all felt that they contributed – we only had one sub for our last game so that is an understatement.  Team play captured the championship.  Make it happen!

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