May 8th, 2013
Support Portland by raising capital outside of Portland
There seems to be a constant stream of chatter about how the Portland startup ecosystem compares to the Bay/Seattle. Inherently, a major piece of this conversation is about the ability or inability to raise money locally. This assumes that if there is money to be had locally, it’s the better choice—raise locally, hire locally, and in doing so support the Portland startup scene.
Below, I’ve outlined three reasons why I feel this state of mind is ass backwards.
1) Broaden the Pool. Every time a company raises outside of Portland, it puts our city on the radar for an entirely new group of investors, advisors, and mentors. Every time a Portland entrepreneur leaves the city to find resources that either don’t exist—or are less readily available like talent or investment—they bring it back with them. The more this happens, the more Portland will be on the minds of those outside of our awesome little utopia.
2) Timing. I spent just about two months trying raise our seed round locally. At the end of the second month, with only $10K in locally committed dollars (outside of Portland Seed Fund), I decided to fly down to the bay for an undetermined about of time. Four days and eleven meetings later I had oversubscribed our $500K angel round by several hundred thousand dollars. While I’m extremely grateful for the ultimate outcome, I can’t help but to think what we could we have built in those two months.
3) Valuation & Peer Pressure. Hard fact: If you play the law of averages, your company is worth significantly more on paper to Bay area investors. In my opinion, this is because in smaller tech communities such as Portland, there simply isn’t enough—or truly any—investor competition. This essentially forces the entrepreneur to “prove” they are worth their valuation with hard traction rather than going with current valuation trends.
Right or wrong, if pre-product startups are getting valued between $4-7 million in the bay and $1-3 million elsewhere, why the hell wouldn’t I raise in the Bay? This is the world of high-risk tech investments. Your $25K investment isn’t going to make you rich, and you may very well lose all of it. What you’re $25K will do is buy you an early relationship with a startup, and also earn you a spot in their next financing when you can more confidently make a six digit investment that may very well ultimately increase your net worth.
That said, if Portland startups set their terms in the Bay, it trains local investors to engage proactively, and show companies why they are the right investors for said company.
In the past year new investors have begun to emerge out of the woodwork and make swift, fair investments. With groups like Portland Seed Fund, PIE, Upstart Labs, and several active individuals, raising that first $25K is as easy as its going to get anywhere—but it’s still hard. But now the resources are here. Take advantage, hit the ground running, and then when you’re ready to start to talking bigger numbers with local investors, make sure to remember your options.
Times are changing. Portland tech is growing. Outsiders are moving in. And the pool is getting bigger. Let’s keep our investors on their toes. Flights are only $99.
NOTE: This post was written before Glider raised our Series Seed. Having now closed over $1MM in total capital, I can’t even begin describe to you how important it is that you find and leverage out of town investors. Trust me, you need the network, your business needs the network, and it will force things into perspective.
Eli Rubel is the cofounder and CEO of Glider, an alum of the Portland Seed Fund and TechStars Seattle. He recently took the stage at TechCrunch Disrupt NY 2013 to announce that their product was publicly available and that they had closed a $1 million seed round, led by True Ventures. You can read more from Eli at his personal blog. And if you want to meet up with Eli, I suggest you read another one of his guest posts.
(Image courtesy Christian Reed. Used under Creative Commons.)