You may have read—or even participated in—the discussion that ensued after Mike Rogoway’s article on the Portland Seed Fund, a new program designed to help fund early stage startups in the Portland area.
I’m happy to see another funding resource for early stage startups around here, but there were some statements in Mike’s article which, admittedly, stuck in my craw. And I may have bitched a little about such.
But, when cooler heads prevailed—and I realized that I was in fact picking on what was very much a startup in its formative stages without even talking to the startup—it seemed that the most appropriate way to continue the conversation was to—shockingly enough—actually engage in conversation.
So instead of just sitting around and bitching about the Portland Seed Fund and talking about what its not, I took the opportunity to reach out to Angela Jackson of Bridge City Ventures—who is in charge of developing the program and managing the fund. And I asked her to provide some more details on what the Portland Seed Fund is and what it’s trying to do.
Angela was more than happy to oblige. And so here are some more details, direct from Portland Seed Fund.
First and foremost, I wanted to get a better take on where the Portland Seed Fund fit in the existing—albeit sometimes nascent—Portland startup scene.
“Our goal is to transform each entrepreneur from a person into a company (yes, even a one-person company) in 90 days,” said Angela. “That simply means that we will shine a light on the dark corners they may be avoiding—typically finance, legal, sales. By making several investments at a time, we create small groups who are in this together, and we believe they will help each other as much as we help them.”
So like a boot camp, the entrepreneurs will be getting some sustenance, be run a little ragged and be supporting their peers. But they’re not going to be doing so from within a walled garden.
“Most important, we cannot—nor would we want—to do this alone,” said Angela. “We have a rich and wonderful entrepreneurial ecosystem here, and we intend to use it. Our portfolio companies will be required to connect with resources we recommend to them, based on their specific needs/trajectory. That could include OEN, Portland Ten, Lunch 2.0, the new Portland Center for Design and Innovation, Nedspace, StarveUps, Portland State Business Accelerator, TiE, OTBC or many other terrific assets we have here.”
Recognizing and using the existing landscape is great. Having peer support is helpful. And getting funding ain’t too shabby. So when can companies get involved and apply? First things first. The Portland Seed Fund needs to complete its fund.
“Our first priority is to finish raising the funds so we can start investing in companies,” said Angela. “Until we are able to do that, we are of little use to anyone. So we are heavily focused there now.”
Once that funding is locked in, then they’ll focus on the application process for startups interested in securing those funds.
And when those companies begin applying, they’re going to have to pay $250 to do so. Why the application fee?
“We believe in proportional skin in the game,” she said. “We think a $250 investment by an entrepreneur to get a 30-day decision on a shot at $25K-$50K to build a company is a great value proposition for the types of entrepreneurs we are seeking. Unlike venture funding, angel groups and funds typically do request a processing fee, so this isn’t out of the ordinary.”
Admittedly, I’m a little bullish on the tech. But I was curious as to what kind of companies the Portland Seed Fund might be seeking.
“Our screen is a mix of capital efficiency, speed to revenue and growth potential,” said Angela. “That said, a company that passes that screen is a potential fit, regardless of industry.”
So it could be anything?
“It’s less likely to be restaurant/retail, service and semiconductors—the former two due to scalability within capital constraints, latter due to capital required. We have seen disruptive business models in unlikely places—even apparel and footwear—that would fit our discipline despite traditionally high hard costs.”
But when it comes right down to it, it’s companies who have something valuable and attractive that will get the nod.
“In all cases, connecting with the paying customer soon and often is important to us,” she said.
And how are these entrepreneurs and companies going to be judged?
Given that the fund will be looking at startups of all kinds, each company’s benchmarks and goals will be different. According to Jackson “there won’t be a one-size-fits-all approach.” Instead each business will be chasing mutually agreed upon milestones.
And while there won’t be any particular services—like legal and accounting—associated with the fund, they will work to help entrepreneurs understand how to engage and manage business services.
“We will teach companies how to select start-up appropriate service providers, what to expect to pay, how to manage agreements for cost control, etc.” said Angela. “We will recommend our preferred providers, but ultimately it will be up to the entrepreneur to retain services for his/her company.”
I was also curious about the funding for the startups. Do the companies just get a check? Does the Portland Seed Fund dole it out bit by bit? If they’re cut lose after 90 days, do they lose their money? According to Angela, at the end of the period companies “owe what they owe, regardless if they burned through all or part” of the funding.
Admittedly, a few areas are still gray. I mean, the Portland Seed Fund is still getting situated. It’s a startup.
They are currently “weighing some options” on outside advisers. So it’s not that they don’t want to develop a mentor program. It’s simply that they haven’t gotten all of the pieces together yet. And they’re also still contemplating whether to publicize their portfolio of companies or not.
But they promise to keep the community informed as things change. If you want to stay up-to-date on the Portland Seed Fund’s progress, the best way to stay informed, according to Angela, is the Bridge City Ventures page on Facebook.
Finally, if you’ve got more questions that haven’t been answered here, please comment. Angela has offered to jump into the conversation to help explain more about the Portland Seed Fund.
(Image courtesy H. Koppdelaney. Used under Creative Commons.)
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My problem with an application fee is that there is a long, prevalent history of organizations and individuals offering various types of funding and fund raising services who take advantage of naive founders for personal financial benefit.
There are “startup expo” producers who swear they will have the best and brightest in VC partners at their event, only you discover they’ve charged you to be pitched by a herd of salespeople from service providers and there’s not a committed investor in sight. Similarly “funding brokers” who promise to find the best investor in their network after you pay them a fee, only to get a meeting with someone completely outside your parameters or industry (or nothing at all).
Look at the blow-up this summer when Jason Calacanis went after a number of angel groups who were charging to be pitched. I’m on his side — if you’re accepting money to sit around and eat lunch while some of the brightest and bravest kids in the land pour their heart out to you, you’d better be committed to funding the good ideas. There are plenty of “investors” who show up at angel forums but have never made an actual investment. Paying them to be there generates an awful lot of bad blood.
Maybe this is a positioning and communication thing. It’s unclear whether I would have to pay up in order to get a meeting, or if it’s more like an application processing fee that I have to pay once we’ve all determined that there’s a fit and someone is going to have to spend time on due diligence. After all, my bank doesn’t charge me to sit down and chat with a loan officer but if I like the terms and want a loan they do eventually charge me an application or processing fee.
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I think the other commenters here are focusing way too much on the $250 fee. People don’t value free and I think it’s important that an entrepreneur have some scratch in the game. To be frank, $250 is nothing in the bigger picture and it’s good value for what you get. Look at it this way: $250 won’t buy you a day with most business consultants, let alone 30.
Everybody wants their vig… Even VCs charge you fees having you pay them out of the very same money they just funded you with; they just hit you with it after they give you money. ;o) I’d view the $250 as a fund raising event… For every 100 people who apply, they’ve just raised funding for another $25K round. Another way to look at it is they might not have the funding to sustain operations and have to find ways to offset operational costs. Without the fees this group has less $ to distribute. Also, given the low $ associated with their rounds they need to put a filter in place to weed out people who really don’t have any business asking for any $; their boat could get easily swamped by every Tom, Dick, and Harry asking for a handout vs. those entrepreneurs who are truly serious. I’m not advocating if the fee is right or wrong, or if you should pay it or not, but I get why they are asking given the limited $ in their model.
@Andrew My concern is not about the concept of charging $250 to apply, but rather that if a founder is looking for only $25k-$50k, $250 is going to seem like a lot of money to them.
Additionally, if a founder is looking for that little of an amount of money, they would most likely be better off either saving for a year while they work on the product on the side, or obtain the cash through getting a minimum viable product to market which can make $25k via sales.
I’m not sure I understand why there is all this fuss over a fund that is only willing to commit such a nominal amount of cash. Isn’t this amount of money typically found in the Friends and Family or initial Angel round? If you truly have an idea that will generate sustainable revenue, finding someone to give you $25k should be easy without paying $250.
“Unlike venture funding, angel groups and funds typically do request a processing fee, so this isn’t out of the ordinary.”
I can’t name a respected one that charges to apply.
Glad for the robust discussion. Thanks!