by Chris Sloan of Baker Donelson
For many years, conventional wisdom held that a promising startup needed to be located in a traditional venture capital hub like Silicon Valley, San Francisco or New York to be successful. In fact, many venture capital firms in those areas would routinely require their portfolio companies to relocate. But as Bob Dylan sang, “The times, they are a changin’.” With technology making communication, collaboration and connection easier, more VC firms are now actively investing in companies located in non-traditional markets.
If you are one of those companies, how can you best position yourself for investment?
1. Connect with local investors.
While it is certainly true that the lion’s share of venture capital activity takes place in a handful of major locations, almost every large city has a local investor community. Connecting with local investors may allow you to raise your first rounds of financing, as well as put you in touch with other investors outside the local area with warm introductions.
2. Take advantage of local resources.
Most cities, and even many rural areas, offer incubators or accelerators to support local entrepreneurship communities. These often serve as hubs for local investors and can provide access to advisors, mentors and other professionals who can help grow your company.
3. Be strategic.
Many large companies now have formal or informal investment programs, so research leaders in your industry to see what opportunities are offered. Strategic investors not only provide capital, but also provide early customer opportunities and other resources to develop your product.
4. Attend regional conferences.
Investors from outside an area often attend regional entrepreneurship conferences as an easy way to connect with many potential portfolio companies and other investors for the cost of a single trip. Conferences like 36|86 Entrepreneurship Festival in Nashville, Tenn., DIG SOUTH in Charleston, S.C., and Venture Atlanta, provide great opportunities for both targeted and informal networking with prospective investors from all over the country.
5. Apply for industry accelerators.
Accelerators have not only multiplied exponentially over the past 10 years, they have also diversified into many specific niches. If there is an accelerator in another city that focuses on your industry, find out the criteria for selection and consider applying. Those programs provide industry-specific advice, mentors, and investors, in addition to direct access to potential customers. Furthermore, graduates of well-known accelerators often have an easier time obtaining introductions to customers and investors.
6. Attend industry trade conferences.
If your product or service is targeted towards other businesses in a particular industry, find the top two or three trade conferences in that industry and plan to attend for the opportunity to meet potential customers and investors. For example, if you are a health care startup, try to consider the J.P. Morgan Healthcare Conference in San Francisco or Health:Further in Nashville. If you are in the area of financial technology, perhaps you can attend Empire Startups FinTech in New York or MIT FinTech in Boston. It’s important to go where your potential customers and investors will already be.
Building a startup outside of traditional venture capital hubs on the coasts is now more feasible and often comes with many advantages, such as the lower cost of doing business. With planning and hard work, you can raise money, grow your company and be successful no matter where you are located.
Chris Sloan is a shareholder at Baker Donelson based in the firm’s Nashville office. He chairs the firm’s Emerging Companies Group and focuses his practice on startups and other emerging businesses and also handles complex software and other IT transactions for small and large companies alike.