There’s been a lot of good news lately about entrepreneurship in Louisiana. With the renewal of the digital media tax credit and the energy around startups lately, things are just going to start taking off, right?
Well, maybe.
I still see some gaps in current eco-system that can be filled with a true mentorship-based seed fund. (In case you’re wondering, I mean a Y-Combinator / TechStars style investment program. Mentorship-based seed funds exist all over the country, I’ve compiled a listing here)
So where are the gaps? Well, here’s what I see:
- The “Moving Companies to Louisiana” Strategy – one of the biggest stated goals of the digital media tax credit, and a strategy I see LED & GNO Inc among others pursing is trying to lure companies to move to Louisiana with the tax credits, etc. GNO Inc put together a great deck, on what makes New Orleans so appealing. Probably the most visible impact thus far is the EA Sports testing facility in Baton Rouge. Here’s the thing: Established companies have employees. Employees have families, houses, schools located near where the company is currently based. Even though knowledge-based industries like digital media don’t have large infrastructure needs, their employees have established lives.
- Supporting the “Shoot for the Moon” Companies – I had a conversation with a Launch Pad member on Friday who has been through the startup process several times, and he and many others feel we don’t have the deal flow in Louisiana right now. The problem is that were not quite at the point where people are seeing the wealth creation of other successful companies, and frankly we’re just new to building a startup ecosystem. Deal flow is directly related to entrepreneurs willing to take huge risks. Entrepreneurs willing to take huge risks and “shoot for the moon” is directly related to having an ecosystem that supports risk-taking and acknowledges and accepts failure.
- Bridging the Gap Between Business Plan and Business - having a great idea doesn’t mean you are prepared to run a company. Most people starting a company have great subject matter expertise or talent, but may not have a fully rounded skill set in the ancillary areas of building a company. First time entrepreneurs get bogged down in this stuff: accounting, legal, personnel management.
So, how does a mentorship-based seed meet these needs and more:
- Move Folks when its Easy to Move – Start young. Most people entering Y Combinator are just graduating from college or in their 20’s. People are portable at this stage and many digital nomads would love nothing more try out New Orleans for a stint. We’re already seeing this with all the amazing young people coming down here post-K for Teach for America and programs like that. There is a huge difference in a person’s willingness to move based on what stage they are in their lives.
- Go Big - A lot of people have a “go big” idea, and given the opportunity to pursue it, even for 3-6 months will usually determine if there is something there or not. Of course, this is the riskiest stage of an idea, but most people never get the shot to really go for it. I know so many people trying to bootstrap a startup right now, but paying the bills with freelance work. The freelance work engulfs you and you never really get to go for the big idea. Often times (I am an example), people build service businesses to pay the bills, and though they may be successful, they aren’t investable and aren’t the big win that we all want to see happen. A seed fund that provides Ramen-soup money for founders to pursue an idea and get it to a prototype without having to divide their time to pay the bills really gives entrepreneurs a shot to go big. Think what would happen in Louisiana if every summer we gave 10 young startups enough funding to build out their big idea.
- Mentorship – these funds are called mentorship-based seed funds for a reason. They don’t just hand entrepreneurs $25k. They have a curriculum and program that teaches the skills required to run a business. Already in New Orleans we’ve created a set of entrepreneurial hubs. This is a huge start, because startups can ask each other questions, and tackle problems together. Filling this out with a true curriculum that removes the headaches of setting up your accounting, legal, etc would enable entrepreneurs to have a singular focus on building their product. We have people in this city willing to devote the time and effort, but the value of this contribution needs to be acknowledged and compensated.
What kind of investment are we talking about?
- 10 companies selected for June – August 2010. Each company gets $25,000 to build a prototype. – $250,000
- The administrative costs of the program are probably equivalent to the investment dollars. – $250,000
When I think about the real-world impact that a program like this would have and the allocation of economic development and grant dollars that are being spent in Louisiana on advertising, conferences, infrastructure, administrative staff, workforce development, it seems like a drop in the bucket to get a program like this off the ground and I believe it is an investment worth making.
What do you think?
Chris,
All excellent points. Exactly what I’ve meant when I said we need to start measuring the level of entrepreneurship here in New Orleans less by the amount of PR we get and more by the balance sheets of these startups.
Great article.
Thanks David – agreed. The proof is in the pudding. As much as we are accomplishing on the PR front right now, its time to double-down on the investment, and create a sustainable, real, startup ecosystem. I believe this would go a long way to doing just that.
Fantastic post and great ideas. Much needed in NOLA. Lets spread the word and work on getting it together.
If the Federal Gov’t can offer $100,000 to raise a home then we should be able to raise funds to add jobs and infrastructure to the bubbling tech sector that you are so passionate about. Gulf Coast bank has made some large bets on this city and i think we would love to be a part of the ecosystem. Chris call me so we can get some of the money guys in the city with the idea guys.
Check out @benjaminreece’s video response to this post over here: http://www.twitvid.com/003EE
Chris,
Great points. It seems like a relatively small investment upfront to fund a mentorship-based seed fund could have huge returns down the road. Here’s an interesting essay by Paul Graham of Y-Combinator, where he discusses the feasibility of “buying” a Silicon Valley in another city: http://www.paulgraham.com/maybe.html .
The takeaway from the essay seems to be that–if anything–buying the next Silicon Valley is at least worth a try, given the relatively small investment required and the potential benefits that could come out of it. I also think that New Orleans would be a perfect place to try it for reasons that we all already know.
Chris,
I would take a look at the Georgia Tech Venture Fellows program. Combined with their Angel Network, it is one of the best mentored incubation programs in the country. It is one the Benchmark programs we studied for the Regional Innovation Strategies Project that I’m on with the Baton Rouge Area Chamber of Commerce and the LSU System. It also functions as both a “entrepreneurs in residence” program and also a talent pool for startups. Many of the mentors move into active management of the portfolio companies once they get funding or begin to scale up for growth.
Take a look, I can also fill you in on the program we’re working on in Baton Rouge once it’s made public in the next few weeks.
But again, your article is on point.
This is not a poor state, nor do we lack investment capital, it’s just that the capital in the state is only directed at traditional investments: oil, gas, hospitality, food, etc.
Perhaps, the first mentorship needed is to mentor the investment community and management networks in what it means to invest in new ideas and disruptive innovation outside of traditional energy and industry.
[...] You can read the full article here → ← Type A Influenza Affecting LSU Athletes Email this to a friend?Subscribe to the comments for this post?Tweet This!Share this on FacebookPost this to MySpaceDigg this!Share this on del.icio.usStumble upon something good? Share it on StumbleUponAdd this to Google BookmarksShare this on TechnoratiShare this on Reddit [...]
Completely agreed. Putting Launchpad in place was a great first step and will help create deal flow. Tell me how I can help.