Saturday, January 23, 2016

Texas Venture Growth Forum Event Results -- 3

A startups fundraising strategy should have a national focus from day one.  While there is ample support for startups in Texas, the funding must be sourced from across the country.

While Texas has many Series A funds which range from $50M to $100M in size and write checks in the $2M to $5M range, there are no Series B funds.  A Series B fund is typically $300M or more from which the fund writes $5M to $15M checks to startups.  Entrepreneurs seeking Series B funding must look across the US to find Venture Capital funding.

Series B investors across the country are looking for quality deals.  Some use syndicate partners to find the deals.  Since there are no local Series B funds in Texas, outside investors have a more difficult time finding the best Texas deals.  In the 1990s, there were over 30 venture capital (VC) funds in Austin alone.  Dallas had its fair share of venture capital as well.  The Dot Com crash crushed the VC community and what came back in its place in Texas were angel groups.  Some VCs repositioned themselves as microVCs with $50M funds and invested alongside angel groups. Texas gave scant attention to the VC community for several years.  Now, fifteen years later, startups have outgrown the angel groups and need Series B funding.
In addition to financial Venture Capital there is a growing number of Corporate Venture Capital (previously called Strategics)  funds.  In the past, pharmaceuticals shifted from internal R&D to buying successful startups to fill their pipeline of technologies and products.  Today, just about every segment of the corporate world has created a venture capital arm to invest in promising startups with the intent to monitor the industry and/or acquire the company.

The Texas Venture Growth Forum brought both financial VCs and Corporate VCs to Austin for a two day conference highlighting 1:1 sessions between the VCs and Texas startups. Some of the financial VCs such as Rembrandt, Three Rivers, and Delta-V were well represented at the event.  Corporate VCs including Shell, Dell, and Microsoft also sent representatives to meet with prospective startups. Venture firms with portfolio companies already in Texas such as Revolution, SSM Partners, and Greycroft participated as well.

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