Pam York said her first six months leading a foundation- and taxpayer-funded economic development start-up called AccelerateMSP “hasn’t been fun.”
She’s occasionally been baffled by the “skepticism, even hostility” she’s encountered from people involved in starting companies and funding them.
Perhaps she’s finding out what entrepreneurs will readily volunteer, that they are tired of hearing about her kind of solution to the problem of inadequate entrepreneurial activity.
Can’t blame them.
Entrepreneurs are out trying to raise capital and living off savings while hearing from well-meaning people paid with money from foundations, city and state economic development budgets, even universities, and all to do what? Teach them how to write a business plan?
What these sorts of groups seldom provide is actual capital, the one thing everyone agrees is genuinely scarce.
Even the organization behind one such effort, the trade group LifeScience Alley, apparently has wondered what’s been accomplished with its Minnesota Angel Network. It’s in the process of divesting of it right now, although LifeScience Alley’s spokesman does claim some credit for “catalyzing” a more active market for new company capital-raising.
The Minnesota Angel Network shouldn’t be singled out, but it is emblematic of the whole problem.
This idea was to take a start-up company through a process to refine its pitch to potential investors and perfect its plan. There would be meetings with eight to 10 consultants from marketing, law or other professional disciplines.
At the end, the company could emerge “certified” and ready to meet investors.
What went wrong starts with charging companies to participate, most recently about $3,500 for a first advisory session and $1,500 for each additional one.
It’s not a shocking amount of money. That is, unless the bills are getting paid in cash that comes from the founder’s second mortgage or 401(k) loan. Then it may as well be $1 million per session.
Another problem is that it’s hard to imagine any investor who wouldn’t come away utterly bewildered by the fact that a deal has been “certified” by some nonprofit. It sure won’t guarantee it’s a good deal.
Perhaps most fundamental is that all this polishing of presentations and business plans can still result in the entrepreneur’s starving to death for lack of capital.
Anser Innovation was the first company through the Angel Network program, and when CEO and co-founder Lisa Lavin emerged, she said there wasn’t anybody there who stood ready to invest in the company.
Lavin’s smiling face is still on the website of Minnesota Angel Network, and she said the process clearly elevated her game. But the $2.5 million the company has raised came from her and her partners hustling to get it the old-fashioned way.
This whole idea of polishing a start-up company’s pitch “has always been overplayed as a variable leading to a start-up’s success,” said Casey Allen, once the operator of a Minneapolis business accelerator. “The only ones that put lots of energy into it are consultants and failing start-ups.”
He ticks off a number of successful companies, and he can’t think of one that engaged a consultant to shape its pitch or massage its business plan. What they had in common was a driven entrepreneur who found a customer.