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.
“I’m not trying to be an elitist, but if any initiative is run by people who are not active entrepreneurs or active investors, it will have a success rate hovering around zero,” he added. “Nobody would stand around silent if a group of well-intentioned people with no medical experience set up a clinic and started dispensing medical advice to people in need.”
That’s one thing other entrepreneurs talk about, that the perceived problem of insufficient entrepreneurial activity sure seems to attract a lot of consultants, attorneys and economic developers.
So it’s not entirely surprising that Pam York has received something less than a warm reception as she started introducing herself around the Twin Cities in her new role.
AccelerateMSP was first talked about in late 2012 as a source of early-stage capital, for up to 10 deals per year, but the group has long since thrown overboard that plan of making direct investments.
York explained that the idea was abandoned after it became clear that many people expected a nonprofit to simply squander its money on bad investments. That’s even if the deals were properly vetted and weren’t the pet projects of elected officials.
As for her mission today, she said, it’s “to stimulate a vibrant entrepreneurial ecosystem here.”
“If we were to be successful at that,” York said, “what would we see in the environment? There are three things I like to describe. One of them is we’d actually have the experience of there being an entrepreneurial mind-set here that permeates the community,” along with providing the know-how to start a company and forging connections between groups with more or less the same mission.
Taking taxpayer and foundation money to help her foster an “entrepreneurial mind-set” isn’t a message that will play that well with entrepreneurs, but York made far more sense when she left the clouds and got down to providing concrete examples. If the organization evolves as she hopes, it could certainly help early-stage companies.
She envisions finding the right expertise for founders of companies, but unlike a roomful of self-selected experts, she said, the most effective adviser to an entrepreneur is another entrepreneur.
Building a company takes a unique set of skills, best acquired — if not only acquired — by having done it. Being able to then teach and advise, she said, is a second “unique skill.”
York attributed the rocky acceptance of AccelerateMSP so far to a phenomenon she called “burn-off.” When frustrations have festered for a while, and someone new comes along with another proposed solution, the first thing that has to happen is for some of that frustration to burn off.
Maybe that’s happened already, she said, as she’s had constructive recent discussions with potential funding sources for AccelerateMSP.
“You know,” York said, “we are pragmatic people. If there is no appetite for this kind of thing here, we’re just going to shut it down.”
firstname.lastname@example.org • 612-673-4302