Harnessing your city’s angel potential
Marc Nager is the Chief Community Officer of Techstars. Prior to that, he was the CEO and CoFounder of Startup Weekend and UP Global (acquired by Techstars) — organizations that bring change to the lives of entrepreneurs. Marc and his team expanded Startup Weekends to over 150 countries and are still growing. They’ve built a network of thousands of volunteers who support hundreds of thousands of entrepreneurs. Marc has both witnessed and fueled the global surge of entrepreneurship.
Marc sat down with us to share some of what he’s learned as part of a two-part series.
This is part one. Check out part two here.
Startup Angels: Let’s start by looking at Startup Weekend and NEXT, what’s the relationship between those events and angels, or aspiring investors, in a community? Do they have a place?
Marc Nager: Absolutely. I think Startup Weekends are the entry point for everyone. Going to these events is like going to the gym for an athlete — it hones your skills and keeps you fit. At Startup Weekends, you’re practicing entrepreneurship, practicing being a mentor, practicing supporting others. Whatever role you want to play, there’s a way to intersect.
Startup Angels: For all the community builders out there, how can they increase investing in startup ecosystems?
Nager: First, you must create a safe space. This a strategy for any minority group, whether that’s socioeconomic, gender, race, etc. By creating a safe place where people can learn from each other and not be alone, you help them find their tribe and you’ll encourage a lot more activity. This is one of the reasons why I really believe in what Startup Angels is doing.
Second, give people a meaningful way to actually do something, not just talk about it. So a question for Startup Angels is, can you not only educate people on how to invest, but then reliably facilitate their first actual investment. If you can get people past that hurdle, they’re more likely to do it again.
Startup Angels: Let’s consider the role of corporations. What can they be doing to invest in and grow their local startup communities? What are some of the best practices and approaches you’ve observed?
Nager: Number one is ‘show up.’ Just show up. Identify people who are entrepreneurial within your corporation, and incentivize them to show up and be a genuine member of the community itself.
Startup communities are some of the most discerning grassroots communities that exist. They can smell people with bad intentions a mile away. So successful corporations must have truly passionate individuals that work to engage as legitimate members of the community.
Number two is to ‘simplify your approach.’ Corporations over complicate the process of engaging their startup community. You must remember that these are real humans with real passions…if you can’t play that game of being genuine, and taking the time to understand what founders really need, vs what you want them to do, then you won’t be successful. Simple and obvious, but it is amazing how frequently we see both of these points overlooked.
Startup Angels: We’ll occasionally hear from smaller to medium-sized startup communities say to us “We don’t need any more angels, we just need Series A money.” How would you respond?
Nager: You can always benefit from greater access to capital. We’re entering a time and a culture in our economy where innovation is only accelerating. So it’s not a matter of scarcity of ‘good startup deals,” it’s a matter of ensuring the downstream infrastructure is in place to help produce that dealflow.
With all this growth, startup communities need ever-greater amounts of capital to fuel their entrepreneurs. If you don’t feed them, they’ll leave.
I also believe that bottom up growth is the only sustainable growth. And angels are the first line of attack as a capital resource for entrepreneurs. So the more sophisticated your angel networks are, the more sophisticated the later stage venture networks can be. If you actually have an active and vibrant angel community that is engaged in all of the early stage activity, the rest seems to follow.
Lastly, I think venture capital is changing. In 20 to 25 years, you will see angels, crowdfunding, and a variety of efficient, early-stage investment vehicles making much bigger bets on later stage rounds. Venture capital will evolve to accommodate these new environments.
We’re seeing some of this now. And we’re only going to see more of it in coming years.
Startup Angels: Techstars has a fund, runs accelerators, and now has its own foundation. That’s a lot of ways to invest. What do you see as different ways to invest in startup communities?
Nager: The answer to that is different for every person, but there are a few common themes. Mentorship and the ‘give first’ mentality is one of the best ways to ‘invest.’ Time is another investment that’s often overlooked. Time is a vehicle for the transfer of knowledge. And of course, there’s money. But money doesn’t have to be in the form of a startup investment…it can also be underwriting local events, local co-working spaces, or supporting other initiatives.
Startup Angels: Within a community, who do you think is best positioned to lead the charge on growing investor activity?
Nager: I think there’s a happy medium. Entrepreneurial communities must be entrepreneur-led. The ideal profile is someone who was an entrepreneur and is now an investor. If they come to the table with that credibility, they’ll be better prepared to navigate the challenges while carrying authority. Realistically, you often get one or the other (investor or entrepreneur), so just ensure that they have committed support from the missing piece.
Startup Angels: What are some of the most surprisingly vibrant startup communities you’ve come across, that the rest of the world may not be aware of?
Nager: Fargo. I love Fargo even though I haven’t even been there. Just look at what they’ve done since late 2013. Greg Tehven started running Ignite, Startup Weekend, a tech meetup, a hall of fame event, etc. And the city has just taken off. It’s incredible to see something pop up like that, where most people — especially along the coast — would point to it as a thriving hub.
Another recent one is Kabul, Afghanistan. They just held their first Startup Weekend. We talk about the power of entrepreneurship to change the world. There is no better example than that!
Beyond that, I still try to go to two Startup Weekends per year. This past year I went to Lexington, Kentucky and Butte, Montana. We have the most to learn and give in those places. The people in those cities are just as passionate and smart as in the bigger hubs, and it’s safe to say that a lot of the leaders in these communities are probably more committed to the massive challenge that it is to push their communities forward.
Startup Angels: You’ve encountered a LOT of entrepreneurs at this point, many of whom have powerful stories. And when you think about angel investing, it’s often a very emotional process. So looking back, what’s one of the most inspiring entrepreneur stories you’ve encountered? On a rough day, what memory makes you want to get back to it?
Nager: Oh my, well as you might imagine I’ve heard a lot of stories. But here’s one good one: KFC. The company is from Kentucky. The story I heard was that after Colonel Sanders sold the franchise to new owners, he essentially lost most of his voting rights. During a challenging period for KFC, he walked into a board meeting to discover the new owners wanted to dilute the gravy with water to shave some costs.
The Colonel objected. He slammed his hand down on the table and let the board have it. Except he no longer had control…they overruled him. I guess Sanders marched out of the room while informing the board he was going to the media to let everyone know that KFC gravy sucks. Turns out they reversed the decision!
Out of this story came a fun motto: “don’t mess with my gravy.” Now, ‘don’t mess with my gravy’ has a great story tied to founder beliefs and values. As a founder, your values can potentially get jeopardized right at the point where you’re at the peak of success.
Startup Angels: Lastly, we’ll be seeing you in Miami in April. What are you looking forward to about that trip and the Summit?
Nager: It’s no secret that angels are a huge part of the equation and journey for many startups. All too often, you hear of horror stories or just disappointing stories about the experiences on either side of those deals. Your Angel Summits and investor workshops are key components to ensuring that the relationships and outcomes between startups and angels are successful. If we can get a predictable, repeatable model to people that helps open their eyes to the possibilities of high quality angel investing, well, that unlocks unimaginable opportunities.
I’d even venture to say that having massively scaled and functioning angel investment opportunities could play a critical role in helping address the growing income inequalities we face as a nation and world. I mean, imagine a world in which investing in startups was just like any other higher risk asset class like the stock market. That has the potential to take current activity from the low billions to the trillions, and the economic and social benefits of that for all of us are amazing.
Stay tuned for the second part of our two-part interview with Marc, where he’ll break down the 7 types of startup ecosystems he’s come to recognize through his career, and discuss how they transition between each other.