Rested, rejuvenated, and — most important of all — replenished with good ideas, the Startup Tour is getting back on the road, revisiting the companies we saw last summer. That first visit set a baseline, introducing the startup companies, but this trip is our chance to help.
Just like they did on the old Newlywed Game, we’re bringing to each company a gift “chosen especially for you.” This is typically something we sensed was missing on the first visit that — through the power of television — we could help provide on this second trip. Sometimes it will be a customer, a strategic partner, a distributor, an investor, a new head of marketing or CEO for those companies that need one, or even a hero for inspiration. For about a third of the companies we’ll be bringing plain old money.
All startups think they need money and some can actually use it. For many, though, cash alone isn’t the answer, because cash brings complexity and obligation — two things these earliest stage companies often can’t handle. Ready-fire-aim may work in Silicon Valley, but we’re avoiding Silicon Valley, remember? So aiming is what we’re all about.
Sometimes finding what we can do to help is easy. The company can’t get a meeting at WalMart, for example. We can fire-up the cameras and maybe get that meeting in Bentonville, but first we’d argue against it, because working with WalMart kills many companies, especially those with shallow pockets. WalMart shows vendors no mercy and doesn’t care how big or small they are. It may be better to aim our cameras elsewhere.
But finding money, it turns out, is a little harder. At least it was for me.
Every startup needs a break, a lucky accident like sitting next to exactly the right person on an airplane or finding the ideal partner at your son’s Cub Scout meeting. But such accidents happen only to those who actually get on planes and attend Cub Scout meetings. Good fortune rarely knocks on doors.
Nor does capital, it turns out.
I had this idea right from that start that venture capital would play a role in both the Startup Tour and the TV show. Here I had this crowd-sourced deal funnel filtering hundreds of good companies into a couple dozen really exceptional opportunities. Readers did the work of a dozen overpaid VCs finding the best startups. What resident of Sand Hill Road wouldn’t want to hitch a ride on something like that? I envisioned offering my VC friends the chance to tag along, giving sage advice on TV and snapping-up the best investment opportunities in the process. It was going to be a win-win.
Except I couldn’t interest anyone in seriously participating.
“We’ll eventually see all those companies,” my VC friends said to me. “They’ll come to us. ”
No they won’t.
Most of our Startup Tour companies have never even met a VC and wouldn’t know how to arrange a pitch, much less do a good one. That’s the Silicon Valley tradition of startup-as-theater. Startup Tour companies have real products, not just ideas, and they’ve already survived an average of six years. I’m not saying they can’t do an elevator pitch nor that they shouldn’t have to do one. I’m saying the Tour and the show aren’t about pitching, but doing.
My VC friends turned out to be too lazy, I think, to participate in what would have been an amazing opportunity for any of them. That’s their loss. But where was I going to get the money?
Hong Kong, mainly.
Now does it make more sense that I’ve been writing about China?
America is strapped (all except the banks and of course the big corporations sitting on $1.4 trillion in cash). Okay, Americans are strapped, while Asians seems more prosperous and less risk-averse, at least for now. Little Hong Kong has plenty of accredited investors still interested in the American Dream. Ironic, eh?
So with my friend Jong Lee, the guys and gals of Hambrecht & Quist Asia Pacific, and Kingsway, a Hong Kong investment bank, we raised the Startup America Fund specifically to help some of these little Startup Tour companies. H&QAP is a Hong Kong-based private equity firm that is 25 years-old and has $2.8 billion under management, so there is adult supervision, which means no new RV for Bob, dammit.
These aren’t prizes, they are investments. We sat down in Hong Kong and decided as a group to practice old-time venture capital, investing modest amounts in real companies with real products that are ready — or nearly ready — to go. The investments vary from $100K to $5 million, which are amounts beneath the threshold of many Silicon Valley VC firms, and involve a substantial component of sweat equity — the fund’s sweat, not the founder’s. Helping startups to succeed is what this is all about, though making a profit is nice, too.
So we’re getting that win-win after all from this desparate exercise in me channeling Simon Cowell.
I only wish more American investors and institutions had taken my call.