San Francisco. New York. Amsterdam.
All three are home to EatStreet investors, including Prime Ventures, the Netherlands-based firm that recently committed $10 million and has had tremendous success investing in the online and mobile food ordering industry in Europe.
However, investment hasn’t always come from the coasts — and certainly not from overseas. Early on, in what was our seed round, I spent weeks and weeks — and more weeks — knocking on doors in Silicon Valley seeking investment, when where I needed to be was in our backyard, smack-dab in the Midwest.
Did I learn anything during that time? For starters, rejection builds character. But most importantly, and I can’t stress this enough: Local investors, particularly for new entrepreneurs, are the untapped ticket to long-term success for Midwest-based startups.
I know what you’re thinking: So much of the capital, and the investors who want to spend it on tech startups, comes from the coasts. Facebook, Pinterest, Uber, and other tech giants live, play, and raise capital there. At EatStreet, we walked a different path, funding locally right from the start. And $40 million later, I can say that it has worked out pretty well.
Here’s why I believe in starting local:
It’s more than money
This isn’t some philanthropic or idealistic sentiment. In the early days of growth, especially for young entrepreneurs — I was 20 at the time — investors know they’re going to need to do more than write a check to see a positive return on their investment.
They need to help the company grow, sharing their expertise and counsel on a regular basis. They want a hands-on experience with you and the team they’ve just funded. They want to be close to you because you are their investment.
Your business model and your pitch are an integral part of their investment, and how you’ll turn that into a profit for investors draws them into the fray. Frankly, at that early stage of a business, their collective expertise and contact base is one you should be equally excited about tapping into.
Few investors are going to write a $200,000 check and say, “OK, I’ll see you at the quarterly board meeting.” Their desire to be in close proximity and contact is something I heard repeatedly during my first month and a half pitching in Silicon Valley. It wasn’t easy to accept but the consistency of the message was indisputable, and it stuck with me. Slack, FaceTime, or any amount of carrier pigeons just won’t do the trick at that crucial point in the business.
For my co-founders and I, straying far from our support base wasn’t an option. We wanted proximity to our partners — and the like-minded, Midwestern values that helped our business grow in the first place. Madison was home and we quickly found out there was money to fund our growth outside of Silicon Valley.
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Access to capital exists
Accelerators, such as gener8tor, which co-led our seed round, are driving money into early-stage startups more than ever before.
These local investors can be great allies. Get to know them and get comfortable asking them questions. Take them to dinner, coffee, or even take a five-minute meeting to get the face-to-face time. Realize a slammed door or dead end could still turn into a partnership at a later time. A mentor or an expert is out there, waiting to help, but you have to find them and convince them that you’re where they need to spend their valuable time.
While the Midwest investment culture isn’t as splashy as it is in Silicon Valley, where hundreds of millions of dollars’ flow annually, it’s changing. We’re seeing more and more investors making the local leap and the startup community needs to be ready.
That’s because it’s easier than ever to raise early funds in the Midwest given the increasing strength of accelerators — the culture ultimately will catch up. The challenge now is that Series A and B investments will be harder to get in the Midwest, given the increased number of successful seed rounds.
Local leads to national
Early-stage investors want to be close for several reasons. You most likely don’t have the metrics or business sophistication to give them the reassurance they can comfortably invest and then simply watch from the sidelines.
These local investors are jumping on board because they believe in your product, service, and vision — and ultimately in you. They see the potential.
Over time you build evidence of success. Seven years ago if an investor asked me about our CAC or expected LTV, I’d be Googling as fast as I could. Today, our team is hyper-focused on attrition, burn rates, and customer experience. Pick the right investors, have the right plan, and then it becomes easier to go outside your local bubble in later rounds when you’ll need to cast a wider net.
When I went back to Silicon Valley and even overseas seeking funding, I had metrics that reinforced our vision and business plan. That led to less anxiety among those distant investors and compelled them to back EatStreet once we proved our concept was a successful one. Our commitment to creating a sustainable and successful business less than a mile from our alma mater became a strong differentiator.
It may sound simple but that’s why I like it. I had to learn it the hard way, spending too much time outside the Midwest ineffectively trying to raise capital. So stay close to your home for early rounds — sooner than later it may lead you overseas for your next round of successful funding.
Matt Howard is the CEO and co-founder of EatStreet, one of the largest independent food ordering and delivery brands, which was founded and headquartered in Madison, Wis., and employs more than 1,000 staff. The company has raised over $40 million, including a recent round led by Prime Ventures, the Amsterdam-based venture capital and growth equity firm backing European food delivery company Takeaway.com.
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