The Geography of Funding Inequality

Around the country, incubators are popping up. Tech incubators, health incubators, manufacturing incubators. Venture capitalists continue to create to new opportunities to attract the next big tech company and angel investors sit poised, ready to be mentors and investors to new entrepreneurs.

Every start-up at some point in their existence, considers chasing venture capital. The funding may be a life-line to emerging companies, who have been boot-strapping to just get by. Location plays an irrefutable role in the ability of these firms to get funding. Location determines both the likelihood and the amount that start ups are likely to receive. Consider that start-ups in Vancouver receive typically receive 80% less funding than start-ups in silicon Valley?

Where is a Firm Most Likely to succeed?

Several studies have examined the likelihood of venture capital success. In a 2009 study in the Harvard Review by Chen, et al, and another in 2010 by Josh Lerner, found that start-ups who received funding that were OUTSIDE of the geography of their venture capitalists, significantly outperformed, those closer to the VC’s office.

This posits an interesting phenomenon, why is that investors continue to be scared of secondary markets? Start-ups are naturally attracted to cities where VC’s exist. VC’s often set higher hurdle rates for firms that are outside of their area due to increased monitoring costs for items such as travel time. Do those firms, because of their higher hurdle rates, outperform start-ups in NY, Silicon Valley and Boston? Or, to actually attract VC attention, are these firms better to start with?

How does this affect firms seeking VC funding?
Is it better for firms who are seeking VC funding to pack up and head to a larger tech center?
There propensity of recieving funding would increase. What does this mean for firms located in smaller cities? Should local governments invest more in encouraging more VC’s and investors in an area?

We will examine these topics in the coming weeks and provide insight and recommendations for firms looking for VC investment.


Hey Entrepreneurs! Have a business question that you could use an answer to? Tweet @CarmenReis and I’ll do my best to help you out 🙂


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What do You Mean I Run a Tech Company?

I run a Tech Company? Huh?

So I was sitting at a meeting a couple of weeks back and someone asked me about my insight running a tech business. For a second I looked across the table at someone else who was at the meeting, but soon realized that the individual was talking to me. I asked him, “me? Run a tech company….? No I just do business plans and and we just happen to use technology tools to automate the business planning process”.

I was met by a “well what are you if you are not a tech company”? This question made me sit back and think about what actually defines tech start-ups. Being labelled a “tech company” does not really change anything—we are still working through the tech bugs with our developers–and I am realizing that good developers need far longer to work through problems, than I think they ought to. In fact, one of the best Developers I have met, Tony Curcio, at Si TechGroup, often tells me “stop trying to play developer”. It is a lesson that I am slowly learning–I am a type A by nature–although having kids has significantly worn down these A type tendencies.

I have had the opportunity to get to know some amazing developers, (Tony and his crew) who are intuitive and anal about the work they do. Would I go through this process again? Yes. Would I do it differently? Yes, Definitely.

So, as I gathered my thoughts, sat back and answered “I guess I am a tech company”, I started to reflect on this stereotype of “running” a tech company and what it means. When I think tech company, I imagine an early 20 something working out of his parents basement (definitely a ‘he”), up at all hours of the day coding programs/apps/web programs, eating ramen, and living in the same change of clothes as he hacks government files in his spare time for fun.

The Reality

While this image is far removed (remember I was a child of the 80′s and any good hacker I knew spent at least a bit of time trying to crack government files), I started to consider how I fit this stereotype  First and foremost, I am a woman. Second I am married, in my mid-thirties with two young kids. I do not program–please there are times I still have to have my husband show me where the C drive is on the computer! I own my own house, hate working in the basement and am a morning person. I do not mind ramen once a year or so, but I appreciate my showers and changing clothes at least once a day. I prefer order to “hacking government files” and my spare time, what precious little I have, I sit on 3 not for profit boards, and act as Chair of another. So, as far as stereotypes go, I am not sure what insight I can give into running a tech company, all I know is that I am still learning myself and will be glad to share my story with you along my journey.

Business Plans for Newcomers – Part 1

I cannot tell you how many times, I have heard of newcomers turned down for loans simply because they could not produce a business plan.
In our lending systems, as covered in a past blog, it is customary to ask for a business plan. In many cases, lenders will not even look at your business idea without it.
So what is an immigrant, with poor English skills to do? Many will pay consultants to prepare plans for them. Sometimes the immigrant will just stop the application process right there. Others will attend month long classes where they will be guided through the business plan process.

While both of these are good in principal, consultants can be expensive. Classes that drag on for months and months, are not only time wasters, but not effective at teaching what a business plan should be.

A business plan should be a guide-NOT a ROADMAP, but a guide, that gives general direction, provides some estimate of costs, and demonstrates an understanding of the market and the steps you need to get where you want to go with your business.

Many, expect business plans to be “gospel truth”, but they are not. There are those in the business world who will tell you never to plan or that they are a waste of time,http://www.inc.com/articles/201104/when-writing-a-business-plan-is-a-waste-of-time.html . I prefer a more democratic approach and believe that a general document should be prepared, but that document should never be taken as the Road Map for a new business.

For newcomers, understanding what to put in a plan, how to obtain market research, estimates of business costs and mission and vision statements, can be beyond not only their language, but also their cultural skills. Remember, Business Plans are largely a North American invention. To do them properly requires insight into Business Culture.

So what is an immigrant to do? My advice is to find a plan/template/program you are comfortable with and use that to develop a basic business plan. More important are items like personal credit and financial holdings. Also, getting a mentor in the industry would be a great asset, for immigrants or those new to an industry. In the next blog we will discuss finding a Mentor.

Article keywords: immigrant business plans

#waystokillanidea – It is too expensive.

Here is part 4 on my blog series of how to kill an idea. I’ll quickly recap three ideas from a recent conference that motivated me to write these posts:
1. Fail fast, fail forward.
2. Do not be afraid to think big.
3. Do not automatically say no.

We love to say no, even when it shouldn’t be our first response. We do need to be cautious, but a quick “No” is a great way to stifle innovation and kill ideas. Whether we are scared, unsure, or uncertain, we quickly come up with some great (and not so great) excuses, which often are just ways to kill ideas. While the entries in this series are independent, I do encourage you to go back and read the previous ones. For those that have been following along, here goes #4: It is too expensive.

To me, too expensive isn’t something that should be thrown out immediately or thrown around lightly. While a luxury car may be deemed too expensive, so might a heart transplant. Before writing off something as too expensive, I like to follow these golden rules:

1. Do you know the actual cost, or are you just guessing?
2. Have you measured the benefits or returns? (Remember, gains need not be solely financial!)
3. Expensive usually implies something big – is this project/undertaking/thing as big as you think, and if so do alternatives exist?

While these may be oversimplified criteria, I do believe that they can be used to narrow down if something is truly expensive, or if we are just being truly lazy or truly un-creative. Either way, a bit of analysis can’t hurt, especially if we are being presented with something completely absurd. Of course, if I present to my team that I’d like to fly to Mars, that isn’t quite the same as asking to launch a new campaign. Yet, our knee-jerk reaction may be to treat these as the same thing and quickly dole out a “It’s too expensive”. In order to clarify, I’ll talk a bit more about the rules mentioned above.

1. Do you know the actual cost, or are you just guessing?

I know that a Porsche is expensive. But I don’t know exactly how expensive. I also know that a consultant may sound expensive, or that a marketing campaign may sound expensive, but do I really know? You may be surprised how little something actually costs. Alternatively, consider that this can go both ways: don’t be afraid to ask a lot of questions to make sure that you have ALL of the costs before green-lighting something. Costs are more then just dollars and cents – consider lost time, impact on your operations, your team and maybe even your image. A lot of the little details and extras can add up – and quick.

2. Have you measured the benefits or returns?

Again, this can often be more then dollars and cents! Some initiatives can have a strong positive impact on your organization’s image, and sometimes if just feels nice to do some social good. Don’t be afraid to start adopting triple-bottom line metrics, and of course, there’s the classic ROI. Sure, something might sound like a lot of money, but if it gives massive returns, then why not invest?

3. Is this too big or are their alternatives?

Sometimes, things DO cost too much, regardless of potential returns. However, we can often make things more complicated or bigger than they should be. If you like an idea but don’t like the cost, consider evaluating both the scope and scale, and how they may relate to your strategic goals. Maybe you can roll something out in phases, or maybe you only need a piece. And even if you do need the whole thing, are their alternatives?

This may sound silly (and overly obvious), but google is your friend. It really is. You would be amazed at what you can find, and the alternatives that it may present. It is entirely possible to build your own social network, fund a venture without the use of traditional lenders, outsource part of your business, and even build your own mobile apps. This is just a short list of some of the great initiatives that the Internet has made accessible to us. The average cost of these? Less than $500.00.

I do want to reiterate that costs are important and must be monitored. Money is too important to throw away, but we need to carefully evaluate opportunities. Don’t be afraid to ask questions, explore alternatives and do some real thinking before saying “No”.

Don’t let the “too expensive” mindset kill a good idea.

Article Keywords: it is too expensive

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#waystokillanidea – We Have No Time.

As I wrote previously, at a conference I hosted, we focused on 3 key ideas:
1. Fail fast, fail forward.
2. Do not be afraid to think big.
3. Do not say no.

We are too often quick to say no, even when it doesn’t make sense. While sometimes we need to be cautious, we let “No” kill ideas, and ultimately innovation. We come up with some great excuses and ways to kill ideas. I’d like to talk about Way #2: We Have No Time.

I recently re-read The 4 Hour Workweek and the 80/20 Principle. These are two excellent reads, and I can’t recommend them enough. These books have taught me some valuable life and business lessons. Above all else, if we allow ourselves to, we have an abundance of time.

That’s right – not a little, not just enough, an ABUNDANCE. If you have an idea that is worth capitalizing on, don’t find excuses, find time. Great innovators don’t allow an excuse like this to kill great ideas. Great innovators don’t allow ANY excuse to kill an idea.

We have no time. I’ve heard this one so many times. I’ve heard it in large corporations, small non-profits and startups. No one is immune to this one. While resources are limited, don’t be afraid to try new things. Often, low-cost, short-term initiatives can have superior and long-lasting impacts.

I know that it’s not easy, and that we do need to examine what is most important, and to give priority to activities that generate the greatest rewards. And remember: rewards do not need to be (and often are not) financial.

Remember, this excuse is good for one thing: killing ideas.

– Rodolfo Martinez

Article Keywords: ways to kill an idea we have no time

Hey Entrepreneurs! Have a business question that you could use an answer to? Tweet @CarmenReis and I’ll do my best to help you out 🙂

Need a Business Plan fast? Just visit our homepage and you can be downloading your Business plan in just 2 hours!