Statistics don’t lie, but they sure don’t tell the whole truth and nothing but the truth either.
For example: $0.00 out of $12.7 billion. 2 out of 1,736.
According to the latest PitchBook data released by the National Venture Capital Association, that is Wichita’s share of venture capital invested in the fourth quarter of 2016 and Kansas’ share of the deals.
I have no doubt the Pitchbook data is bona fide. However, it is mostly self-reported by
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institutional investors, so it grossly underestimates what Wichita investors are capable of and do regularly.
Wichita’s private investment community is vibrant, but it’s just that – private. So I would caution entrepreneurs not to get discouraged nor treat these gloom-and-doom figures as gospel.
Now let’s connect their relevance to how entrepreneurs can access Wichita’s steady flow of private capital. Simple: It’s relational investing.
Relational investing can be characterized by, let’s say, a post-revenue-growing software company that just cannot spark the interest of a private investor who has made money in franchising.
However, another local software company that is in the pre-revenue idea stage has raised hundreds of thousands of dollars from the same investor and their peers.
This happens everywhere – to some degree. I’ve witnessed it first-hand in the Northeast, Florida, Texas and Scandinavia.
It’s common knowledge private investors prefer to invest in what they know or “cook in their own kitchen,” to share an apt colloquialism I recently heard.
Occasionally they will venture (pun intended) outside their domain when a trusted peer investor brings them a deal.
In Wichita, relational investing is the norm, not the exception. It’s just how we roll here.
One could infer this is an indictment of the Wichita private investment community; not true. In fact, Wichita’s propensity for relational investing is a testimony to the trust and respect our city’s diversified private investors have for each other’s judgment.
There are fundamental principles required of all entrepreneurial companies to be successful, irrespective of their industry or whether they are led by a millennial or a centennial. Wichita investors easily see the forest through the trees.
Being grounded in these fundamentals prevents them from jumping on the proverbial bandwagon and following the latest trend that’s leading the herd over the cliff.
A prominent Wichita entrepreneur and private investor, Gary Oborny of Occidental Management, puts it this way: “There is no shortage of capital, but putting together a solid deal requires an entrepreneur to know more than just the widget or the code.
“They’ve got to have a sound business model and an executable strategy to monetize their technology.”
Hard to disagree with that, so don’t interpret “relational investing” as a mere rebranding of “it’s not what you know but who you know.” Who and what are equal bedfellows.
“Putting together a solid deal … ”
“Know more than just the widget … ”
“Sound business model and an executable strategy …”
All entrepreneurs must bear these burdens, but not alone. The leaders and contributors to the Wichita entrepreneurial ecosystem bear the burden of creating the game you should choose to get in and fostering an environment rich with creative collisions, relationships and mentorships to grow your social capital.
Do so, and capital will follow. It’s out there and all around you.
John F. Dascher is president and CEO of e2e Accelerator Inc. Contact him at jfd@e2eAccelerator.com.
Interested in writing for “Business Perspectives”? Contact Tom Shine at email@example.com or 316-268-6268.