Monday, April 29, 2013
Interview with Gavin Christensen, Kickstart Seed Fund
There's always been a shortage of capital in the region for startups, despite many successes (mergers, acquisitions, IPOs) of companies here--and there continues to be. However, that slowly is changing, as the area grows its reputation for creating big exits and great outcomes for investors. One of the area's local investors, the Kickstart Seed Fund (www.kickstartseedfund.com) is helping to bring in more investors, with a brand new, $26M fund, which is dedicated to seed stage investing in local companies. We spoke with Gavin Christensen about the firm's new fund, and investment strategy.
For those who aren't familiar with the Kickstart Seed Fund, can you talk about the investments you make?
Gavin Christensen: KickStart is a seed fund focused on Utah and the Rocky Mountain region. It's Utah first, but we've also done deals in Denver, New Mexico, and will soon be doing a deal in Arizona. The majority of our investments are in Utah. The way we see our role in the ecosystem, is we've really partnered very closely with universities in Utah, angel groups here, and the entrepreneurial community, to help source deals, due the due diligence, and structure something that makes sense. We syndicate those deals, and bring in our LPs and other seed funds. We've invested in 24 companies, historically, and that number is bigger now, as there are other deals that we have not announced yet. We'll be at thirty-plus deals in a few months. Some of our companies include Growsocial, which was sold to Infusion soft in Q4, DropShip Commerce, in Draper, Utah, which as received some very nice plaudits in the retail, drop shipping supply chain for small retailers. About fifty percent of what we do is software or Internet, and the other fifty percent is actually quite varied. We have a composting firm, Ecoscraps, started by a kid who was only 24 out of BYU, which has done very well. We have some med device companies. We're really looking at the best deals in the region.
Why the focus on seed funding deals?
Gavin Christensen: First and foremost, I love the seed stage. My partner, Clark and I, are entrepreneurs ourselves. Clark has had a lot of success in startups, and I'm an entrepreneur with this seed fund. There's so much energy and excitement when you're figuring out a new product and market, and recruiting a team. I get excited about that, and love the seed stage from that perspective, and from the opportunity perspective. It's always inspiring when a company reaches a level of critical mass, and where you see a clear national market. You have a real impact at the seed level, and frankly, we are differentiating ourselves with a seed fund to help companies get to the next level, and attract capital from wherever.
How did the new fund come about?
Gavin Christensen: We just announced the fund recently, but we've been funding it for the last few months. It took about six months to fundraise. We were pleasantly surprised. We started thinking about the new fund, just as we were getting to the point of fund one when we were doing our last deals. It really wasn't until right before the first close of the fund, in April of last year, that I really started working on it. I brought in a partner, Clark, and brought in Alex as well, and that's when the fund really started to come together. We received support from our LPs, added some great new LPs, and got it done.
You came out of a more traditional, non-seed stage investor. We imagine you must have to approach investment differently at the seed level than at the traditional venture capital - how has that affected your investment process?
Gavin Christensen: That's where I cut my teeth when I was with vSpring, learning how to do Series A and Series B deals in this region. I ultimately fell in love with doing things in this space. I also think that's the nature of venture capital, in general, outside of the money centers like the Bay Area and Boston. You have to be more entrepreneurial, and you have to help companies more. You have to lean in and help with business development, recruiting, and strategy. I really love the aspects of that. They're more pronounced at the seed stage, because there's less of a company there, and it's more formative.
From the Kickstart strategy standpoint, clearly, our investment region is undercapitalized. But even more importantly, there's a gap in leadership at the seed stage. That's why we're helping to create deals, and create fair terms for both entrepreneurs and investors, and that's how we operate as board members. There's lots of opportunities when you're jumping into a space that is not well defined. We're trying to do that in such a way that it takes the long view, and creates a great seed fund and franchise for several decades, instead of just for a few years.
What are the ideal kinds of company you are looking for, and any advice to entrepreneurs?
Gavin Christensen: We don't expect a full management team, but we want to see an entrepreneur, someone who has really used their resources wisely, who is very scrappy, and has created lots of momentum with very little. We want someone that believes in lean startup principals, and who can really show efficiency and fluid effort. I feel like the deals that we do are the "we can't miss" kinds of deals. They have a real persuasive argument, and have a really special opportunity. It could be in software--often, in software-as-a-service, they'll have some kind of initial product and some early revenue--and they should have a semblance of management, such as a CEO and CTO, or founder and CTO, and we're happy to help them fill out the rest. The most important part is momentum. It all adds up to the idea, the team, and some intangibles.
My advice to entrepreneurs would be, when they're fundraising, it's a mutual interview process. How an entrepreneur behaves with us while doing due diligence is really like a honeymoon style reality show--they need to show their best self. It's important that the process really reflect on them, how thorough they are, how persuasive they are, how well they know the market opportunity, their product, and team. I believe in transparency. I want a founder to be able to tell me what issues are the most important to them, and here are the biggest weaknesses in our strategy and team, and how can you help me solve those, that these are the two or three ways we think we can mitigate these issues. Entrepreneurs that are that lucid, really impress us, and make the process really easy. On the flip side, sometimes we're run into an entrepreneur who hasn't through through the issues. You don't want to be asked the tough questions the first time when you're meeting with an investor.