I need to take my own advice... think bigger!
This article was originally published August 12, 2010
Eight years ago, I started InnoVenture. A couple of years ago, I co-founded a technology start-up, Hoowaki, with someone I met through InnoVenture, Ralph Hulseman who was with the Michelin Americas Research Company. Our partners are Bill King, who is a professor at the University of Illinois, and March Maguire, who came from KEMET.
A long time partner of InnoVenture has been Noro-Moseley, a large venture capital firm in Atlanta. Recently I had dinner with Kathy Harris of Noro-Moseley. I shared with her an exciting new development at Hoowaki.
Let me put her feedback in context. I also serve on the board of the SC Venture Capital Authority, which invested $10 million in Noro-Moseley, $10 million in Frontier in Charlotte, $10 million in Azalea in Greenville (which is not a venture capital fund), and $20 million in Nexus Medical Partners in Boston. After several years. Noro-Moseley has not found a South Carolina company to invest in, and neither has Frontier. Nexus has made nine investments, but only two were in companies already in the state, Sabal and Lab 21. The rest they brought in from the outside. Azalea has invested in only one, Sage Automotive, which was a spin-out from Milliken so not a venture investment. So after several years of four firms looking for venture quality opportunities in South Carolina, they have found only two companies that were already here to invest in. Why?
Noro-Moseley is looking to invest in teams of serial entrepreneurs who have successfully grown and exited venture backed companies in the past. They don't always find that ideal, but Noro-Moseley has opportunities to invest in teams in other places in the southeast that are basically reincorporations of successful teams. What happens too often is that South Carolina companies closest to being venture quality get sucked out of the state to where the money and the teams are. South Carolina companies need to attract more serial entrepreneurs and ultimately grow a base of our own.
Noro-Moseley raised about a $120 million fund, so they need to see that over time they can invest $5 million to $10 million over a few rounds in a portfolio company. Saying a company needs $1 million and that it may not need more is not compelling to Noro-Moseley.
Kathy said that they have recently been on a west coast road show with a Noro-Moseley portfolio company. She said talking about a business that can be $100 in revenue doesn't get much interest there. West coast folks are interested in $1 billion opportunities. That is framing Noro-Moseley's mindset about what they need to invest in, because the west coast is where they see they will find the next rounds of capital up from their investment.
Most entrepreneurs in South Carolina think too small. I occasionally teach a Clemson MBA class on technology start-ups, and the first day of the first class I tell students, "I don't care how big you have been thinking, think bigger."
I am not suggesting being imprudent. The mantra of one west coast firm is "Think big. Act small. Increment your way there." That is good advice. But what more South Carolina entrepreneurs need to be incrementing their way to is a $1 billion company.
I shared the conversation with Kathy with another friend who is a leader in South Carolina, in fact who is a leader in his field globally. His response when I told him Hoowaki was a billion dollar opportunity was, "perhaps this is me falling into that “small dumb state” mentality, but the idea of a start-up $1B idea in SC is one that I fear you’ll have a hard time convincing people to take seriously."
He self-diagnosed the problem with that thinking. We don't live in a “small dumb state”. From Research Triangle Park to Atlanta, Oak Ridge National Lab to Charleston, we live in the eighth largest mega region in the world, with 23 million people, fifteen research universities and a world class industrial base with global relationships. There are many people here who are among the world's best at what they do.
It is time for me to take my own advice. Think bigger! We all need to think bigger!