By Tom Ballard, Chief Alliance Officer, PYA
Lisa Calhoun looked around the Southeast and noted that the region has 40 percent of the U.S. population, but gets nowhere near that level of venture investment.
“We lack enough diversified early stage capital,” she says emphatically, noting that her home state of Georgia captures about one percent of venture investments nationally. “This is a big opportunity for investors to gain value locally, and enjoy the double bottom line of economic development and opportunity for return.”
She has joined with others to establish a new, very focused fund based in Atlanta but with a larger geographic focus. Named Valor Ventures, it was announced a little over a year ago and had its first close in May of this year.
“I wanted to invest in the early stage technology companies growing up around me,” the fund’s General Partner said. “Just look at the numbers, like the Cambridge index (valor-ventures-attachment) on early stage venture capital, for why.”
As Calhoun looked for the best way to get more accredited investors involved with early stage companies, she said that she considered the angel path, but liked the venture model more.
“I started paying a lot of attention to the venture world before we launched Valor Ventures,” Calhoun said. As a result, she discovered what she describes as “capital inefficiency” – large investors like university endowments writing checks that essentially get invested on the West Coast.
“Tech talent in the Southeast is world class,” she says. “Tim Cook (Apple) was born in Alabama and educated at Auburn. Facebook Co-Founder and Asana Founder Dustin Moskovitz is from Florida. Khan Academy Founder Salman Kahn is from Louisiana Marc Andreesen is from Iowa. Dave McClure – 500 Startups – is from West Virginia.”
The talent problem? “No problem at all,” Calhoun illustrates. “The capital opportunity – that’s something else. But a lot of the money these folks head out West for was made here, just invested there.”
That conclusion leads to another question.
“How many times are we washing dollars?” Calhoun asks. “We can get a better return by cycling a local institution’s investing dollar locally before sending it out of the region. Investors can invest here, where valuations are stronger, and potentially capture the returns they seek while also getting an economic development boost.”
Ironically, as she explored other programs around which she might model Valor Ventures, Calhoun discovered another initiative less than 100 miles away – The JumpFund in Chattanooga.
“Kristina (Montague) and her team are a great inspiration to me,” Calhoun says.
As noted on its webpage, Valor Ventures describes itself as “a modern fund for sophisticated, accredited investors.” It invests in hyper-growth technology start-ups that have secured their first customers and have an entrepreneurial team ready to quickly scale their business.
“We as a region don’t produce a sizable number of entrepreneurs in any one industry sector,” Calhoun says. “Our diversified strategy is to invest in a specific stage with a specific strategy to help the entrepreneur scale to a serious liquidity event.”
Three areas that she describes as growth opportunities are artificial intelligence, the on demand economy, and emerging technologies like drones. Valor Ventures’ team also says the region’s minority entrepreneurs represent a significant but underserved sector.
“We are blessed in technology talent in general, including women and African American entrepreneurs,” Calhoun says. That reality helped inspire Startup Runway, a pitch preparation program that we described in this recent teknovation.biz article.
“We have a sourcing strategy around minority entrepreneurs,” Calhoun adds while also noting that gender is not part of the investment decision-making process. It is simply an opportunity to capitalize on an underserved talent base. The founders in Valor’s growing portfolio currently are 75 percent male, 25 percent female.