Getting Portland on the map

February 12, 2010

Josh Friedman wrote a nice “In My Opinion” piece in the Oregonian entitled “Getting on the map as a hub for startups.” While agreeing with the fact that Oregon is the West Coast laggard in venture capital, he argues that the bigger issue is the lack of angel, or seed, funding.

This caused me to reflect a bit on the three startups that I’ve been involved with.  The first two were based in California.  The latest was in Portland.

There was no lack of financing for the California based companies, either angel or venture capital level.  Times were different in the late 90’s and early 00’s, of course.  However, there is simply more access to capital outside of Oregon. The first startup raised $70M.  The second raised even more, and ended up going public.

In my latest startup, based here in Oregon, we actually didn’t experience a lack of angel funding.  We raised several million dollars, primarily from angels.  Angel money was raised locally, from out of state, and even from investors based in Australia (the best place for a pitch meeting, ever!)  We hit the financing wall at the venture capital level.  Lack of venture capital financing is what eventually killed us.  So, my initial reaction was to somewhat disagree with Josh.

That said, I think he’s right.  I’m hearing that many Portland angels are now in hibernation.  They’ve taken hits and are shy to jump back in.

Because there isn’t much seed money, entrepreneurs need to bootstrap, scratch and claw to get businesses launched.  Unfortunately, this reduces a lot of potential businesses to projects.  (I’d guess that my latest startup would face a very different reception if raising angel money today, here, in this environment.)

The deeper question is what to do about it, if anything.  That issue isn’t addressed in the article.

At the most fundamental level, the issue here is lack of success stories.  Seattle has Microsoft and Amazon.  LA and NY have media and entertainment giants.  The Bay Area is the center of the equity economy.  Portland, relatively speaking hasn’t had the successes.  We don’t generate $100M+ companies and big exits.  We create what Kevin Tate with StepChange calls “small furry mammals” (I steal that one all the time…).

Success spawns deep pocketed angels with the ability to help the next generation of entrepreneurs get started.  In this sense, Portland’s entrepreneurs are a bit like orphans.

I’m ultimately skeptical of solutions that call for public money to help address this issue (although there are some interesting public/private partnership approaches).  I also don’t see angels from other markets stepping in.  The ultimate solution is building a track record over time.   Good things can happen here, it’s just more difficult.

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