My Journey in Radical Transparency

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San Diego nExT: Part 4 of 5- What’s nExT

{OPENING THOUGHT: This post was the first San Diego nExT post I wrote back on February 21, 2016. Obviously it’s taken me way too long to get these out and many things have changed since then. Just keep this in mind as you read through the post. We’ve come a long way in the past year.}

n Entrepreneurs x Technology = Startup Ecosystem

How can we get this done? San Diego nExT- A catalyst organization that works with other active groups to foster the growth of the entrepreneurial spirit in San Diego. We can maximize the impact by coordinating efforts with groups like Seed San Diego, San Diego Venture Group, UC San Diego, Connect, EvoNexus, Startup Leadership Program and Startup San Diego. This will catalyze the rest of the ecosystem and provide opportunities for others to get involve in whatever way that’s most meaningful to them. Mentor, adviser, team member, syndicate investor, angel investor, founder, we’ll work to connect them all.

Each program will be created by entrepreneurs to develop methods to support other entrepreneurs in testing ideas and build companies. The initial program will be an idea accelerator focused on helping entrepreneurs understand how to measure the size of the problem they’d like to solve. They’ll learn to run test to better understand if this is the opportunity that’s worth pursuing further. From there they’ll have an opportunity to present their findings and apply for the accelerator stage of the program to help put the idea into action.

This can be facilitated through an early stage life cycle fund. The fund will work with entrepreneurs to develop programs to support other entrepreneurs in testing ideas and build companies. The full cycle fund has the ability to support a select number of companies all the way to their series A. All along the way it will catalyze the rest of the ecosystem and provide opportunities for others to get involve in whatever way is most meaningful to them. Mentor, advisor, team member, syndicate investor, angel investor, program manager, etc…

Here’s an example of how this could be done. First, we create a regional seed fund that funds programs to help grow the earliest stages of company development. The primary goal is to fund companies that can not raise traditional venture capital. We consider these independent companies.

Historically it’s been very challenging to create a venture fund that only focuses on one particular region. The biggest challenge is primarily deal flow. The paradox comes from a limited number of regional deals vs the need to deploy the fund in a timely manner. Of course there are exceptions to this rule and we have an industry here that is one of them. There is a high enough concentration of Biotech and Life Science companies here that we can focus a fund primarily in this vertical and secondarily on the region. However, this doesn’t exist for other industries.

The first way to address this is to start with funding even earlier stage teams. This creates stronger ecosystem with a solid foundation for building higher quality and greater quantity of deals for later stage funds. The second thing to do is work with the right local limited partners. We’ll need to make sure interests are aligned and that you don’t have institutional pressure to invest the funds before it’s in the best interest of the entrepreneur and the startup.

San Diego nExT will participate in the creation of several new programs. The first program will be an independent idea accelerator. This program will help individual entrepreneur’s better define their idea and within a very short amount of time be able to conclude whether or not this is something that they should pursue. The program’s goal is to give entrepreneurs their first bit of outside money that provides an incentive for them to focus on their idea. They learn the techniques required to test an idea so they can understand why they should continue working on this idea or why they should move on to a new one. They’ll now have the skills required to understand if that idea is worth pursuing and what to do if not.

The second program will be a life cycle accelerator program. This program will work with the individual entrepreneur’s with ideas that are worth pursuing and help them build companies. We’ll cover team building, business model, finances, and customer development. The goal for this program is to help the entrepreneur determine their idea’s product market fit. In addition to providing some initial funding we’ll also match the teams with mentors and train them with the skills they need to build a great business. The structure of the investment will allow us to have aligned interested even if the company doesn’t end up having an exit or raising additional outside funds.

Imagine what our ecosystem would look like if we could rally our resources around the creation of 100 home grown $50mm companies instead of hoping we can attract 5 unicorns.

{CLOSING THOUGHT: Now that I’ve waited so long to post these I already have an idea of what this looks like in action. Part 5 will talk about some of the results we’ve seen over the past year.}