Any entrepreneur will tell you a great idea is not enough to build a successful business. Guiding a startup to profitability takes time, hard work, long hours, the right team and a fair amount of money.
How important is investment capital? A Gompers and Lerner study found 90 percent of new ventures that fail to attract investors fail within the first three years. Successful fundraising is the key to bridging the entrepreneurial valley of death.
That reality can be daunting for tech entrepreneurs trying to launch companies outside traditional hotbeds like Silicon Valley or Boston. However, companies in Idaho’s triangle of innovation (east, north and west) are finding capital, talent and opportunity without having to move to capital-rich locations on the coasts.
Sean Luangrath, CEO of Pocatello’s Inergy Solar, faced a key decision when he joined the fledgling spinoff of Big Dog Solar last summer. Fresh off a stint with a Silicon Valley startup, Luangrath arrived in Idaho asking the question posed by many of the state’s aspiring tech entrepreneurs: Stay or go?
“Salt Lake City was a real option, because it’s a bigger market with more resources,” Luangrath says. “But after getting my feet wet, I realized the value of building a new business in Idaho.”
Luangrath says the burn rate, or startup cost, is significantly less in Idaho than Salt Lake City — and orders of magnitude less than on either coast. The state’s investment dollars go much further in Idaho. Equally critical is the support system and infrastructure. State government, the tech network and a growing investment community rally around new companies, unlike ultra-competitive environments elsewhere.
At its global headquarters in Meridian, SaaSFocus CEO Nathan Mueller pursued a merger strategy to help fund a fast-growing consulting business that helps companies adopt technologies, including cloud computing, technology solutions and industry-specific services.
“We grew so fast we actually did a merger with one of our overseas partners,” Mueller says. “This allowed us to go after emerging cloud markets in Australia, India and Singapore and then focus back on the very competitive U.S. market and operate from a place of strength.”
J.D. Claridge, CEO of xCraft in Coeur d’Alene, took a visible path to fund his drone-development business. Claridge received unanimous agreement to invest celebrity money in his versatile new drone on the popular ABC television show, “Shark Tank.” The company also launched a crowdfunding campaign for a drone that uses a smartphone for smooth operation.
Claridge also relocated xCraft to Coeur d’Alene from Sandpoint after considering other options, including several locations in Washington state. “Remaining in the state was the right move,” he said. “It has brought us access to great talent and allowed xCraft to secure new capital with local investors.”
Next month’s Capital Connect Conference, scheduled for May 12 at Boise State University, will bring together tech entrepreneurs and investors from around the state. Attendees will discuss the region’s investment environment and strategies for raising and securing capital in and out of state. This Idaho Technology Council event is designed to support this growing innovation economy.
Make no mistake — there are investors in Idaho. The state is rich in angel investors — many of whom are current or former employees of Simplot, Micron or HP, where innovation is in their DNA. While VC investments are declining in traditional tech hotbeds, Idaho boasts an increasing number of out-of-state VC firms and private equity groups opportunistically pouring significant capital into Idaho. With beautiful Idaho landscapes, innovative ideas and lower startup burn rates, who can blame them?