Labels can be a fantastic tool for recognizing who someone is, what they do, where they are from, and a host of other positive and useful references. Doctor. Governor. Professor. American. Goat Roper. Of course we also know that labels can be awful derogatory tools of bigots, classists, protectionists, and every other horrible thing mankind has been able to come up with. No examples necessary. I’m certain you already know this.
Of course, tongue in cheek as it may be, I’m not surprised that are many who have come up with derogatory terms for VCs. Vulture Capitalist. Venture Crapitalist. In fact I’d love to hear from others some good ones. There are VCs who behave badly and these modifications of the label Venture Capitalist are at times deserved, but I digress. However, I find that in the Great Lakes region the label Venture Capitalist has dozens of different meanings and modifications. Too often the label leads to confusion and assumptions that confound far too many interactions I have.
In Silicon Valley and Boston, it is probably pretty clear what someone means when the label Venture Capitalist is used, but those regions are dominated by an entrepreneurial culture and the venture industry. In the Great Lakes region our challenge is a little more complex. We are viewed as a fly over zone. We have entrepreneurs who are running for the coasts and entrepreneurs that complain about the region lacking any venture financing at all. While the reasons for this are numerous, and I will tackle some of them over time, there are three “labels” I want to address that I believe has contributed in no small way to our region’s problems:
- The label Venture Capitalist: While this seems basic, lots of people like to use this label, but shouldn’t. The number of real funds in the Great Lakes region is relatively small, and because of this it has created room for soothsayers to play at being at venture capitalists. At best this can confuse some entrepreneurs and at worst leave entrepreneurs with a negative experience.
- Early Stage Venture Capitalist: This label has far too many definitions and the vernacular for this label is inconsistent and confusing to entrepreneurs and other VCs alike. Entrepreneurs most often struggle to find their first capital and think that because someone is labeled early stage venture capitalist, they should be interested in investing in their just formed company. When it is just too early for that fund, entrepreneurs become bitter because of a bad label. Worse (for RPM in particular) is when an entrepreneur thinks their idea/business is too early and doesn’t even approach us.
- Midwest Venture Capitalist, Michigan Venture Capitalist, Ann Arbor Venture Capitalist: These labels have caused the Great Lakes Region to create dozens of silos that have fragmented the venture community in the region. With the rare exception, venture funds within the region have not pulled together and backed each other’s best deals. As an industry we perpetuate the notion that we are a fly over zone by not partnering with VCs in the region on deals as a first option.
Over the last month I’ve had a discussion on each one of these labels with other VCs and entrepreneurs alike and from those discussions it became clear to me that these labels are a real issue. Each label deserves its own independent post, which I’ll deliver in 3 additional parts. I believe that if entrepreneurs and VCs begin to rethink these labels it will improve the quality of our funds and companies in our region. Or at least improve the communication between all of us, which will be a good start.