Feeding the Startup Addiction
Let’s go way back to the founding of Capsule in the year Prince made famous.
We had a pair of investors when we first started and they liked our business model, but pressed us to come up with ways to design and launch products. We gave the appropriate smile and nod to signal our acknowledgement of their request, and then quickly abandoned it. We were in the business of enabling existing ventures to reach even greater success, after all, not launching our own products.
But, as board members tend to do, the idea was insisted upon. So, we designed a way to participate in new businesses without actually taking on all the risk and having to build a second, third or fourth business. In 2002 we started investing in new ventures, either through our own capital or sweat equity in the form of convertible notes.
We participated in some interesting ventures and saw some spectacular failures. Our first success story was a vodka from Slovakia called Double Cross. The founders were from NY and had a desire to launch a vodka, starting in the NYC market. It was a mild success, but then one of the founders died in a tragic car accident right around the time they had not kept current on their key person insurance. So, after another raise we now had watered down vodka equity. Dilution - if we’re getting technical.
Since that first experiment we’ve taken investments in a boxed water, a community brewery, a vitamin line, an augmented reality toy, a meal delivery concept, a teddy bear washing system and nearly a chocolate. It has been an interesting journey and often fed by a hunger to see new offerings come to life. But, if I’m honest, it also fed my addiction to startups, sometimes in an unhealthy way.
Hi, I’m Aaron Keller, and I’ve been sober of startups for just over 6 months.
I know it hasn’t been that long and to be honest I’ve got my eye on this new startup brand of sustainable sauces called AWSM Sauce that looks quite interesting. It is a more sustainable, responsible form of ketchup, bbq sauce, mustard, and any number of other water based sauces.
Now we have an operating committee, set up just to review these opportunities and provide an objective viewpoint on the long road any startup has ahead of it. And specifically, if we want to hitch ourselves to that wagon train and help pull them along the journey faster and with greater rewards. The final determining factor is the founders, do they have the grit, tenacity and agility to make the 10+ yr long journey.
Most of what we see in the world is overnight success, mainly because when the average citizen becomes aware of a startup it has likely hit an exponential growth curve. That curve, in my opinion, is at least 10 years on the horizon, an average across most categories. For most investors, this is too long, so they choose to believe more capital will bring that curve sooner or sell their share before the curve hits. Only a small percentage of startups even make their curve at all, so many founders give up or the venture and category never really develops to find the curve.
Exponential growth is important, not just for making money, but more importantly for making an impact. Being a part of a curve sprouts many new opportunities for those involved and for the larger community. It often means the venture will start making a lasting impact on culture and be able to start to fulfill the core of its social mission, if there is one.
For instance, if Patagonia wasn’t able to achieve the growth and goals it has, we might not be looking at “business for good” as a thing, or at least we wouldn’t have a shining example that has achieved scale. And, if Paypal hadn’t hit its exponential growth curve we might not have Elon Musk, Peter Thiel, Luke Nosek, Max Levchin and Yu Pan. Exponential growth curves create more opportunities for the communities where those entrepreneurs originate, feeding the startup ecosystem.
Speaking of the ecosystem, let’s look at two groups that measure it, Startup Blink and Startup Genome. Both provide a rather robust analysis of what feeds a startup ecosystem and how communities can amplify it. Our Minneapolis / St Paul community ranks 43rd on the first and 19th on the second. Considering these are global rankings, that’s not too bad. Yet, the more we do to feed this addiction -- in a healthy way -- the more vibrant a community we’ll have.
Our operating committee became my coach for the consumption of a healthy portion of startup work. Let’s get more consumption of startup behaviors so we can see more ventures hitting their exponential growth curves. And, let’s do it with teams of people who can be there to fuel the next ventures. Exponential growth in a startup and exponential growth of startups can become the same thing.
If you’re wondering what you can do, simple answer, start something. Step two; reach out and connect with us so we can build a stronger startup community.