Video Venture Capital in Detroit, Among Other Places (Video) 36
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If you have a startup idea kicking around in your head, you don't necessarily need to head for California, New York or Massachusetts to find venture capital. In today's video, Timothy Lord visits a venture capital firm called Detroit Venture Partners. (Yes, it's in Detroit.) This not an intimidating company, even though it has some big bucks and big names (including Magic Johnson) behind it. But this doesn't mean you need to rush to Detroit to fund your million-dollar idea. There are lots of local venture capital companies in the U.S. -- and chances are, wherever you are, there's one near you that's panting to invest in your can't-miss business opportunity.
Be careful (Score:5, Interesting)
My experience is that a lot of supposed venture capital firms (particularly those that deal with economic development zones and distressed areas) are little more than scammers who live on government funding and/or ponzi-scheme style investments and use most of it to pay very high salaries to their staff. So if you're actually looking for venture capital be careful who you deal with. If their senior staff are all driving new Mercedes, while the portfolio of ventures they've funded is surprisingly slim, you might want to look elsewhere.
Not saying that is the case with the specific firm mentioned in this story. I'm just saying be careful who you deal with. The same also goes for non-profits, and anyone who wants to "pay cash for your inventions." There are plenty of reputable investors out there, but plenty of scammers too. And when you're desperate for funding for your big idea, it can be tempting to fall for the latter. Don't let your dream turn you into a mark.
Re:Be careful (Score:5, Informative)
You're right, there are a lot of scammers out there, and that gives the real guys a bad name.
I used to work for a legit firm. Here's a few tips (totally anecdotal) in case you're interested.
1. See how fast they move
If they're trying to close the deal after one or two calls, beware. Proper firms will vet the idea, invention through several channels, as well as having lots of internal discussion before closing a deal. Even if the firm is just a few people, lots of consideration goes into each opportunity. Unlike scammers, who are wham bam thank you entrepreneurial maam.
2. What other companies are in their portfolio
Just like the parent mentioned, investigate their portfolio. Don't look for a lot of companies. Rather, look for companies that seem to have a legitimate product or service they are marketing to a known (not necessarily established) marketplace. Note: some of these companies won't have websites or huge public faces yet, that's not bad necessarily, it could just mean they are young.
3. Get a second, expert opinion
Search your network and find someone you know who's dealt with an investment banker or VC before. Tell them in vague details what you've experienced, and see if they identify any red flags.
Angels and VCs are a great way to bring an idea into reality. Don't be afraid, be careful.
Is this even newsworthy ? (Score:2)
I mean, Detroit got one startup that was funded by venture capital and people think that it's so hot, that it's newsworthy
Plus, this particular startup has yet to prove it can succeed in the marketplace
One bird does not a flock made
Not until Detroit is swamped with a growing cluster of successful startups then maybe it'll become newsworthy
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I think it's worth noting that #1 could indicate you're screwing yourself, and could still be dealing with a reputable company. If you're not asking for a good enough deal, then the decision is quite a bit easier to make for the VC.
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If they're offering a lot for very little it's probably a scam. Recently our local "VC" claims they paid $50,000 for nothing more than a blogspot site of an idea that still says "launching summer 2011". Really? Obviously fake, a real VC doesn't give you 50k without at least a clear idea and a $10 domain.
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Exactly. The trouble also is that you, as the entrepreneur/inventor/owner of what's being sold, can experience some cognitive dissonance when confronted with "too goo to be true" offers. In other words, since you love your creation, a scam artist knows they can appeal to you with what seems like offers that are too good to be true, since you are trying to justify doing business with them. That's why it is so important to get an outside perspective, hopefully from an expert.
Detroit? REIT! (Score:2)
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If New York and LA are going under water Detroit will also start running into problems as the Great Lakes swell.
That's not where the water in the great lakes comes from! All of the great lakes are fed by rivers, rain and runoff. In general, water flows from lake superior down through the other lakes and rivers TO the ocean. Detroit is 600 feat above sea level, New york is practically at sea level. I think Detroit is safe no matter how far the oceans rise.
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How about 601 feet?
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They're smarter than they let on. Y'see, if you can't figure out that the group needs an IT professional, or how to contact them about it, you need not apply.
It's a job posting disguised as a job board. Genius!
Plus... (Score:4, Funny)
There's another advantage to setting up shop in Detroit these days: The city is much safer now that an angry Clint Eastwood is out there roaming its streets.
The companies aren't in Detroit. (Score:2)
Most of the companies they're funding aren't in Detroit. And they mostly seem to be social media phone apps. No manufacturing, automotive, or heavy industrial startups.
(We need to get past "social media" and do something else.)
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Agree.
I was interested until I saw they describe themselves as all-digital: "We invest in social media, mobile apps, software, cloud computing, e-commerce, digital advertising & media, marketing technology, and general internet businesses."
In other words, we don't want to create anything. I love Detroit but I don't think it will be reborn in this way.
Two of the companies they've funded say they are "disruptive." I'm not up to date on marketing jargon. What does that even mean?
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In terms of a car analogy, the car was a disruptive technology back when horsepower literally was horse power.
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I wish there was good Venture capitalists (Score:1)