Why it's important for Texas startups to get funding within the Lone Star State
When you set out to disrupt a long-standing industry, one of the most important aspects is figuring out where you are going to get the money. Odds are, you are going to be OK with breaking the mold on other traditional practices such as forgoing the venture capitalist firms for smaller companies who share your innovative vision and want to invest in it.
That philosophy works well in Texas seeing as the big venture capitalists tend to stay on the East and West Coasts.
There are dozens of things to think about when starting a company. Funding can be the most important, and there are many ways to approach raising funding for your startup. Here are a few things to consider.
They say everything is bigger in Texas, and one thing is for certain, the Texas economy is thriving and historically very stable. Five of the top 10 fastest-growing cities in the U.S. are in Texas, and a recent Federal Reserve Bank of Dallas report found that Texas is the top state for corporate relocations due to our business-friendly climate.
Benefits of the Texas economy
Business owners and investors alike are noticing the rapid job growth, low tax rates, minimal regulation, successful economic development, and the fact that Texas is the largest exporting state in the nation.
It's important to explore and evaluate all of your options because there are investors everywhere – big and small. I explored fundraising in other states and had I gone that route, it most likely would have led to a successful fundraising campaign. However, it would have looked a lot different. I learned during the first round of fundraising that as much as the angel investment matters, the first meaningful investment might matter even more.
Explore family office investors — it's personal
Traditionally, companies looking for investors seek out the venture capitalist firms with deep pockets. You can joke that Texas is a venture capitalist desert. Compared to the "coasts," there are not many venture capitalist firms here.
I realized that what Texas does have plenty of, is family office investors. And I quickly learned that it was this type of organization that I truly desired. Why? Because local family offices are more likely to share your "homegrown" startup vision. They have true vested interest and it is really personal for them.
Also, the younger generations of these family businesses often lead the way in extending beyond oil wells, fracking, shopping centers and agriculture in seeking to invest in technology startups.
Expert tip: We used our personal connections to target regional investors such as Court Wescott; the founder of 1-800-Flowers; retired Hollywood Casinos CEO Jack Pratt; The Murchison Family; and residential real estate developer Phillip Huffines. We were able to successfully reach around $12 million in the Series A round of fundraising.
When we were ready for the next round of fundraising, we had everything we needed right here in Texas.
Great ideas get funded
Venture capitalists who put a lot of money into a lot of companies also delegate to those companies a lifespan, or a timeline for getting their money back.
Since the family offices believed in our concept and understood what we were doing, we were seen as more of a long-term investment and therefore given a longer time horizon than we would if we had gone the more traditional route of fundraising.
Investors like to watch their investments grow and typically they have more money for second and third rounds of funding when you can prove your success in the first few years.
The bottom line: Investing in Texas companies is a beneficial strategy due to the Lone Star State's booming economy and investing in companies that you believe in makes for a more meaningful relationship, which helps everyone involved succeed.
Alex Doubet is the CEO and founder of Door Inc., a Texas-based, tech-infused real estate platform.