Notes on the Governor’s Finance Summit or What I Really Think About HWY 12
The Guv's tool for getting the financial sector to invest
So Mark Solon is pissed off at me because of things I said on Twitter in response to the Governor’s maddening finance summit held a couple days ago. Here’s the story.
The inimitable Norris Krueger live-tweeted the whole event, which was awesome. There came a point in the summit where the VC’s were summoned to the table. I imagine it was much like the previous Governor’s summit where the Governor and his bureaucrats sat on the dais high above the panel presenters, scowling down in barely concealed boredom. So Mark Solon took center stage.
A week or so ago, someone joked to me that Mark would get up there and say simply that, “there’s nothing for us to fund here.” I readily, yet sadly agreed that that would probably be the case. Imagine my *surprise* then when Norris tweeted that his #1 takeaway from Mark Solon was that “there was nothing for them to fund here.” I have several problems with that statement, none of which have anything to do with how and where Mark spends his investors’ money.
Mark may have elaborated; I don’t know. But the accurate statement would be, “there’s nothing to invest in here the way our fund is currently organized.” The distinction is important.
Highway 12 invests in early stage deals. They like to fund companies that have revenues, operating history, and a management team that is getting the job done. That’s what early stage VC’s do. In Idaho, granted, there are few of those deals around. And with the current fund, Solon and his partners probably don’t have any option but to do what they are doing: looking for deals out of state, so they can return a profit to their investors. But my issue with the simple statement “there’s nothing for us to invest in” troubles me because Mark has a ton of information about the system here in Idaho but in my years of experience as an observer and company founder who has been through this mill, it seems that the people that understand the weaknesses in the system aren’t willing to cast blame or enlighten the powers that be.
The Governor and his staff know boo about finance. They don’t even know what questions to ask. The helpful discussion in my mind is one where H12 elaborates to say:
There’s nothing for us to invest in here. Were we organized as a seed level fund, or a mezzanine fund, there would be. Idaho’s problem is getting the solopreneurs up and running so they can grow up and come to us.
But no one is going to point at the Boise Angel Fund, which wants to be a mini-VC, and say very simply “you guys aren’t getting it done.”
So in my mind, the only way that the phrase “there aint nothin’ for us to invest in” is helpful is if it is put into context, and then delivered with a remedy to the bureaucrats that don’t understand this stuff one bit.
Mark also pointed out to me that they just invested in a couple of pre-revenue companies to the tune of $200,000 and $400,000 or something very similar. That’s interesting because it represents a change in investment strategy for those guys. But it doesn’t get at the root of Idaho’s problem which is the complete unavailability of seed level funding of less than $100,000. That isn’t Mark’s problem, but I think it is his duty to tell the governor that where funding is concerned, that is Idaho’s problem.
As long as no one is going to point the finger at BAA/BAF, Idaho is not ever going to have a steady pipeline of gazelles for Solon to fund.
Final note: I like Mark Solon personally, and am glad for the work that H12 does for Idaho’s companies and in the community. I hope everyone understands that. But I also think it is important to speak truth to power. Maybe Mark did that, maybe he didn’t. But if Norris’ takeaway was simply that “there aren’t any early stage deals in Idaho” my fear is that the bureaucrats probably heard the same thing, but understood it less, and we have missed a great opportunity to tell the Governor what is wrong with funding in Idaho.
Tags: Highway 12, Mark Solon, VC
Conferences, Economic Development | admin January 7, 2010
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By Mark Solon, January 11, 2010 @ 8:13 pm
Chris,
There’s much in here that I disagree with. Rather than dissecting it here, I’d much prefer we go out to dinner together, have a few beers and see if we can find some common ground. How ’bout it?
Best, Mark
By David Hopkins, January 15, 2010 @ 10:41 am
I attended the summit and can confirm that Mr. Solon’s comments were:
1- there are no deals here in idaho worthy of highway 12 investment.
2 - funding SHOULD be hard to obtain.
3 - the “patents per capita” statistic overstates Idaho’s capacity for innovation
4 - Idaho needs to focus on education to compete in the global marketplace
In between those points, Mr. Solon sprinkled praise for himself and his firm.
Here are some things he left out:
1 - I am Mark Solon and my annual income is rumored to be $750,000
2 - I am Mark Solon and I am taking this summer off because I have been working so hard and I need a break.
3 - Even though my largest investor is the Public Employee Retirement System of Idaho, most of my investments have been in companies outside of Idaho.
4 - If things continue as they have to date, Highway 12 will fail to deliver a positive return to its investors.
5 - I should have said “there are not enough companies that are worthy AND willing to take money from Highway 12.” Several Idaho companies have declined to take investment from Highway 12 because of onerous financing terms or personality conflicts with me.
By Ryan Woodings, January 21, 2010 @ 10:42 am
David,
Wow! That’s quite a dig at Highway 12. As an Idaho Entrepreneur myself I wholeheartedly agree with Mark’s statements that funding should be hard to obtain (the Dot Com Bubble was a result of easy funding), and that Idaho needs to focus on education in order to compete in the global marketplace. As Thomas Friedman describes in The World is Flat, the U.S. has drifted from our pursuit of research and has started to slow down compared to China and other parts of the world that are still hungry for progress and success. Idaho education is far from excellent.
Venture Capital in the Rockies (VCIR) is next month; this is an annual event focused on VC funding for the Intermountain West. Billions of dollars of VC funds will be represented at VCIR and would be an excellent venue for Idaho companies seeking VC money. The fact that only a single company from the entire state of Idaho applied to present at VCIR is a pretty good indicator that Idaho is indeed lacking VC-worthy deals at the moment.
(http://vcirwinter.com)
Concerning your personal animosity toward Mark Solon, I have known Mark for a few years now. He has no financial investment in my company, but is always willing to go to lunch or coffee with me and chat about business, give me advice, connect me with people that can help me, etc. Mark is a solid pillar of the community and works hard for Boise and Idaho.
By admin, January 21, 2010 @ 4:26 pm
I for one certainly did not want this to turn into a Mark Solon beauty contest, because I like Mark.
I do stand by the assertion that venture capital at the seed level should be EASY to get. If you can’t get $25,000 from a 10 slide deck, you don’t have a functioning seed level funding operation in your state.
There are deep social and historical structures at work in Idaho that make this place very, very, different from places like Colorado and especially Utah - structures that impact the very way people conceive of “entrepreneurship” here. And that’s way too long a discussion for a comment.
Mark sometime let’s chat about how to make your efforts successful here.