For most startups and young companies, standard “bank” financing provided by our established banks and credit unions is simply not an option. The lack of revenues, assets and track records in the marketplace all combine for a trifecta of risk that banks and their shareholders are unlikely to take no matter how promising the business. Interestingly, research from the Kauffman Foundation, the largest U.S.-based charitable organization focused on entrepreneurship, says that most startups find their initial capital from their own savings (or equity from their homes or other real estate), friends and family, and perhaps surprisingly, credit cards. But often these sources of cash can only take a growing enterprise so far. Enter equity capital, which is industry jargon for investors essentially buying a part or share of a young company. Entrepreneurs don’t pay an interest rate on this capital, but rather agree to “share the wealth” with investors if they are successful.
Early stage companies in Oregon have seen rapid growth in both the number of sources of equity financing, as well as the sizes of these funds. In a little more than a decade, our state has gone from having just a few angel and venture funds, to well over a dozen, with some reaching close to $30 million in deployable capital. Central Oregon has shared in this growth and boasts a locally-based venture fund, angel fund, two early-stage accelerators and a nationally recognized venture conference. For our region, the bulk of this activity took place over just the past five years.
General Early Stage Funds
Across the state, angel funds have established themselves and managed to grow their funds to deploy more meaningful amounts of capital to help bridge the funding gap for early-stage companies. Oregon Venture Fund (OVF, previously Oregon Angel Fund), now in its 12th year, has managed to grow the yearly recurring fund from less than $1 million in 2007 to over $10 million in 2018. In many aspects, OVF has been the Oregon model for other funds to corral individual equity investors to deploy capital, while deeply engaged in the due diligence process to help entrepreneurs succeed with their own personal time and expertise. Other notable Oregon players for equity capital include:
• Rogue Ventures, which is targeting two funds, expected to reach $20 million each;
• Portland Seed Fund;
• TiE Oregon, a consortium of investors that deploy more than $1 million annually;
• Cascade Angels, based in Bend, is in the process of raising its fifth fund, targeting a $3 million raise, and has deployed nearly $1 million annually since its inception five years ago.
Targeted Funds
Funds that target certain causes or industries within the early stage space have also established themselves in recent years. These include:
• Seven Peaks Ventures, based in Bend, is targeting over $20 million in capital through its second fund to invest primarily in software ventures and the life sciences industry;
• Elevate Capital looks to deploy funds into underserved communities, minority and women entrepreneurs, and has deployed $2.1 million since its inception in early 2016;
• Oregon Sports Angels is targeting the outdoor and more traditional recreational sports industries;
• Oregon Best, a state-funded organization, has historically invested in “clean technology” companies and is in the process of organizing a new fund with private capital.
• Previously, Oregon Best and sister signature research center ONAMI deployed equity capital and grants, but this is being restructured and currently out for bid.
Here in Central Oregon, Cascade Angels and Seven Peaks Ventures funds are not limited to investing in Central Oregon companies, however, there certainly is a bias towards them.
Accelerators
Startup Accelerators, intensive cohort-based programs that include connections, mentorship, educational components, and increasingly seed investment, can also be a source of early capital. Here in Bend, Founders Pad takes a small equity stake in software and life science companies that participate in that accelerator. Along with seed capital, Founders Pad does a deep dive into the company and attempts to bring in talent that can accelerate the business. This may be anyone from a CEO or other senior executive, to someone with a very deep industry Rolodex that acts as an advisor.
Bend Outdoor Worx, the first accelerator in the U.S. to focus on the outdoor gear and apparel industry, mentors and proves out business models of cohort startups using extensive experience and contacts from its founders who are current and past leaders of companies in that sector. These founders are currently evaluating adding seed capital to cohort participants.
OSU Cascades has just launched its new accelerator, the Innovation Co-Lab, that welcomes both tech and product companies to tap into the university’s brain trust, commercialization expertise, and business and pitch coaching.
Starve Ups, an organization that has been providing assistance to young companies via their Portland location for the past 18 years, characterizes itself as a “scalerator” and has recently made investments in startups. Starve Ups has announced that it is officially establishing a presence in Bend in 2018.
Conferences
Unique to Oregon are the angel and venture conferences which take place every year. These events create funds to deploy equity into the most promising startups that apply to present. Three of the most established conferences include Angel Oregon (the oldest in Portland), the Bend Venture Conference (BVC), which is now in its 15th year, and the Willamette Angel Conference. Although the amounts deployed by the funds themselves are typically quite small, usually in amounts under $250k, the deals that get catalyzed and syndicated through the conferences can be sizable. In 2016, BVC saw $4 million in equity capital deployed to ten different companies.
In the context of other startup ecosystems like Silicon Valley, Boulder or Austin, the equity funding landscape in Oregon may seem uninspiring. But viewed from the perspective of where it was just a few short years ago, and where it will be on the current trajectory, things look very attractive to early-stage companies looking for equity capital.
