There is anxiety these days in the venture market. It’s hard for firms to close B, C, and D rounds worth tens of millions, and equally hard for investors to feel comfortable deploying this capital. Hot deals in Boston are like houses in a tight real estate market, where buyers submit photos of their kids to differentiate their bid. From the coffee shop 70 miles west of Boston where I’m writing this, these problems sound like a dispatch from an alien planet.
We have the reverse problem: we’re drowning in innovators but starved for capital. You can be forgiven for thinking you heard that wrong. The conventional wisdom is that there are no deals outside the city limits. Investors occasionally come through, announce that they’re accepting pitch decks, and…. crickets.
There is a venture market here, but it looks different. The alien planet metaphor works well to explain what I mean. If you go to Mars looking for elephants, after all, you won’t find any. However, there might well be organic molecules hard at work under the ice caps. I’ll introduce you to a few of the people you meet in this market.
I spent my Friday afternoon in Holyoke with the team from Clean Crop. Their electrochemical process treats seeds and nuts, removing pathogens and boosting crop yields without harming the food. Co-founders Dan and Dan, both veterans of the agriculture market in East Africa, now live in Chesterfield and Hadley. I’ll pause for a moment while you check Google Maps. Clean Crop raised a Series A this Spring from national investors after spending several years researching available technology and building proofs of concepts on a shoestring. Now they are poised to make downtown Holyoke a stop on the way to the next Green Revolution. The Dans, as they’re affectionately known around the area, are innovative people who decided to be here. There are many more like them.
Co-founders and spouses Andy and Siyana left NYC banking careers to raise a family in Northampton and pursue their dream of launching a fashion brand. When we met, they were already a rising player on Etsy, with off-the-charts satisfaction scores and near-zero return rates. We know nothing about fashion, as Andy likes to remind me, but clearly they do. We invested in their growth plan, and they’ve delivered, with 5x revenue growth and no signs of slowing down.
These two projects employ over 30 people. The raw number isn’t impressive until you think about the type of jobs they represent. These attract highly educated, creative people, and allow them to live outside a major city. It’s a category of employment that otherwise isn’t available to rural America. There is nothing wrong with fuel oil companies and warehouses, but when I talk to a graduating computer science PhD from the world-class program at UMass whose family would happily stay here, it breaks my heart to hear that they have to move to Seattle to find work.
We’ve backed 13 companies over the past 3 years, with a pool of capital which would barely pay for Sequoia’s conference room furniture. With an open mind, rolled up sleeves, and a bit of luck, it’s worked out, as our projects have gone on to raise 10x this amount from other parties. This is a credit to what people can do when you give them access to the innovation economy, and it demonstrates that creativity is deeply human. It’s not just something they grow in a lab at MIT.
We’re now working with the next wave of innovators. There is a tow truck company owner in Ware who tired of his drivers calling out and is now creating the Uber for commercial truck drivers. Up in Putney, there is a doctor developing an automated CPR device which improves on the 5% success rate of the manual process we all learned in First Aid class. Both are professionals secure in their jobs, and neither has any reason to start a tech business, but both are drawn to it. I’m reminded of the saying about being an artist: if you can avoid it, do so, but if not, well… become an artist. It turns out that artists are all around us. Now that I know what to look for, I realize that I’m meeting them every day.
These innovators are disconnected from the social networks which drive urban venture funding. They often lack sophistication in channel strategy, agile development, and the use of capital. They aren’t ready with a polished deck and an ask for $20M. However, they thrive with a small dose of targeted support, after which they are nationally competitive.
This is the shape of rural innovation. I’m happy to report that the innovators are already there and waiting.