Access to Capital


This variation of the well-recognized phrase applies not only to Dickens’ comparison of the conditions in London and Paris in his classic novel A Tale of Two Cities but also to a comparison of the two vastly different “markets” present in the startup ecosystem in Utah (and nationwide).

On one extreme, some technology companies are growing at double and triple-digit rates, raising mounds of equity at insanely high valuations and basking in the attention and adoration of the national business news media. A select few have even magically transformed themselves into bona fide “unicorns”, with $1 billion-plus valuations and celebrity status that rivals or exceeds that of the State’s top performers or professional athletes.  These businesses have little trouble attracting top talent, even within the disciplines that are in high demand and hard to find, with their offers of higher-than-average comp plans, valuable stock options, free meals, flexible schedules, and numerous other perks.

At the other end exist myriad entrepreneurs with talent, great ideas, passion, and a burning desire to be a successful business owner, even the next unicorn. If you ask them what they need, most will reply with one word, “capital” – the fuel to propel their “rocket” into orbit. History, however, teaches that there is more lacking than just capital. The truth is that many suffer from “unconscientious incompetence” (Chuck Coonradt’s apt moniker for “they don’t know what they don’t know”) and in some cases; they aren’t willing to acknowledge it or ask for help. Without the right acumen and experience, the capital (almost regardless of the amount) will not lead to success – rather it will lead to a series of starts, stops, pivots, and strategy & product modifications until there is too little left to fund a successful strategy that may have been discovered in the preceding months/years of trial and error.

In the middle are businesses that actually have a product, are gaining or are trying to gain customer traction, and have a reasonably clear pathway to growth and profitability. However, like the would-be startup entrepreneurs, many will tell you that they lack the capital to take their business to the “next level” but by now, many have realized that they need help and are looking for the talent to augment their team, but here again, capital comes into play because in many cases they cannot afford all of the talents that they need when they need it.

The lure of entrepreneurism and the imagined success has spawned multiple incubators, accelerators, shared office spaces, and entrepreneur groups promising training, mentorship, business acumen, and access to capital among other things to improve the chances of success for a small cost and, in some cases, a bit of your company’s equity. We’re not being critical of these groups, in fact, we think that they can offer real value but they typically are not the “end all” solution for start-up success – especially for those businesses slogging through the “middle” stages of the spectrum.

So now we ask, what is an entrepreneur to do? Great question and one for which we don’t claim to have all of the answers but we do have a few ideas based on our observations over the years.

First and foremost, in my humble opinion, the attitude of the entrepreneur is key. One of the ways to quickly evaluate one’s attitude is to observe how she/he views challenges or constraints – they can either be seen as the roadblock that we cannot overcome without outside help (i.e., capital) or they can stimulate us to achieve more and can be an impetus for a better outcome by framing how we view them. I read a great example of this recently in a story about Audi’s desire to win LeMans.

“In the mid-2000s, Audi’s focus was on winning the 24 Hours of Le Mans, but the engineering teams, like their competitors, had already focused on the speed of their cars and conducted endless wind tunnel experiments to create vehicles so fast they exerted two tons of downward thrust. Rather than frame the challenge in terms of speed, the question posed by the chief engineer was “How can we win Le Mans with a car that can go no faster than anyone else’s?” That question couldn’t be answered with wind tunnel experiments. Instead, the engineers realized that it is possible to win Le Mans in those circumstances if you pull into the pits less often, and the solution they found was diesel technology. The resulting R10 TDI went on to win the 2006 24 Hours of Le Mans, and was the first diesel vehicle ever to win the race.”

Let’s relate the reframing process to a typical startup’s constraint or challenge of having insufficient capital to engineer and manufacture or program a “minimal viable product (MVP)”. If we only look at the problem as a lack of capital, we may never find a solution. On the other hand, if the problem is reframed as, “how do we achieve MVP status without extra capital?” it opens our eyes to other opportunities such as strategic partnering with another company, using equity to compensate a freelance programmer, learning to code during my off hours and relying on other lean startup concepts to find a way to “bootstrap” to a solution.

I call this kind of attitude being “scrappy” and we love scrappy entrepreneurs. I’ve worked with many of them – Rick Alden (Skullcandy), Jason Ellis (Spring Mobile), Greg Warnock (vSpring / Mercato), Dusty Zundel (Signature Products Group), Michael Sneddon (MultiLing), Paul Allen ( and Jeff Kearl (Stance) to name a few. All of them faced seemingly insurmountable challenges at some point during the early stages of their businesses, including a lack of sufficient capital to grow the business. The common thread is that each of them found creative ways to reframe and overcome the constraints and ultimately, built highly successful businesses with their teams.

The experiences of these and other successful current and former clients have taught us that entrepreneurs/founders control more than they usually realize and you don’t always need outside capital to solve your problems (Spring Mobile, Signature Products Group, and MultiLing did not raise outside capital until they had achieved significant growth and profitability and if/when they did, it was to accelerate growth).

The next (and final for this post) essential attribute is humility (aka the antithesis of pride). By this, I mean the ability and willingness to admit when you are wrong or have made a mistake or when you don’t know what to do and to ask for help. This singular character trait gives an entrepreneur (or employee or partner, etc.) immediate credibility in our book and is essential for me to consider any kind of partnership (hiring, investing, etc.) Such entrepreneurs are not afraid to expose their weaknesses, and look for ways (and people) to solve their constraints that they are not able to do on their own. They surround themselves with people who are smarter and better than they are in specific areas and by doing so, they encourage everyone to make suggestions and try new and unusual solutions. As a result, they spend less time traveling down dead-end strategies and less money to achieve their ultimate goals.

If you’ll do a little research on many of the businesses described in the first paragraph, we believe you will find at some point in the entrepreneur’s journeys – either in this business or in a previous life – they found themselves on the “crowded, other end” but found a way to navigate to their current success by overcoming their obstacles and constraints. Even they will tell you that the entrepreneurial path is not easy and it is not for everyone. But by learning to reframe the challenges that you will inevitably face and by having or developing the attributes of scrappiness and humility, we believe that your chances of success will be greatly increased.

Categories: Raising Capital