The New Faces of Silicon Valley: MMTC Investors Forum Provides Key Access to Capital Advice for Tech Entrepreneurs

by DeVan Hankerson on August 15, 2014

2014 Conference Investors ForumThe Minority Media and Telecommunications Council is dedicated to improving opportunity for minority and women entrepreneurs. At this year’s Access to Capital and Telecom Policy Conference, MMTC held an Investors Forum to educate budding and established entrepreneurs on investment opportunities that could benefit their businesses. The discussion centered on creative capital and the latest developments in angel investing venture capital, crowd funding, vendor funding, and audience aggregation.

Due to the vast array of information presented, the unofficial theme of the forum could have been “All the aspects of investment and financing entrepreneurs should know.” Dr. Anna-Maria Kovacs, Visiting Senior Policy Scholar from the Georgetown University Center for Business and Public Policy, revealed important characteristics of minority markets and outlined the shape and scope of the opportunities for investment. Her presentation also made the business case for investing in minority enterprises, discussing the steady climb of minority buying power and population growth.

According to Dr. Kovacs, per-capita buying power for members of minority groups will have increased by 28 percent in the eight years spanning from 2010 to 2018 and amount to more than $4 trillion in the next five years. Dr. Kovacs highlighted four ways the Internet enhances the attractiveness of business opportunities from minority entrepreneurs and minority communities:

  • Access to ideas obtained through Internet use
  • Access to suppliers
  • Access to buyers
  • Access to capital

After Dr. Kovacs’s presentation, MMTC board member Erwin Krasnow, who presided over the panel, gave each of the six discussants an opportunity to chime in with lesser known facts and insights in their individual areas of professional expertise.

Tony Thomas, Partner at Syncom Venture Partners, stated, “Now is still a great time for entrepreneurs to launch a business.” He discussed “one-click” purchasing and how the option creates an enormously valuable link between consumers and entrepreneurs. This is the kind of opportunity that new entrants should leverage, he said. He also pointed out that it is much less costly to launch a new business now than it was years ago, but emphasized that raising capital is very difficult, no matter the amount.

According to Thomas, crowdfunding platforms are good sources of capital, and new businesses should not overlook them. Entrepreneurs have to take as many meetings as possible and get out there, he said. Krasnow added that today’s digital startups often only need a few hundred thousand dollars of seed funding to launch their businesses.

Cardinal Telemedia Managing Director David Mallof also lent his expertise to the audience, focusing his message to entrepreneurs on the impact of regulation. He stated that regulatory hurdles are the key risk to mitigate, and the goal is to seek out preferences and levelers as appropriate. “The FCC is a fount for encouraging new businesses at the bottom, even while consolidation is going on at the top,” he said.

Loop Capital Markets Managing Director Sidney Dillard also provided valuable tips for entrepreneurs seeking investors. Dillard stressed that there are several options for entrepreneurs seeking capital, and bank capital is not the only source. She named private equity and family offices as options, calling them “quasi private equity opportunities.” Family offices are private companies often used by the wealthy to manage their investment capital, which often consists primarily of the family’s own personal wealth, often accumulated over generations. Dillard says there are about 300 family offices in the U.S; their investment horizon is limited, and family offices typically enjoy investing in areas where they may have made their money and often they don’t want to be in a control position, which may be very attractive to an entrepreneur who needs investment capital but who wants to be in control of the business. Dillard encouraged entrepreneurs to look for ways to grow their businesses through M&As and through family office liquidity.

Former Deputy Administrator of the U.S. Small Business Administration (SBA) Marie Johns promoted SBA resources and discussed in detail the opportunities for new business owners with Community Development Financial Institutions (CDFIs). These are financial institutions that operate to provide economic development, affordable housing, and community development financial services to underserved communities. “CDFIs should be on your radar screen,” said Johns, “and people of color underutilize CDFIs as a resource for financing their businesses.”

Paul Weiss, Rifkind, Wharton & Garrison Partner Patrick Campbell added there were three things attractive companies have in common: they are well run, they have a very clean organization, and they have great advisors, including investment bankers and lawyers. He cautioned entrepreneurs that if they can’t get advisors to take up their cause, they will have even more of a problem with others. He highlighted woman-owned, a business operating in the wireless space that demonstrates some of the principles he’d discussed.

Aaron Saunders, Co-Founder of Clearly Innovative, Inc. focused on some of the lesser-known aspects of being an entrepreneur and seeking capital. He said that although being an entrepreneur involves risk, people of color tend to be risk averse. “What people are doing in Silicon Valley is just gambling,” he said. “You will have to go begging, and that’s how the game is played.” New entrants may not be aware that asking for money is a big part of how things go, he added. “If you want to get in this game, you have to be ready to talk to people who don’t look like you.”

The session concluded with a few audience questions about the investment and innovation hubs springing up around the country that mirror Silicon Valley. Dillard pointed out that cities all around the country are trying to attract entrepreneurs and build the community of technology oriented businesses. Initiatives in major cities include:

  • Chicago’s 1871 is an entrepreneurial hub for digital startups
  • Washington, DC-based 1776 connects startups with the resources they need to grow including corporate connections and capital
  • New York City’s Silicon Alley and Silicon Harlem work to build new Internet businesses and create investment and employment opportunities in diverse communities
  • Baltimore’s #edtechmd and Boston’s LearnLaunch focus on bringing together professionals from education, technology, and business to develop dedicated city tech hubs
  • Austin’s Silicon Hills and Charleston’s Silicon Harbor are following the California model more closely, building upon their start-up infrastructure and continuing to target investments in early-stage and growth-oriented companies in the local technology market

More cities nationwide, including Detroit, are starting to figure out what it takes to support tech startup hubs, meaning that regional opportunities for new tech start-ups to access capital are expanding.

A full video of the panel can be found here.

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