One of the positives that has emerged from the Covid-19 pandemic is the plethora of free or low-cost webinars that businesses and organizations are providing online, in order to stay in touch with their clients and customers when they can’t gather in person.
Seedfunders, a St. Petersburg-based early-stage investing firm, and Embarc Collective, a Tampa nonprofit focused on the startup community, hosted two virtual events this week that offered checklists of how-to’s for entrepreneurs and young companies.
The knowledge is needed, as Florida grows its capital and operational support for startups, said Ruth Ross, a Seedfunders partner.
“Florida is now the sixth-biggest state in terms of dollars committed,” Ross said, citing information from Pitchbook. In 2019, $3.31 billion was committed to 265 deals in Florida. “Florida is really coming up quickly in terms of the number of deals and how important Florida is as a place to grow.”
Seedfunders focused on its Seedfunders Opportunity Fund, which invests in “friends and family” stage technology businesses founded by Black entrepreneurs in Florida, while Embarc hosted a Southeast CEO summit, aimed at supporting startup members in the Series A and Series B stages.
Here are some highlights from each program.
‘Black entrepreneurs matter’
Seedfunders, which has committed over $3 million in 24 deals, generally focuses on pre-seed funding and companies that lack the capital to hit the milestones bigger investor firms require, Ross said during the Oct. 16 webinar.
The company has always been open to businesses started by people of all races and genders, but the Black Lives Matter movement prompted creation of the Seedfunders Opportunity Fund. “Black entrepreneurs matter,” said Dave Chitester, co-founder and CEO of Seedfunders.
The Opportunity Fund provides both capital and mentoring, said Geoff Keith, a partner on the Seedfunders Opportunity Fund board.
“That is our mission, to provide both, and to help Black founders, people who traditionally in this state don’t have the same level of access to friends and family capital, technical assistance … and try to step in and fill that void,” Keith said.
The eligibility criteria is different from Seedfunders. The three basic requirements are that the company is African-American majority owned, is headquartered in Florida, and that the product or service is a scalable technology concept. Companies are not expected to have a minimum viable product in the market yet, but should have a driven, capable and passionate founding team, a clear path to $1 million in annual repeatable revenue of $1 million over three to five years, and a minimum addressable market of $100 million.
“We see it as a gateway. If we can help fund their business and get things off the ground, then we can present it to Seedfunders,” Ross said.
The Opportunity Fund is currently raising capital from accredited investors.
Boards of directors
Embarc Collective brought in several partners throughout the Southeast United States for its Oct. 15 summit, which included a panel discussion on what early-stage companies should consider in establishing boards of directors with a fiduciary and legal responsibility for the business.
Seed stage companies tend to have advisors more often than formal boards of directors, said Victoria Treyger, general partner at Felicis Ventures.
Still, it’s good discipline for a seed stage company to establish a board, said Lo Toney, managing partner at Plexo Capital.
“I think the goal of the board at the earliest stages is to support the CEO and make sure the CEO can be successful. If something isn’t going right, it’s not ‘we have to fire the CEO.’ It’s more, ‘let’s drill down and understand what’s not working and figure out what can we do to change the thing that’s not working’ and save replacement as a last resort,” Toney said.
Seed stage company boards typically are small and grow in size as companies move into Series A and Series B funding rounds, said Erik Rannala, founder of Mucker Capital.
“Usually it’s a three-person board at the seed stage, when they are getting the training wheels on and getting into the motion of having a board meeting, updating the board and developing that relationship,” Rannala said. “Once you get to Series A, the expectation is that the CEO reports to the board. You create materials, have a board meeting and have to get professionalized around it. By the time you hit Series B, the board is five or more people and the management team needs to report to the board in a very professional way.”
There’s a human dynamic that has to be taken into account when choosing a board, Treyger said.
“When you are joining the board and investing in a Series A company, it’s about a seven-year relationship, maybe longer. Founders should get to know board members extremely well. It’s like choosing a spouse or partner,” she said. “That human dynamic is how you work together and the ability establishes trust. You can talk with your board members about not just the good stuff but the hard things and the challenges.”
In addition to paying attention to financial hygiene, such as the cash burn rate, and compliance and regulatory issues, boards should keep an eye on the company’s internal culture, she said.
“It’s easy to do the classic board meetings, where you are looking at revenue and customer growth, but I think it’s important to look at the big picture of the company as well and the macro environment,” Treyger said.
CEOs should also have a separate, personal board, a group or individual who can coach the CEO on how to work with the formal board of directors, Toney said.
Boards will shift in composition as a company grows.
“The natural time for board composition to change is with rounds of financing,” Rannala said. “We usually commit to being on a board for 12 to 18 months then roll off … Then we move into a shadow board member role, as a sounding board for founders.”