Summary

In the latest episode of The Innovators and Investors Podcast, Kristian Marquez interviews Les Craig, general partner at Next Frontier Capital. The discussion centers on Next Frontier Capital’s investment thesis, which focuses on early-stage companies in the Rocky Mountain region, excluding California. Les explains the rationale behind these investment choices, emphasizing the “paradise” of the Mountain West and its burgeoning startup activity post-COVID. He discusses the importance of the region’s access to capital for founders and considers the evolving landscape of venture capital, particularly in how firms like Next Frontier Capital are positioned to nurture local entrepreneurs. As the conversation unfolds, Les shares insights from his journey in venture capital and his experiences as a founder, stressing the significance of timing in fundraising and adopting a growth mindset. The dialogue concludes with an optimistic outlook on the market dynamics, especially as activity at Next Frontier has ramped up significantly since the low points of the COVID pandemic.

Highlights

• Investment Focus: Next Frontier Capital targets early-stage companies in the Rocky Mountain region, including states like Montana, Utah, Colorado, and others, to support local founders and entrepreneurs.
• Post-Pandemic Growth: There has been a notable increase in startup activity and talent migration to the Mountain West, making it an attractive destination for investment.
• Exclusion of California: The firm deliberately excludes California from its investment focus due to the already established access to capital and the resultant inflated valuations.
• Importance of Founders: Les suggests that a founder’s ability to attract top talent is crucial for securing funding and driving a company’s growth trajectory.
• Investment Calculus: The firm emphasizes capital efficiency in growing early-stage teams, leading to a more sustainable growth model compared to those in higher demand areas like Silicon Valley.
• Timely Fundraising: Les stresses that fundraising should begin 9-12 months after receiving capital, advocating for a proactive approach to maintaining investor interest and securing future rounds.
• Engagement in Ecosystems: Next Frontier Capital aims to be actively present in the regions it serves, providing a collaborative and engaged approach to building company ecosystems.

Key Insights

• Regional Investment Appeal: Investing in the Rocky Mountain area is not merely about cheaper deals; it’s about nurturing local talent and creating a supportive ecosystem for founders seeking early-stage capital. This can lead to sustainable growth and long-term success for companies in the region.
• Access to Capital vs. Valuation Pressures: California’s concentration of venture capital has led to inflated startup valuations, which can hinder the growth of companies as founders struggle to match expectations. By contrast, the Mountain West offers a more balanced and manageable approach to funding, allowing companies to reach milestones without extreme pressure.
• Founder Fundability: A significant takeaway from Les’ insights is the importance of a founder’s capability to raise funds. It emphasizes that beyond having a good idea, a founder must possess the skills to effectively engage with investors and build a compelling narrative around their company for successful fundraising.
• Market Timing and Expectations: The insight into expected fundraising timelines highlights the necessity for founders to maintain an active engagement with potential investors at all stages of their company’s growth. It stresses how an awareness of market expectations can directly influence a company’s success chances, particularly for those transitioning from seed to Series A funding.
• Lessons from Past Experiences: Les discusses how his background in operations informs his investment approach. As an operator, he learned the importance of aligning product development with customer needs and revenue generation. This balance is essential for evaluating the potential of early-stage companies.
• Navigating Founder Challenges: Many founders face unrealistic expectations about their businesses’ trajectory. Les emphasizes the need for founders to maintain clarity about their path and to understand that not all ventures will evolve into unicorns. Some may require adjustment of expectations and openness to alternative growth avenues.
• Collaboration Over Competition: Next Frontier Capital’s model focuses on collaboration rather than simply competing for the best deals. Engaging directly with local ecosystems allows them to forge stronger relationships with founders and contribute to the development of a vibrant startup community.

In conclusion, the conversation with Les Craig depicts a nuanced perspective on venture capital in the Rocky Mountain region, revealing the dynamics at play in identifying and nurturing entrepreneurial talent outside the traditional epicenters of technology. The emphasis on capital efficiency, founder engagement, and awareness of market expectations presents actionable insights for upcoming entrepreneurs and seasoned investors alike.

Stay up-to-date with Les Craig, General Partner with Next Frontier Capital.

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