Omaha World-Herald Op-Ed: Nebraska startups need a different venture capital model

This article originally appeared in the Omaha World-Herald.

Nebraska needs more venture investment to support a startup culture that can help the state attract and keep bright workers. Broadly speaking, venture investment signals a strong entrepreneurial environment that in turn creates more jobs truly added to our employment base. These net-new jobs tend to come with higher wages and subsequently increase the quality of living for the community at large.

Yet, for many Nebraska funders and founders, the one-size-fits all mechanics of traditional venture capital investments don’t always make sense. Until recently, traditional venture investments have hinged the return of capital entirely on a company’s sale. Once a company sells, especially if to a company based outside this market, there’s no guarantee those jobs and higher quality of living will remain.

I have been in the Nebraska venture ecosystem for nearly a decade now and know that Nebraska startup founders and funders are a rare breed. It’s because of that unique culture that I’m bullish on a new, flexible, innovative version of venture capital.

The best founders in Nebraska’s startup scene:

Measure twice, cut once, especially when developing their product.

Are inclined to build with customers in mind.

Celebrate sales growth over raising capital.

Take great pride in creating jobs and wealth for their employees.

Most interestingly, they build in the pursuit of solutions to worthy problems, not necessarily in the pursuit of selling their companies.

This unique culture amongst our best and brightest entrepreneurs — across the state, mind you — lends itself to innovating how we offer capital to Nebraska companies.

How a company returns money to its investors is at the heart of whether a venture fund shares the same goals as the founders related to timeline and financial gain.

We refer to these shared goals as alignment. Alignment is the Holy Grail between companies and their investors. If alignment is found, companies and investors can return more money earlier, and in a manner that ensures everyone wins.

Our backyard requires an innovative approach to venture capital, namely because the culture that drives entrepreneurs here is different.

For our fund, that innovation starts at the initial term sheet — the “deal” we’re offering entrepreneurs in exchange for our capital.

We tie our fund’s return to the company’s revenue and sales growth over a company’s lifetime, not just at the time of a company’s sale. Why revenue? Revenue and sales-led growth enable more sustainable businesses. Sustainable businesses create sustainable jobs. Sustainable jobs catalyze communities. And, the thriving innovation economy we all want in Nebraska becomes more of a reality.

Why we are bullish on our company’s ability to create returns through revenue? Partially because of the founders. And, because our fund’s investors want to roll up their sleeves. Nebraska investors enjoy the process of growth and are unafraid of participating in that growth, beyond merely providing capital. They know if we source sales leads, make calls and earn customers, their return is within sight. But so is the other bottom line; perhaps it is the more intangible bottom line that comes with backing Nebraska’s own and having a small role in their success.

For founders, this alignment to revenue growth also equates to control. It means founders generate strong cash flow, which allows them to grow the business without a looming dead end if their investors’ capital runs dry. They can start adding jobs, paying better wages and take better salaries for themselves.

This new model values sustainable scale over volatility.

It’s at the heart of our “round-tables only” approach. We’re either fully aligned or not at all.

Erica Wassinger is a general partner at Proven Ventures, a Burlington Capital fund.