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Andy Stefanovich (left) chats with Brandon Lewis from Plan G, one of many comp-anies that Stefanovich has invested in. Photo by Jay Paul
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Photo by Jeff Saxman
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Photo by Jeff Saxman
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Photo by Jeff Saxman
The economic earthquakes of 2008 took down a few of Richmond's bona-fide business titans, from Circuit City to LandAmerica, but in their wake, the region's entrepreneurial spirit has risen to fill the gap. While some small business ventures "bootstrap" their way from concept to corporation — funded only by their owners' bank accounts — other local startups often need the help of so-called "angel" investors ready to offer guidance and infusions of cash.To gain some insight into the process, we talked with a handful of economic Johnny Appleseeds who are helping to cultivate Richmond into a capital city of another kind.
Lots of local startup investors profess their love for Richmond, but few do so as loudly or as proudly as Andy Stefanovich does.
"I just love Richmond," says Stefanovich, who gained his own measure of financial comfort through advice and encouragement from the likes of Richmond business elites Jim Ukrop and Bob Mooney. "I got access to them, and it was very important to my success. If we don't pay that forward, we've just not done the right thing."
And doing the right thing starts at home for Stefanovich and his wife: "Jill and I have said Richmond is our home, and you invest in your home. I think it's a moral commitment."
Stefanovich looks at his startup investments as a three-pronged effort with a single goal — promoting Richmond to worldwide prominence as the capital city of creativity.
The first prong is New Richmond Ventures , better known as NRV, the new-business startup incubator that acts as financier, cheerleader and social conscience while focusing on local businesses with global market potential. He co-founded NRV two years ago with Mooney, Ukrop and former Land America CEO Ted Chandler.
"We're building things that go out to the world, but Richmond gets the credit for it," Stefanovich says, noting a special emphasis on making sure that the credit, when due, is also positive — and maybe even carbon-neutral. "They all have to have some impact on the world in a good way."
His second effort, Men in Shirts, looks inward a bit more, investing primarily in local businesses like its first undertaking, custom shirt company Ledbury, that are less about saving the world than they are about "a good story that adds to the fabric of Richmond."
"It's a kind of conglomeration of guys … who really believe in Richmond," he says. "We make modest investments."
Stefanovich says the plan is to invest in three or four companies a year through Men in Shirts to the tune of $50,000 to $150,000 — in addition to a commitment from Stefanovich to put his mouth where the money is through valuable marketing and strategy advice.
"Our job as a small investment group is to tell the story," he says, using as an example promotional efforts by the group for upstart Scott's Addition brewery Ardent Craft Ales.
Stefanovich's third prong is not so much about money as it is the value of sharing ideas. "I just [meet] with people who have an idea and help them to shape that idea and get it to a point where it's ready to present to an NRV or Men in Shirts — or somebody else who can help take it to the next level."
This third prong has become more structured in recent months, with Stefanovich launching his Feed & Seed program, which seeks to give entrepreneurial sparks the fuel they need to catch fire, primarily in the form of ideas versus investment.
Stefanovich says Richmond itself is, in many ways, on fire with ideas and entrepreneurial promise right now. He calls it "attitudinal change."
"When you create a critical mass at this level, people start to see and start to believe," he says, suggesting that rather than being at the beginning of something great, Richmond is in the midst of a renaissance.
"Richmond's a really beautiful town in that we have more access to each other than in most towns," he says. "I encourage everybody to call and ask for help. It's our obligation to help you. When we're asked, we line up. And I think that's very different than [in] a lot of cities."
It takes one to know one, and Patrick Hull knows entrepreneurs when he sees them.
"I got the bug when I was in college — I have never worked a real job," says Hull, whose first business launched while he was still a construction management student at Virginia Tech. It came straight out of a need he heard from construction companies trying to bid on federal contracts. "One thing led to another … That's how I stumbled into entrepreneurship. I can thank God for what happened."
So can the startups he's been involved with since he began investing in the early 2000s. By 2008, when he sold GetLoaded.com , an innovative freight-matching service for long-haul truckers, Hull says he made the move to "where my actual job was investing."
Today, Phull Holdings, Hull says, allows him to "invest as if I'm my own private equity group."
"I bootstrapped everything, really," Hull says. "I did have several investors in GetLoaded.com, but by then I had several companies behind me. But I think it depends on what you're trying to accomplish whether you can bootstrap."
Which is why he sees such a value in seeking out ideas — and idea creators — that could use a little lift. So far, he's lifted — or tried to lift — more than 30 companies.
"Ultimately, I say investing in ideas is not really the point," Hull says. "You need to have a good idea, but if I believe in the team, that's what really matters. Can they get the right team around them and the right management to pull it off? Businesses don't buy anything, people do."
This may explain Hull's wide variety of interests — and investments. While many of his past entrepreneurial efforts have focused on freight logistics, he's also explored lifestyle businesses, as was the case with his nutrition company.
"I have a wide variety of interests. However, I'm far more prone to invest in a tech-oriented company. I think it's because I feel comfortable in that space, and I understand how that works."
With Hull, money is only part of his investment in an idea. "I would say I'm more hands-on — I'm more as an advisor, strategist," he says. "I'm more comfortable if I'm engaged because most startups, the bulk of mine, are newer startups that don't have any experience. I use my network of experts, and I help strategize. The No. 1 thing I think of first is: How do we get the money flowing? That's really where I like to focus."
If an idea seizes his imagination, Hull is all in. "I've got anywhere from $25,000 to $1 million in some deals. I'm still in that bracket where I'm an angel investor."
And while right now many of Hull's investments are outside of the region, he's intimately involved in Richmond's community of startup capital investors. As a contributing columnist for Forbes.com , he's even used the power of the pen to express his belief in Richmond as a place where ideas find enthusiastic backing with a frequency that's unique.
"You've got a lot of community leaders from the older establishment, and their hearts are really into building up the town," Hull says. "The momentum is really starting to pick up, and I think it's just going to get stronger and stronger and stronger."
Hull says one way to make it stronger is not only fostering talent as it comes to market but nurturing it even before it launches.
"There's nobody supporting that stage between the idea and the business plan," he says, talking about the importance not only of having a business plan but also having a proof of concept. "There's nobody actually doing that. ... It makes me wonder how many ideas go by the wayside right now."
Karen Booth Adams
Just as the best ideas often find their caffeinated spark at the bottom of a cup of coffee, so too do the best partnerships often launch over lattes, says Karen Booth Adams, perhaps one of Richmond's most prolific pursuers of good startup opportunities.
"We got involved in investing in other people's investments quite accidentally," says Adams, one of three partners in Hot Technology Holdings, a company that's often described as an incubator but is perhaps better explained as a one-stop shop that fosters talent while helping alleviate the stress of petty management chores so that ideas can grow. "We were all entrepreneurs that bootstrapped and then accidentally fell into investing. It was, ‘Hey, can I have coffee?' … and that's quite literally how it started."
Since that first cup of coffee, Adams counts 10 startups that she's helped grow and foster before setting them free to soar on their own.
"I love startups, and I love being involved in the early stages, when most professional investors view them as too risky," says Adams. "That's the fun part: when you're figuring out the name, what your brand's going to be about, what your culture's going to be. When it gets to where it's more of an operational challenge, and you're running the same model, that's where it's a lot less exciting."
This may explain why Adams is so well known as a serial investor among Richmond startups, a community that she says is healthy and growing, especially among "early-stage investors" like herself who are willing to take a chance on something that's not yet a household name, but that could be.
"Richmond is, I think, a very open-door culture for startup entrepreneurs," she says. "It's a lot harder in a lot of other markets to get in front of those early-stage investors. We're fortunate in Richmond because it's not difficult to sit down and have conversations with the early-stage investors."
Adams' own interest tends toward service and technology businesses, but equally important, she says, is that "we like to be involved in businesses that want to stay headquartered in Richmond but that are scalable well beyond Richmond."
And while technology is her passion, Adams says, "there are some industries that we really love and that we seek out, like organic, healthy products, childhood online education — how to bring financial and real-world education concepts to K-12 — and fashion and design." This last one is even a bit surprising for Adams.
"I don't think people would naturally think of us as wanting to think of [fashion], but we've actually gotten fairly deeply involved in a couple of ideas," she says.
Those ideas, all three of them, were based in New York or Los Angeles, and Adams says she's committed to finding and funding someone's fashion passion right here in RVA.
"I would love to find a Richmond-based startup that wants to do a lifestyle brand," she says, "so, calling all designers."
Equally unlikely, until you factor in that social-entrepreneurship angle that Adams finds so critical, are ideas focused on the country's aging population. "I'm very interested in how we take care of our elderly," she says. "Anyone in Richmond who's in that space, I'm interested in talking to them if they have a scalable plan."
As with her peers in the Richmond startup investment community, Adams says she remains as committed to strong business sense as she is to ideas. But the entire package has to have heart and soul, too.
"What gets me to where I want to give you money? It's probably several factors. I probably meet with 100 groups to get down to five that fit this criteria — the CEO and management team have to be authentically passionate about the mission of their startup," she says. "They have to have a purpose that transcends just making money."
John Kemper's business bootstraps got a serious workout on his way to the top — to the point where he was able to throw an investor's line to other entrepreneurs. "I spent over 40 years trying to create my own company," says Kemper, who first built then sold his health-care consulting company, only to buy it back in 2002 then sell it again in 2010 to a private equity firm.
Though still involved in that business, Kemper now throws himself into his passion for helping young entrepreneurs build their own ideas.
"Richmond really has — and I don't think a lot of people realize it — a lot of young people starting companies. It's very exciting right now."
Like Stefanovich, though on a more modest financial level, Kemper says he's as focused on financial investments as he is on offering brand help and business planning advice.
"If it involves investment, then great," he says. "But for me it's about taking those ideas and moving them forward. To me, that's what makes this country tick."
In Kemper's eyes, good entrepreneurs first need a good idea, but even the best idea is doomed to failure if the people behind it lack the wherewithal to tackle the nuts and bolts of business.
"There are lots of people — not just Richmond, but anywhere — that have vision," he says. "The key is being able to convert that vision and to implement. That's where most companies stumble. Most visionaries are not implementers. You've got to help them. Most small companies fail in the execution and implementation. That really is critical."
To put it another way, Kemper says, "I really bet on the jockey, not the horse. If the person driving this, if that person is right and is smart enough to figure out what his or her strengths are and smart enough to bring on people who complement that strength, that's what I'm looking at.
"You can have the greatest concept in the world; if the jockey's not right, it's not going to happen."
Kemper sees himself as a business advisor as much as he's a career counselor.
"I always ask, ‘What's your end game?' " he says. For some, it's about building a company and staying with it. Others want to grow an idea and then sell it. Others simply want to grow to the right size to provide an income for the founders and a few jobs for the community.
For Kemper, all are legitimate motivations for launching an idea. And more importantly, Richmond is a great launch pad. "Good quality of life, midsized, second-tier city, close to the beach and close to the mountains, even traffic-wise," he says. "And there's this energy that's been created, I think ... and interest with lots of different people with creating these incubator-type organizations. They're all over the map with what they're doing."
Kemper is fairly new to the startup investor game, but he's on the lookout for more ideas to back.
"I've invested in two startups here, and I'm looking at another one — and I'm helping another, just giving them free advice about how she grows that business," he says. "I'm not looking to make a lot of money out of it. I get excited watching them take their vision and make it grow. It took me 40 years to get there — there's got to be a shorter path than that."
Tom Benedetti is an investor of a slightly different breed. He's not interested in your bright idea; Benedetti wants proof. His Blue Heron Capital group is an investment firm that's betting big money on making the next big thing even bigger.
"We invest in companies that are a little further along than startups, though I've done some personal investment in startups," says Benedetti, whose group — in spite of liking the idea — took a pass on such later winning local concepts as CarLotz. "For our investors, it was a little too risky at the time. They've since proved out their concept, and I applaud them. But we're looking for companies already just north of $2 million in revenue that are at profitability or a little ahead of that — where they're just a bit beyond the enterprise phase."
For Benedetti, this is a critical time in a business' growth. And while that startup phase may hold the lure of romance and excitement, it's this transitional growth phase when support is most critical to the stability — sometimes the survival — of a young company. It's a point where they're not quite big enough to attract the attention of big-money investors, but where they may be ready to take the leap, given a little help, to that point.
"We're usually doing anywhere from $2 [million] to $5 million with each deal," says Benedetti. "There's a lot of companies out there that are sort of stuck in that $2 [million] to $4 million revenue range," Benedetti says, "and they can never get out of that because they don't understand what it takes — to that point you've been putting it together with baling wire and WD-40 and spit. And you need to take it to the next level."
Blue Heron is the next level. Benedetti lists former Anthem, Genworth and Brinks CEOs among the investors his firm brings to the table. Those proven leaders are there not just to invest, but also to advise.
"That's what attracts capital, is people who understand what they are," Benedetti says, seizing on the startup investor analogy of betting on the jockey as much as the horse to note that it's at this phase in the race where the horse matters most. "You can't have a horse that has no legs."
And you can't win without feeding the horse, which may well be the most important piece of advice Benedetti offers to startups, both young and adolescent.
"A lot of it is investor communications," he says. "You may run out of money — the market is just about to catch fire, and if you haven't been communicating with the investors, you may not be there when it does catch fire. Part of that is telling investors the bad with the good along the way."