Why Successful Area Founders Don’t Reinvest After an Exit

Today’s startup community is like a freight train rolling through just about every business sector—and many of them, despite our visibility, aren’t prepared for it. Dallas Startup Week 2016 is in planning, and if you’ll recall we had close to 3,000 participants from across the region. I expect that to double for 2016.

We have accelerators, incubators, coworking space coverage like few other cities, eight Startup Weekends, our media is paying attention, and the story is permeating the everyday culture. Dallas-Fort Worth is the place to be if you’re building a tech startup of any kind or scale. Not just for area founders, but people are moving here too. Lots of them.

Sure, I could go on and on about the progress we’ve made in just the past two years, but I’m going to share a hypothesis instead. Last week, while listening to Lance Crosby, the former CEO of SoftLayer (full disclosure, SoftLayer, an IBM Company, is a sponsor of Launch DFW), a company he’d go on to sell for just over $2 Billion, it occurred to me why many successful Dallas area founders (those with nice healthy exists) may not reinvest their money into the Dallas ecosystem.

This hypothesis is so logical once you hear it, you’ll smack your forehead. Remember that our ecosystem is very, very young compared to others. Austin has half a decade on us, Boulder is just under a decade total, Chicago, New York, and arguably the oldest “startup community” is Silicon Valley with 50ish years. We’re at two years, in earnest.

These other cities have had a real community—they’ve had the things that are still relatively new to us for what amounts to an eternity in startup years. When Lance and team were building SoftLayer, they spent every waking hour building SoftLayer. The team had very little interaction with anything like what we’d call “community” today. They were talking to customers.

Look at all of the exists and acquisitions over the past few years in the cities mentioned above. Nearly all of them were led by founders that were intimately involved in their startup ecosystems. They started their companies surrounded by peers from within the community—they had a pulse on what everyone else was doing.

Think about it for a minute. Most of the successful exits in the Dallas-Fort Worth area were led by founders (and teams for that matter) that had no attachment to what we’d consider today’s startup community. It wasn’t out of malice or with any negative purview, in fact, the reason is incredibly simple: our community didn’t exist when these companies were founded.

To summarize in case you were lost along the way… the reason successful Dallas area founders don’t reinvest their capital into our community after an exit is because they have no attachment to us. This will get better with time. Way better.

So, how do we jumpstart this process? Patience. Invite them to our community events. Show them what we’re up to. Get them involved and show them how much better the next generation (in startup years, of course) of founders will be if they’ll simply get involved.

Over time, with more successes (and exits) from within our community, we’ll see more smart capital than we can imagine. Be patient.

  • Michael Sitarzewski is the Publisher of Launch DFW, co-founder and CEO of Epic Playground, Inc., makers of inboundgeo. He is a veteran entrepreneur (and a TechStars Cloud alum) with a specific focus on Web-based software and services. Sitarzewski has been a part of the internet startup culture since 1994 and has had two exits along the way. After a seven years in the Boulder, Colorado startup community, Michael returned to Dallas, Texas, in 2013 where he’s focused on growing and increasing the visibility of the burgeoning Dallas startup community. He is the EIR at The DEC, a mentor in the RevTech accelerator, and leads several events in the Dallas area. Sitarzewski considers helping people understand and leverage technology his life's work.

  • Show Comments

  • Ryan Roberts

    Some don’t want to seed a company here because it is ridiculously hard to obtain a legit Series A round. They know that if they seed a valley/l.a./nyc company there’s a better shot of an A round and ultimate liquidity in their investment, regardless of how “good” the DFW company is relative to those places. They have a connection geographically, but they feel that seeding a bunch of companies here would be more of an affinity play rather than putting their capital to best use. As the VCs increase here, that will change.

  • David Burrows

    Over the past years, there’s also been tech reinvestment played out in other ways. IE: After selling broadcast.com, Cuban used his cash to re-invent the Mavericks and built the team/brand into a powerhouse which has had a huge impact on Dallas. To your point, North Texas still has a hang up on old school investments like O&G, real estate and banking. Investors are coming around however and the best is yet to come.

  • BillMcNeely

    There are a significant number of founders of firms in the DFW area who choose not to participate in the startup community.

    These founders define startup community as the meetups, conferences, events etc.

    Their thought is successful people don’t have time for this noise.

    On the flip side when they have a problem or need to reach out to legit investors marketing etc folks they don’t know who to turn to because they did not invest in their network.

  • Chirag @ NoD Coworking

    Totally agree, Bill. There’s a delicate balance between going to all of the events, and focusing on running a business. If someone is brand new to the community, I recommend they go to a lot of meetups, make new friends, and then pick 1 or 2 that they want to attend regularly that may pertain directly to their domain/vertical (gaming, healthcare, marketing, coding, etc.).

  • Chirag @ NoD Coworking

    Indeed. The best is yet to come!

Comments are closed.

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