At SeedCon, Chicago Booth welcomes next wave of disruption and disruptive funding

Posted on November 25, 2013



CHICAGO (Built In) — Disruption isn’t easy, but it’s certainly not impossible. This is what more than 200 students and entrepreneurs learned at Chicago Booth’s annual SeedCon conference on Friday during the daylong event featuring speakers such as Neil Stevenson of IDEO and Kevin Willer of Chicago Ventures.

“Our environment is especially ripe for disruption today,” Chicago Booth adjunct professor Mark Tebbe told Built In. It’s because of the declining cost of computing and data storage, and influx of mobile capabilities and data aggregation paving the way for innovation. This plus higher transmission speeds are bringing prices down and volume up.

But this doesn’t make disruption an easy task.“You’re pushing against conventional wisdom; you just have to be persistent,” he said. And a number of entrepreneurs throughout the day agreed that a great product can get you anywhere: every successful entrepreneur somehow found an entrance into evolving markets.

For example, fellow SeedCon speaker Dan Macklin of SoFi, a company that found a solution for financing student loans through connecting students to alumni, said he found a way to raise conventional venture capital to achieve a natural funding and growth trajectory — first raising $4 million in Series A in 2011, then $79 million in a Series B round almost a year later.

Others are a little more unconventional likeSandbox Industries managing director Anna Haghgooie, who is helping match companies to potential funding through emerging funds created solely for certain industries.

When companies find their own niche markets like Sandbox did, companies also discover their own ways of funding. Adam Rodnitzky, director of marketing at Occipital, said the company didn’t take a drop of funding from the get-go. Instead, they built a mobile computer product, sold it to eBay and used the money to invest in developing new products. At this point, the company started a Kickstarter campaign, he said in the second panel discussion of the day.

The company grew “without raising investor money, all through hard work, scragginess and bootstrapping,” he said. However, what has worked in the past won’t necessarily work in the future.

“Kickstarter, personally I feel like it’s probably on the wane, just because it has lost its luster and some projects are not delivered” in the ways people hoped, Rodnitzky said.

And kickstarter campaigns aren’t the only type of new-age funding seeming to wane. As for the incubators that have been emerging across the country and fueling the success of so many startups, it might now be that companies have to get into a top 10 incubator to find success as the market dilutes, Rodnitzky said: “Obviously it’s gone beyond the trend into something frothy,” there are just too many incubators and kickstarter campaigns out there.

So how do you navigate this ever-crowded venture atmosphere? The answer that was decided upon at SeedCon is less than satisfying: it just depends.

“People have been able to circumvent fundraising after Kickstarter if they have good products,” Rodnitzky said. His peers encouraged persistence; and gave three tips toward success:

  • Don’t raise money until you’ve got a great product

  • Don’t feel the need to keep your company idea to yourself because it takes a village from an investment standpoint.  When you’re starting to build a product, talk to as many people as you can and let them help you.

  • Especially if you’re a student, utilize your network. Recognize your resources and continue to reach out.

With entrepreneurs, there is no one-size-fits-all approach to investing, as the case studies presented at SeedCon show. Investment environments are constantly changing to fit new forms of innovation.

But the entrepreneurs at SeedCon showed that there is a silver lining to the innovation and funding cloud. Even though Macklin said “there are a lot of people chasing the next Twitter, the next Instagram,” and one SeedCon attendee, Booth MBA student Chinwe Aneke, said she feels all capital flows to San Francisco, there is increasing capital available through emerging funds.

“It’s encouraging because I know there’s access,” Aneke said.

And that access is especially easy if companies are presenting a good product. An idea isn’t enough – you have to have something to show. Because of lessons learned through discussions at events like SeedCon at her Booth classes, Aneke said that when it comes time to employ her entrepreneurial skills, she’ll know how to better build a product and sell her idea to investors.

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