Innovators & Entrepreneurs: Seed fund plants success in Oklahoma
By Scott Meaham
Copyright © 2016, The Oklahoma Publishing Company
Black Mesa in the Panhandle is the highest and driest place in Oklahoma.
Black Mesa used to be considered a no-man’s land. Paleontologists went there to look for dinosaur bones. It’s the harshest, coldest place in the state.
And yet, the flora and fauna reported in the Black Mesa are unique — some of these are not found anywhere else in the country. Species have adapted to the harsh climatic conditions. Hikers and visitors to Black Mesa Nature Preserve can look for more than 60 species of butterflies and 50-plus species of birds (and nine types of snakes, if so inclined).
Ten years ago, Oklahoma’s landscape for seed capital was like Black Mesa. We were high and dry. There was no venture capital money here. SeedStep Angels hadn’t been organized yet. Entrepreneurs simply didn’t have access to the investment capital to fund the milestones that move young companies from concept to startup to potential successes in the marketplace.
Then, the state embarked on an experiment — the Oklahoma Seed Capital Fund. The fund recently passed the eight-year mark. It’s a seed capital success story.
More than 26 Oklahoma companies have received investments totaling more than $12.7 million. That Seed Fund investment leveraged another $48 million in co-investment at the deal level, and more than $161 million in total leverage — better than 12-to-1 ratio.
Twelve Oklahoma companies receiving $4.5 million in i2E seed funding have had a direct economic impact of $37.3 million and an indirect impact of $11.8 million.
Every Oklahoman is impacted by the rate of new business starts in this state.
Nearly all net new jobs in the U.S. economy over the last 20 years have come from new companies. Those new companies come from the 50 percent of startups that survive five years are more.
And it’s not only access to early stage capital that helps that 50 percent succeed.
Research indicates that failure rates among startups is caused primarily by lack of proper planning and lack of capitalization.
A Washington State study reported that the five-year survival rate for companies that received both capital and business assistance was 90 percent. A study by Harvard Business School indicated that the participation of angel investors (angels mentor and provide hands-on help, as well as funds) increased new firm survival rates by 27 percent.
In Oklahoma, we tackle both challenges — the Seed Fund, other i2E-managed funds, SeedStep Angels, and our new Angel Fund source capital. And that capital is then teamed with i2E’s venture advisory and entrepreneurial development services.
The Seed Capital Fund has invested in companies from the metro areas of Tulsa and Oklahoma City to Stillwater, Shawnee and beyond.
We don’t have a startup in Black Mesa yet, but if some entrepreneur has an idea, we’re certainly open to new frontiers.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at [email protected].