Next Frontier Capital is a venture capital fund in Bozeman that was founded in 2015. Next Frontier Capital’s newest partner, Les Craig, took some time to answer some questions about the company, venture capital investing in Montana, and Montana’s entrepreneurial makeup.
1. What is Next Frontier Capital?
Next Frontier Capital is Montana’s most active venture capital fund. Our mission is to provide access to early stage capital (Seed and Series A) in the Northern Rocky Mountain Region, with a strong preference for Montana based companies. We partner with mission-driven, talented entrepreneurs to build high-growth potential companies of impact, utility, and value.
2. What has surprised you about being in this line of work?
Since we launched Fund I in 2015, we worked to validate four foundational theses that we believe have created historical challenges for Montana entrepreneurs. The ability to raise a fund of meaningful size ($21.125M) and the ability to deploy that capital in deals that have attracted top-tier venture firms from across the country have been strongly validated.
However, most surprising is the ratio of capital that Montana venture deals have attracted from out of state investment. For every $1 invested by NFC in Fund I portfolio companies, those companies have raised an additional $5.3 from out of state investors.
3. Why should an entrepreneur start a company in Montana?
There are many reasons why Montana is a great place to live, start a company, and build a life. However, one of the more understated reasons why an entrepreneur should start a company in Montana is because now they can. That is, the ecosystem and timing today makes the decision to start a company in Montana much less risky than in decades past.
Experienced technical talent, world class academic institutions, access to early stage capital, high speed internet, direct flights to major US business hubs, and approachable world-class mentors – all the factors that create the conditions for early stage companies to be successful – these conditions now exist in Montana.
4. What makes the start-up and venture capital culture in Montana unique compared to Silicon Valley, Seattle, or even Boulder, Colorado?
The start-up and venture capital culture in Montana is unique compared to others because it embodies Montana culture. This state has a long history of independence and do-it-yourself attitude starting with different homesteading acts attracting and retaining only the hardiest of folks who became the founding residents in 1889.
People who decide to live here are seasoned by the elements and pushed to new limits by the aggressive landscape. Individuals don’t survive, communities do. That casts a unique start-up and venture capital investing culture built around people and relationships with a focus on integrity, diligence, practicality, independence, fortitude, punctuality, and cooperation.
5. A lot of start-up communities thrive because they have been able to develop a self-sustaining ecosystem, which develop, nurture and help newer businesses. We’ve seen this develop in Bozeman. How can we expand this so it has a larger impact across the state?
I think we are starting to see the beginnings of self-sustaining ecosystems across the state. Bozeman may appear to be further ahead than others, but look to places like Missoula, Hamilton, Whitefish, and Butte, and you will see amazing people working on developing support structures to help nurture and grow new businesses.
I also believe that when we define self-sustaining ecosystems with small geographic boundaries we put false constraints on potential. For instance, San Jose is home to one of the most successful self-sustaining start-up ecosystems in the United States (Silicon Valley). San Jose has a population roughly equal to the population of Montana.
I believe there is great potential for our 1M people to have just as much economic impact and for the cities in our state to work together as part of a Montana based ecosystem, where mentors, capital, and technical talent flow to places where people least expect it.
6. What skills do you see lacking in Montanans who seek capital?
I don’t necessarily see a lack of skills in Montanans who seek capital, but sometimes there is a simple information gap in the purpose of venture capital. It’s not something specific to Montanans either, it’s generally a foreign concept to those who haven’t experienced it before.
The purpose of venture capital is for rapid growth, and the founder must understand how venture capital is the right instrument to get them to the next milestone. Founders also sometimes misunderstand how massive the growth potential must be in order for the long term return to make sense, both for them to give up equity in their company (the most expensive type of financing) and for the investor to take on the deal.
There’s typically two outcomes the founder must understand that make sense if they intend to raise venture capital — either an acquisition or an initial public offering. Those are the common information gaps I see; as for skills, Montana founders have them and they are just as impressive as founders in any other national start-up ecosystem.
7. What legislation would you like to see passed to help entrepreneurs in Montana?
HB 187 would have been a tremendous benefit to entrepreneurs in Montana by further opening up access to capital. It would be great to see this important piece of legislature resurface in the next session. The bill allowed a credit against individual income tax equal to 30% of investment of at least $50,000 in a startup firm developing new products in certain fields or in an investment fund that makes 75% of its investments in such firms.
In addition, any statewide efforts to encourage co-working space and accelerator programming would help foster the Montana start-up ecosystem and attract more high growth potential companies to get started in the state.
8. For a person wanting to start a technology company in Montana, what are three pieces of advice which you would give them?
- It’s like back-country skiing: don’t do it alone! Find a co-founder that balances out your talents and abilities, and make sure you are comfortable spending more time with this person than members of your own family – because you probably will.
- It’s like hiking to the summit of a ridge: you are going to bust yourself day in and day out, it’s up until it’s straight up – don’t give up! When you get to the top, bask in your accomplishment shortly, scout out your next course, and it’s onto the next ridge.
- It’s like floating a river for the first time: you won’t know what’s around the next bend so make sure you have a guide! Lean on mentors and the people in your community who have been there before. Don’t forget to tie on a fly and improve with every cast – always be learning, especially when you don’t catch anything.
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