Filling a Void? Oklahoma Venture Capital and Growth Capital

According to participants in yesterday’s Bricktown Capital Conference in Oklahoma City, Oklahoma has a need for more robust venture capital, nurture capital and in some cases private equity, when an entrepreneur needs between $1 million and $5 million to fuel the growth of their business. For any higher amounts, out of state capital is targeting Oklahoma companies, and for amounts below $1 million, there are small business grants, loans, incentives, family money and even bootstrapping that can provide the required capital. It is the critical gap in between where we need to focus our efforts.

It was a last minute decision to accept the invitation to attend the Bricktown Capital Conference and I’m delighted that I made the trip down I-44. Aside from being a well-executed, informative and well-attended event, there were great speakers, strong Q&A and interesting perspectives from the audience.

The three sessions in the morning discussed the availability of capital from senior debt to equity and everything in between, as well as options for business owners selling their company. The second session talked through lessons learned from preparing your company for sale, the acquisition or capital raising process, as well as how to present your business to investors, lenders and buyers.

Oklahoma’s Capital Problem

It was the third session, however, that drove the theme of this blog.

There were both positive and negative perspectives of raising money and seeking capital for an entrepreneur in Oklahoma, but there seemed to be near universal agreement that it can be incredibly difficult to source $1 million to $5 million for a growing Oklahoma business, when the bank’s not interested in lending any more.

One of the panelists was a highly successful and seasoned Oklahoma entrepreneur, with multiple successful ventures between him and his partners, yet when it came to raising $5 million for a new venture within Oklahoma, he shook every tree and made every call, with support from our Governor on down, but could not get commitments for a $5 million investment.

After several months of searching for Oklahoma capital, he made one connection with an Austin, TX venture capital investor and within weeks he had a $5 million check. You could see that it was hard for a Sooner fan to reach into Longhorn country for capital and you could sense his frustration that he couldn’t find backers in Oklahoma, when there was no shortage of capital outside of our state. His motivation for speaking was to push forward the agenda to find ways to encourage additional Oklahoma private investment dollars to fund the growth of Oklahoma businesses. This got me thinking about a more focused approach on Oklahoma venture and growth capital.

While some people rightly stated that multiple Oklahoma funds do exist, there are probably not nearly enough. If a handful of Oklahoma funds each only make a handful of investments each year in the $1 – $5 million range, supply likely doesn’t come close to meeting demand. While a comparison to Silicon Valley, New York or elsewhere may seem nonsensical, perhaps there are some lessons we can learn from how they have been successful. In California, tremendous wealth has been generated in technology and communications, hence the huge number of VC and private investment firms seeking to invest in those sectors. In Oklahoma, we have enjoyed huge wealth generation in energy, manufacturing and a number of other industries.

So, here are a couple of thoughts for Oklahoma.

1) In order to better market and make available Oklahoma growth capital, we should probably start by targeting the creation of venture and growth funds that invest only in sectors that have been the primary sources of wealth generation in our state. The reasoning is that investors who’ve made their money in a particular sector are more likely to write investment checks for growing businesses in those sectors.

2) If we want to fully support entrepreneurial efforts in technology, communications or other growth areas in Oklahoma that historically may not have been sources of significant wealth generation in our state, it would still be possible to create venture and growth funds headquartered in Oklahoma that are funded in part by investors from outside Oklahoma.

Unfortunately, there is no simple answer, but I’m sincerely grateful for the work that the Oklahoma Venture Forum is doing, as well as i2E, OCAST, Francis Tuttle, and the growing entrepreneurial initiatives at OU and OSU that were discussed over lunch to support the future growth of Oklahoma’s entrepreneurs. Let’s keep working to promote and drive entrepreneurialism in our state.