Sid Baveja ’09- Microdesign Consulting Inc.
Last Friday, student groups presented our client companies to potential investors, covering issues from monetization strategies to marketing ideas. It was a great learning experience that gave students like me unique exposure to the thought processes of seasoned investors. My teammates, Katie Moon and Will Inglis also noted how we had grown together as a team and gained practical insights into the world of new ventures from this experience.
The forum ended with a discussion led by Liz Robert, ex-CEO of Vermont Teddy Bear Company, addressing the issues and challenges that Vermont faces with its current ecosystem for developing entrepreneurship. Ms. Robert had some valuable insight on how to improve and sustain the business ecosystem in VT. She prefaced her ideas on the business climate by giving the audience a quick spiel on her new company, Terry. Listening to her speak about her new company and her strategy for taking it to the next level of profitability was a great opportunity for us students.
Her main observation for the business ecosystem in VT was:
- Too much investor money is chasing start-up pre-money companies in Vermont. As it is, pre-money companies are riskier investments. She thinks investors should try and bring medium sized companies to Vermont and create more jobs. She is already setting an example by doing so herself. She has just bought a small company that has $7 million in annual revenues. With her investment, she hopes to leverage the Vermont brand to sell her company's products, and make use of the available manufacturing infrastructure of VT to improve margins. She thinks that by bringing in medium sized companies, or by investing in already existing small sized companies in VT, there will be a higher probability of companies staying and growing bigger in VT as opposed to other states. The current challenge that people like Ms. Robert face is hiring and retaining middle level management in VT because there are few companies and jobs available to people that have the required skill-set. It seems that there is a mindset issue where everything in Vermont is perceived to be small and unattractive for career growth, making it difficult to attract quality talent. If ‘more’ investors harnessed their energy and directed it towards middle sized companies, then the problem of bringing in good middle level managers might get solved.
Ms. Robert’s proposal was to set up a proactive forum for private investors to invest in companies larger than the early start up stage. She thinks the forum should help investors gather and deploy resources, find the appropriate deal flow, and work with the state government to attract new companies to Vermont.
Some of the questions raised from the debate were:
- Is there an appropriate infrastructure and corporate tax code available in VT for companies like Ms. Robert's to do long term business in VT?
- What kind of liquidity is available to investors in-state if they make investments in medium sized companies instead of smaller start-ups? Will an exit be easy? If an exit is available, how can we make sure that the company stays in VT after the exit? The argument was that it is difficult to find entrepreneurs like Ms. Robert who have both a passion for running their own businesses and a strong desire for staying in the state of Vermont. It is difficult to distinguish those who have lifestyle VT businesses and those who see serious potential in the resources that VT has to offer. Basically, the private sector has to recognize that VT has strong resources in state that can lead to profitable businesses and favorable returns for investors.
- What is the best way to create a pipeline of deal flow? Will the forum Ms. Robert is talking about be similar to MSG where new pitches are brought to investors?
- How will the ‘Human Resource’ issue be solved? What is the best way for companies to attract middle management into VT and keep them in the state?
- Most entrepreneurs have a pre-conceived view of VT being a small state with high costs and an unfriendly business environment. So the question to be addressed is: How can we change that perception? What can the government do with the private sector to brand VT as a business friendly state?
The discussion was a lively one, with insights from both experienced in-state investors and Middlebury students about the issue of mindset and human resources. For the most part, there was agreement in the room that Ms. Robert had identified the right issues that are holding back VT's business ecosystem from reaching critical mass. I was happy to see a lively debate that gave students like me exposure to policy and development issues in the business arena. The questions raised were insightful, and it was encouraging to see some consensus being built around Ms. Robert's proposal. Thanks to Prof. Claudon and his team for organizing such a great forum and giving students the opportunity to gain some real world experience.
