Certainly, little venture capital goes to anyone but white men. And in the U.S., most of those founders are primarily located in the same geographic regions.
But what entrepreneurs Sergio and Kimmy Paluch learned is that a lack of funding isn’t the hardest part for tech founders from overlooked communities, at least when it comes to very early-stage ventures. Instead, it’s the lack of access to connections and mentors—the rolodex of potential contacts available to many pre-seed founders who recently graduated from, say, Stanford University, and not open to most entrepreneurs from other parts of the country or who are people of color or women.
That’s why Sergio and Kimmy, who founded a product innovation company that catered to Silicon Valley enterprises about 15 or so years ago, decided to use their tech startup and innovation moxie to form Beta Boom, a Salt Lake City-based pre-seed fund aimed at nurturing founders typically overlooked by VCs and even the usual accelerators. “We saw there was a huge pool of innovators with very diverse backgrounds and based throughout North America and the world building tech products for massive, overlooked markets,” says Kimmy.
Most of Beta Boom’s portfolio of 10 startups are run by women or people of color.
The Paluchs spent quite a few years, as Sergio puts it, “in the tech bubble of Silicon Valley.” But during their time there, they grew increasingly disenchanted with the overall mindset they encountered and, “The homogeneity of the people we were interacting with,” he says. The proverbial straw was a 2016 article in a tech publication about a $ 700 smart lock. “We were innovating for the 1%,” says Kimmy.
What they decided was they had to do something about the lopsided allocation of capital and out-of-touch nature of the innovation that was being funded—to unlock much-needed resources and make them accessible to a broader population of founders. To that end, they set out to explore what was happening in different parts of the country and what was needed.
The message that became ever clearer during their travels was just how much entrepreneurial activity was underway in the rest of the country. Plus they were amazed by the diversity of those founders in everything from their professional backgrounds to their ethnicity. At the same time, however, “They had much less access to all of the things entrepreneurs need,” says Sergio.
Heading for Salt Lake City
Around 2017, “Utah came on our radar,” says Kimmy. By many accounts, it was a happening place in terms of entrepreneurship. So they packed their kids and dog in their car and headed for Salt Lake City to investigate. When they saw how much entrepreneurial activity was underway, as well as the fast-growing populations of Hispanics and other groups, they decided to set up shop there.
To broaden their reach and increase startups’ chances of success, they determined their venture had to address three significant gaps. One was increasing their pipeline of pre-seed-stage deals, so they didn’t rely on their own, limiting networks; another was eschewing the usual “markers of pedigree”, as Sergio calls it, that venture capitalists usually rely on when assessing very early-stage founders—whether someone worked at Google, say, or attended MIT; and providing access to well-connected tech and entrepreneurship experts, as well as post-investment support.
Team of Coaches
Ultimately, the emphasis would be on daily, highly customized work—that is, working with mentors who would help with everything from honing in on product market fit to developing funding strategies.
To that end, startups are paired with a team of advisors: a head coach who oversees their progress, a guru who helps them hone their products, a marketing pro who works with them to run marketing experiments, a sales coach and a fundraising mentor. For the latter work, there are no demo days. Instead, the focus is on making targeted introductions, hopefully leading to multiple pitches to individual investors. Each program lasts for six months—it’s been virtual during the pandemic—with six startups participating.
The fund started out by making $ 20,000 investments in each company. But the Paluchs are now in the process of raising a $ 15 million fund that should allow them to make $ 150,000 to $ 200,000 investments for an 8% to 9% stake in the form of a convertible note.