Venture Capital. org - How This Non-Profit Accelerator Helps Mentor New Investors

Tatyana Gray interviews Brad Bertoch

Hey, everybody. Welcome back. Today, I’ve got a super exciting angel investor as a guest. His name is Brad Bertoch and he is the president of VentureCapital.org, formerly known as The Wayne Brown Institute. VentureCapital.org is a non-profit startup accelerator operating out of Utah, and recently, has expanded to Idaho.

Brad is going to share with us how VentureCapital.org got started and what it’s doing now to help entrepreneurs get funded by angel investors and venture capitalists. The pitching mentor ship that VentureCapital.org provides to entrepreneurs for free is amazing. I have volunteered a few times as a mentor and believed tremendously in this program. There are gurus and coaches out there who charge big money for this kind of service to start founders. It’s very fortunate that we have VentureCapital.org who does it for free. So, don’t go anywhere. Here is Brad.

Hi, Brad. Thank you for joining me today. How are you?

Good, Tatyana. How are you?

Pretty good. I’m very excited to have you as a guest today and to spend a lot of time talking about the Wayne Brown Institute, a non-profit venture accelerator. But, first, my readers and I are very curious to know how you became involved in startups, and became an angel investor and part of this startup investing world.

I’d be happy to share. Back in the early ’80s when the economy was a mess — it was a really mess in Utah, we had unemployment at around 11%— I was involved as an economic development director for the big Chamber of Commerce in Utah. My job was to do businesses, plan businesses, and create jobs. One of the things I found out real quick is that it was really hard because no one was expanding and no one was doing anything. Businesses were going out of businesses and interest rates were extraordinary. I mean, they were in the stratosphere.

Business was not expanding. Businesses were not moving forward, and one of the things I observed in Utah was a handful of companies that had done very, very well continued to do well. They were backed by something called venture capital. I began researching that and I began to see that technology startups do some amazing things.

Number one, they don’t rely on the fact that interest rates are 18%. They rely on investment by these people called venture capitalists. That they seem to be recession-proof in terms of them being started and actually more of them got started in bad economic times than in good economic times. I thought, ‘We ought to try to help these companies get along and see what we can do to help move them forward’.

What happened was, unfortunately, the rest of the Chamber of Commerce was not interested in that at all. The board of directors and the CEO had never heard of homegrown high-tech investment. They were not very pleased when I presented a strategy to do that. Fortunately, for me, they had one person that had just joined the board, a gentleman by the name of Wayne Brown, who had been involved at the University of Utah as the head of the engineering department. More importantly, he had started something called an ‘innovation center’, and there was only one of them at that time in the world, and it was at the University of Utah. Its whole purpose was to help new tech startups.

After problems at the Chamber and them not liking what I did, fortunately, Wayne called me up and said, “Why don’t you come and work for me? It sounds like you like to do what I like to do”. I said, “Sounds good to me because I’m getting fired at this job”. So, I went to work for Wayne and got immersed in the whole world of tech startups; how they’re financed, how they grow, the idea of angel investing, and the idea of venture investing.

Very early on in the ’80s, Wayne had started this innovation center, which was the world’s first incubator. He had been involved in an SBIR program that he got going. He had been involved in a research park development. He developed a park in Utah at Salt Lake City at the University of Utah. We really started being involved in infrastructure building because there were no venture funds in Utah. There were very little service provider support people knowing how to do this kind of stuff. There was a bunch in Silicon Valley. There was a book that got published in ’84. I think it was called ‘Silicon Valley Fever’, and it introduced to the world the whole idea of venture capital and startups.

Wayne had been involved in a number of companies. He and some associates had had some fabulous students that started some great companies, like Adobe, and Silicon Graphics, and Netscape, and Safari, and other great companies. But, they all started in the Valley, and that was really what Wayne’s frustration was to get things going. Well, one of the things he did was start a non-profit educational organization to help educate local entrepreneurs in how to compete with their Silicon Valley counterparts, and that was the birth of what would become the Wayne Brown Institute, and now is known as VentureCapital.org.

I got involved with him and did due diligence on my first deal, even though I was not an accredited investor. I made a small investment in it. It was a fun deal. It eventually made some people a lot of money, but us initial investors, due to a problem, didn’t make any money. There’s a satellite company. We had a satellite going up on Space Shuttle Columbia and the Space Shuttle Columbia blew up.

Needless to say, the company was in trouble and it sold off its assets. One of those assets that our group picked up went on to become famous and became a big deal. It was what became known in the world as QuickTime. It was a unique video compression technology. I started then fooling around with little companies and fooling around with angel investing. We got involved with William Wetzel who wrote the book on angel investing back in ’88 that talked about this whole idea of angel investing.

We got involved in angel investing early on, and as my fortunes changed in the ’90s and in the 2000s, I actually became an accredited investor as VentureCapital.org got a lot of the access to investors, access to venture investing as this serious investor. Between VentureCapital.org and myself, we were able to make a few little investments and get some stock donated by various investors or entrepreneurs in their companies.

That really got us in the game and we had worked with a lot of venture capitalists, brought a lot of venture capitalists out here with the programming that we had, and we really became the hub of venture investing in Utah in the ’90s, 2000s, and today. So, that’s how we got involved and how I got involved in doing that. By 2005, we were involved in helping start several of the angel groups here. We got started and launched with the help of Bill Payne, who at the time was with the Kauffman Foundation’s Entrepreneur in Residence, and several wealthy individuals here wanted to get involved in angel investing. Groups got started and I was able to stay in the groups and just participate. If I could invest, I’d invest. If I couldn’t, then I could just participate, work in through our system at VentureCapital.org.

That’s a great story, Brad. One thing I’d like to highlight for my readers if they’re interested but not an accredited investor, is when you got involved, you were not accredited. You started participating, learning, building your network, making connections, and figuring out what it takes to be an investor. Once you got to that level where you qualified, you were able to start writing checks and making investments.

A good point to make is that whether you’re accredited or not, if you’re interested in startups and investing, start learning now. Don’t wait until you do have that $200,000 a year income, or a $1 million net worth because, once you hit that, you want to be able to get in and have the expertise.

Absolutely. There are two kinds of groups: angel investors that meet the accreditation standards by the FCC, have sufficient liquid net worth over and above that, like to write checks, and like the whole idea of angel investing; there are also people that I call founders who are the younger people that want to get in investing. They have some money, they’re worth $500,000 or have a decent current income, but they’re not accredited. They’re really excited about getting involved and they have been involved, and they get involved in a startup or whatever.

My encouragement for them is to now step back and become a founder in a great deal. You don’t need to be an accredited investor to be a founder. Start very early on with the deal and get involved in it so you can build your net worth, if that’s your path. If your path is just to be an investor, then you need to get in very early, try to become one of the initial founding partners or founding investors in a company. Not all investors, early on in a company, need to be accredited. If you need big money, you’re quickly going to outstrip the non-accredited investors. You also want to be sophisticated enough that you don’t cause problems for the company as being one of the few people that are non-accredited.

That’s great to know. I haven’t heard anybody talking about not being accredited, how to get in and become a founder or early-on investor where accreditation is not an issue.

As critical.

Thank you for sharing that. That, I think, is a very great insight. Getting back to Wayne Brown Institute or VentureCapital.org, it’s a venture accelerator and non-profit. I think we’ve all heard of Y Combinator, Techstars, and I think people understand that model. But, how is VentureCapital.org different, being non-profit?

There are a couple of things, and it’s why we make the distinction because we didn’t start out to call ourselves an accelerator. I’ve got to admit that we borrowed that term as it became popular in lexicon with groups like Y Combinator and Techstars. It describes, from many perspectives, some of the things we do. How we’re different is that we do not have captive funds. We don’t make financial investments.

Consequently, we don’t require, unlike others that might do, a share of their stock. One of the things that we do that has really started to be the backbone of Y Combinator and Techstars is we found out, early on, 30 plus years ago, the importance of adult supervision in startups. 90% of entrepreneurs don’t know what they don’t know. They’re first-timers. Even the two-timers or three-timers are more sophisticated. They understand that they have to work and play well with others. They then begin to appreciate the advice of subject matter experts and industry experts. They understand that value is added far more than money, and that oftentimes, it’s that other value that is critical to the success of the company as opposed to the money. First-time entrepreneurs don’t really understand that or appreciate it. Hopefully, over time, if we can work with them and help them, they can begin to understand or appreciate the value of that adult supervision.

Take someone who is interested in the deal and puts in this available mentor. Number one: we say that’s a positive step. Number two: is what we call the cooperative mentoring, which is the idea that the people that are going to help you are there to help you to create a safe environment for you to be able to fail in front of them before you fail in front of investors.To help you understand the benchmarks, the milestones you need to accomplish to get an investor excited; help you organize; help you organize that pitch that articulates that, so that you can have a chance of having in depth conversations with investors and capture investor interest.

We’re not just focused on the pitch, but on the pieces that really build momentum and excitement in investors that they will receive in a pitch. Investors don’t want to spend two or three hours for somebody. They want to get a quick overview and see if it fits their criteria, fits their interest, and then they’ll either go to a next step or they move on. A lot of the angel groups have said that — yes?

Yeah. I volunteered a number of times to be a mentor through this process. For new investors or even people who don’t hit the threshold of accredited but want to get involved, finding an organization like VentureCapital.org is an amazing opportunity. As a mentor, I got to meet so many other more experienced investors, and because I’m located in Sun Valley, Idaho, I participated completely by phone. I never met some of these people in person, but just to be able to meet them and start building relationships was great. One of the people was Robb Kunz, a guest on the podcast a while back. Another person was Sam Bernards with Peak Ventures that I met through being a mentor with VentureCapital.org. Sam was also on the podcast and was a great guest.

For a newer, younger investor, you volunteer your time, but you also get so much more. Plus, you get to meet the startups. You get to share what you think on how they can improve, and then you have this other panel of more experienced investors. For me, it was always reassuring when they agreed, and it actually lead to at least one investment for me. Maybe more. I don’t remember now. But, at least one of the companies that I mentored, I did invest in.

Great, great. And you’re absolutely right. I’ve had entrepreneurs, for example, that have had a very successful life. They, for lack of a better term, had money burning a hole in their pocket, and they wanted to invest it. These may be technical entrepreneurs, they may be non-technical, they may have sold a non-technical business, they may have had big real-estate deals, for example. Anyway, they had money, and the important thing is you really need to understand what’s important to look for in an investment. Are there other people that are interested? Do other people have reservations? What are those reservations? You don’t jump at the first thing that you see. It’s very easy when you’re first in the business — this is something that I had to learn and took me quite a while — to fall in love with the technology. But you can’t.

But wait…there’s more!

This post has been adapted from the Angel Investing with Tatyana Gray podcast.Listen to this recent episode for more great information from BRAD BERTOCH!

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About Tatyana
When Tatyana learned that out of almost 9 million accredited investors in the United states only 300,000 (about 3%) were active angel investors, she made it her mission to attract, educate, and inspire the next wave of angel investors in this country.
As a new angel investor herself, Tatyana loves to learn the craft of investing in startups from experienced angel investors. It was only natural to share this process with a broader audience via her Angel Investing podcast.

Follow Tatyana on Twitter at @tatgrayid. We welcome your comments.