Venture Capital: Finding The White Space

This article was originally featured on Forbes.com and was written by Tom Taulli

Finding the White Space in Venture Capital

In the Valley nowadays, the obsession is with pumping up a startup’s valuation. And yes, the levels have gotten pretty crazy (when it comes to pushing things to the limit, the Valley always seems to know what to do).

Well, there are some skeptics with this strategy — including various venture capitalists (VCs).

One is Blair Garrou, who is the managing partner at the Mercury Fund, which manages over $200 million. Then again, he’s a veteran of the tech world and has seen his share of wrenching volatility.

But in a way, the valuation excesses are turning out to be fairly positive for Blair. After all, he thinks there has been widespread neglect of the middle part of the US — which is thriving with innovation.

Yet Blair notes that his money is just the minimum. “Mercury Fund has spent the last 10 years growing our network of customers and partners throughout the middle of the country,” he said. “It is difficult enough for entrepreneurs to launch their businesses outside of the coasts, so we believe they need every advantage they can get. One of the advantages we try to provide is playing matchmaker between startups and established customers and partners.”

Blair also points out that much can be leveraged with the company’s location. “An entrepreneur with an intelligent manufacturing software startup has a reason to base his company in the Midwest,” he said, “where there are a lot of potential manufacturing customers and a strong talent base. While we always look for companies to open up secondary offices on the coasts to mitigate the talent and fundraising risk, we always want their product strategies to overlap with the industrial ecosystems from which they are based.”

Ok, this might not be too sexy. But the fact is that Silicon Valley does not have a monopoly on great tech companies. If anything, there are parts of the country that have big-time advantages – and this will certainly lead to tomorrow’s breakout companies.

Tom Taulli (@ttaulli) is the author of various books, including the Complete M&A Handbook
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Posted June 2015 by | Venture Investment Strategy