Reed Robinson Wants to Rethink the ‘Friends and Family’ Round
For many entrepreneurs, the “friends and family” fundraising round is a crucial step toward securing bigger investments down the road. During this phase, entrepreneurs often ask relatives and friends to chip in a small amount of capital to help launch a new business. The problem with this model, says Reed Robinson, is that it inevitably misses a wide swath of would-be entrepreneurs.
“Not everybody has friends and family that they can lean on,” says Robinson, an active member of the Twin Cities startup scene and co-founder of nonprofit Beta.MN. “If starting a company is only available to people who have personal capital, social capital, or access to high-network individuals, you’re only going to see those kinds of companies get started.”
So, Robinson is launching a new venture fund to help entrepreneurs get much-needed capital during the “pre-seed” stage—the period before entrepreneurs solicit big-ticket investments. Robinson’s fund, known as Groove Capital, is slated to launch sometime in 2021, with plans to make more than 20 investments throughout the year. The goal is to distribute between $50,000 and $100,000 per company.
During his time at the helm of Beta.MN, which operates Twin Cities Startup Week and a startup accelerator, Robinson saw firsthand how existing startup infrastructure wasn’t reaching all aspiring entrepreneurs. He’d seen dozens of folks participate in various accelerators around town, but they often lacked the resources to move forward afterward.
“This was the nagging issue that we just never figured out how to solve as a community,” Robinson says.
The hope is that Groove Capital will help bring more equity to the startup community, providing capital for underrepresented groups such as Black entrepreneurs and other people of color.
Alongside the new fund, Robinson also plans to launch a new network of angel investors, who could help fill in some more financing for entrepreneurs. According to Robinson’s calculations, there are probably less than 200 angel investors in Minnesota. But state data show that there could be upwards of 40,000 angel investors.
“The delta between those two numbers is shocking, and something we all need to be paying attention to,” Robinson says. But it’s also “a huge opportunity.”
“We can reach out to people who are not currently angel investing and start giving them means to get involved,” he adds.
What’s holding back that huge number of would-be investors? It’s certainly not a lack of capital, or a fear of risk, Robinson says. Instead, it’s more likely that many don’t know it’s an option.
“People invest money where they’ve made money themselves,” Robinson says. “There aren’t that many people here who have made money in startups, or in technology startups specifically.”
But Robinson is hoping his new venture can help educate investors on the value of providing capital for startups.
Meanwhile, venture capital generally doesn’t appear to be slowing down during the pandemic. This summer alone, two other venture capital firms have launched: Bread and Butter Ventures, and Artisan Venture Lab. For his part, Robinson acknowledges that it’s a tenuous time to launch a new fund. But, in his view, a pre-seed fund is needed now more than ever.
“Yes, there’s a lot of uncertainty out there, but that uncertainty is also part of the motivation for why this stuff needs to happen, and why a lot of us are feeling motivated to come in with support and resources for our founder community,” Robinson says. “I’ve seen the growth this community has had, and I’m not about to let five years of momentum just disappear.”