Crunchbase recently quoted me in an article on venture investing returning to the Garden State. When speaking with the author, Natasha Mascarenhas (also a NJ native!), we spoke about how NJ-based VC firms and government legislation are helping NJ re-emerge as a desirable location for entrepreneurs. Here at Newark Venture Partners, we are deeply dedicated to the revitalization of Newark, a city with incredible infrastructure (three rail lines) and bones (dark fiber internet) but that is branded as crime ridden and obsolete. Similar to the mission of Steve Case’s Rise of the Rest fund, we refuse to accept these outdated assumptions, and we won’t stop until forgotten cities such as Newark participate and benefit from the economic power of the startup economy. The reality is that incredible founders are found everywhere and they will go to where the capital is -- so why should Silicon Valley or Manhattan always be the ones to benefit?
However, while we want to feel altruistic for placing our fund in an unpopular city, the truth is that this is far from the truth. For however much we are giving to Newark, Newark is giving more than this back in return. Yes, being in Newark may make us seen by some as an “underdog”, but the very nature of this has made us into better investors. This may sound counter-intuitive, but we think that one of the most powerful tools in venture investing is to get away from “group think” and to stop doing things a “certain way” or a “standard way.” Being in Newark, only an 18 minute train ride from NYC, is enough of a distance to pull us outside of the VC bubble and to force us to think on our own.
The core components of our independent lens is the deep-rooted belief that the best entrepreneurs are everywhere and that it is our job to hustle to find them. We understand that if we sit back and wait for referrals to come our way, we are limiting our deal flow on the factors of network and geography (somewhat important but not a top criteria for business success), and we will lose. We believe that in order to be a top performing fund, we must look at every option available to us, and we must prioritize the criteria that actually has a real impact on business success.
Here are some of the ways that our process supports this belief:
1. We look everywhere for entrepreneurs
At the end of the day, venture fundraising is a bit of a game. The founders who are in Silicon Valley or New York know how to play this game. However, just because they can play it doesn’t mean that that’s where a VC should make their bets. At Newark Venture Partners, we won’t settle for anything other than the best. So, we hustle, and we get in-front of every qualified founder in every nook and corner of the country, we even look internationally.
2. We have built a multi-channel, robust sourcing strategy
In order to accomplish #1, we can’t just wait for investment referrals to come our way. Top founders with the best ideas may not be networked with the investors whom we have relationships with. Again, we won’t settle for anything but the best. We must hustle and source from numerous channels, and we do. Our current channels include: cold outreach from database scrapes, cold outreach from news scrapes, attendance at hundreds of events per year, warm referrals from our community, warm referrals from our corporate investors, and our online application. We ramp up with intern support in order to review up to 1,000 qualified companies per month when seeking our next Labs class.
3. We don’t care about the following:
A. Popularity of current investors
B. Popularity of investors in pipeline
C. How long it has taken to raise
Many investors look at prior funding success as a predictor for future success. However, if you are not well networked with investors, this is a vicious cycle in which top entrepreneurs may never be able to break into. At NVP, we don’t care about prior funding success. If we believe in the vision, strategy and team, we are fine being the first institutional capital in and the rest will follow. A good business that shows growing traction eventually wins this race.
4. We read every cold email that comes our way
Other firms pride themselves on never looking at cold outreach. This is more opportunity for us to find the diamonds in the rough which are ignored by others. (PS our email is Info@Newark.VC - give it a try!)
5. Unconventional founders seek us out
We know that when founders look at NVP - and our city of Newark - they may see us as an odd take on venture - and this is to our benefit. For a less-networked or less-traditional founder, we are seen as a solution, and they reach out to us. This gets us deal flow that other funds simply do not get.
You can see our results in the impressive companies of our most recent Labs class. We reviewed over 2,100 companies and found nine gems. Three out of the nine companies were not looking for funding until we came knocking. For two, we were the first institutional capital in. Founders hail from non-hub cities such as Newark, Atlanta, Sacramento and Chicago. We have one company from Bangalore, India.
This unique lens with which we seek entrepreneurs is proving to pay off in more than one way. To date, our companies have raised $324M in capital and we've seen our first big exit (to be announced soon!). It’s also true that NVP has a double bottom line. As we invest in promising startups, we aim to convince them to stay in Newark, catalyzing an economic impact that will truly move the needle for this city. We are already seeing results on this front, but it’s time we said “Thank You” to a city that has been the foundation of our success. “Thank You Newark” for providing an independent lens that makes us never rest on VC norms. The result is a fund with its own beliefs and standards, and a unique sourcing and vetting process built around these. The result is the most deserving entrepreneurs being discovered and funded so that they can flourish and the world can benefit.