Royal Street Ventures opened their $25 million seed fund in Kansas City in early 2016. While they have only made one investment in the area so far, they plan on making many, many more (obvs).
To learn more about what sort of investments they’re interested in, we reached out to Laura Brady, partner at Royal Street Ventures.
Laura didn’t hold back. Entrepreneurs, there’s a lot to learn here, grab that pitch deck and take notes:
Tell me about the sorts of investments you’ve made or are planning to make. What’s the thru line and what sort of businesses are you uniquely suited to support?
These four pillars form the foundation of Royal Street’s investment philosophy:
1. Flexible and driven entrepreneurship team
2. Proven product with significant market potential
3. Capital efficient business model
4. Potential for Royal Street to “add value” by accelerating the time in which a company hits its first milestone
This philosophy allows us to diversify our risk and invest in many different industries. In our second fund, we have invested in everything from a government mobile payment platform and healthcare IT patient engagement solution to a multiplayer online game and education technology STEM platform.
Why have you decided to invest in businesses in Kansas City? What about the KC entrepreneurial ecosystem is attractive to you, and where can there still be improvements?
The decision to invest in Kansas City businesses was an easy one. My business partner grew up in Kansas, and I grew up in Kansas City, so we both have a strong commitment to the area. And while we both knew there is a lack of early-stage capital in Kansas City, we know Kansas City has a growing entrepreneurial ecosystem to which we felt we could contribute.
Kansas City has made strides organizing capital for entrepreneurs, but that capital needs solid businesses in which to invest. A strong addition to the ecosystem would be helping entrepreneurs understand how to build a business in a way that will attract capital.
How do you consider the risk involved in investing in startups? Why are you interested in early stage investments?
Royal Street is a micro-Venture Capital fund intentionally focused on early-stage investments, as we believe that stage allows us to consistently execute our investment philosophy and create opportunities for significant returns for both entrepreneurs and investors.
We know that startup investing is perceived as “risky,” yet we seek to diversify our risk by investing small amounts of capital across multiple industries and providing follow-on capital when company milestones have been achieved.
What uncommon characteristics do you see in the most successful entrepreneurs?
Some of the most successful entrepreneurs we know learn and adapt uncommonly quickly. Their ability to listen, understand, evaluate and put into action things they learn from all the noise that comes at them from customers, investors and competitors is what puts them into position to grow their businesses quickly.
What three things are most important to you about an entrepreneur’s pitch? Will anything kill a pitch straightaway?
The most important thing is the ability to identify and clearly communicate the problem you are solving for your customers. If you can’t do that for us, you probably aren’t doing it for them either.
Second, we really value a dose of realism when you pitch. We know you think your market is huge and you’re going to grow “up and to the right,” but the ability to identify how hard that’s going to be and how you’re going to solve for the difficulties you will encounter matters.
Finally, the best pitches we see are those that can identify what a business needs besides money. Venture capital is a panacea for exactly nothing in our experience. It’s capital plus all the other stuff that makes businesses successful.
What go-to advice do you give to entrepreneurs in whom you’ve invested?
Get your business to a spot where you are in control of what’s next, not us or any other funder out there.
We understand that you’re probably not going to be wildly profitable when we make an investment. We make that investment for you to spend it. But when you’re done spending our money, your business needs to be in a place where, if macro forces that are out of your control are blowing against you, you and your business can live to fight another day.
To learn more about Royal Street Ventures, hit them up on Twitter.