After three years with the Kansas City-based Sprint Accelerator, John Fein is moving on to lead a venture fund that has ambitious Midwestern plans.
Fein, who’s served as the managing director at the Techstars-led accelerator since 2014, will serve his last day with the organization on July 31. With decades of fast-paced startup experience, Fein reflected on his positive tenure with the accelerator while also sharing his joy in growing the new early-stage fund Firebrand Ventures. Fein will serve as the fund’s managing director.
“It’s exciting,” Fein said during an exclusive interview with Startland News. “I’m taking everything I’ve learned from Techstars and my 20 years of operational experience and applying that to a fund.”
Fein said that Firebrand Ventures’ first fund will invest $7 million in about 30 Midwest startups over the next three years. The fund will target lean, “capital-efficient” software startups in the greater Midwest, which Fein defined as an area between San Antonio to Minneapolis and Boulder to Columbus, Ohio. Fein said that the fund will lead and co-invest in deals with an average check size of about $150,000.
The Midwest affords Firebrand an array of promising investment prospects that are typically overlooked, he added.
“This is really meant to target companies in that geography that are typically underserved when it comes to early-stage investment,” Fein said. “It’s a huge opportunity. You have a lot of companies that come out of communities like Kansas City, Omaha, Cincinnati, Detroit and Minneapolis. Oftentimes when they can’t raise early-stage capital they either raise it from coastal investors or they leave.”
Fein is not only tapping the powerful Techstars’ network to grow the fund and its portfolio firms, but also the expertise of its co-founder, David Cohen, as a formal advisor. Fein also has selected Kansas City-based investor Keith Harrington as an advisor. Harrington previously was the managing director at the Kansas Bioscience Authority and is a fellow of the esteemed Kauffman Fellows program for venture capitalists.
With the promise to be “radically different” from other venture funds in the Midwest, Fein said that Firebrand will unconventionally operate to find its deals.
First, Fein said that he will buck the Midwestern trend for investors to be “behind-the-scenes” and difficult to reach. Fein plans to be active and visible in the startup communities the fund will target, networking alongside startups and frequently taking pitches for investments. He also plans to work alongside startups in coworking studios to increase interaction with them.
That tactic will help Firebrand find a larger array of opportunities, Fein said.
“It comes down to the approach,” he said. “We’re going to be very proactive and visible, and those are some of the things you don’t see a lot of investors do in the Midwest. … We’re going to be approachable and accessible. I’m not afraid to do that — I enjoy doing that — and it’s one of the things that’s going to set us apart.”
Secondly, Fein said that Firebrand is going to be “founder-friendly.” That means entrepreneurs can expect transparency, responsiveness and a quick answer. As a former founder himself, Fein said he understands well the importance of a clear, quick answer on whether an investor will get involved.
“It’s one of my pet peeves — and a pet peeve of a lot of entrepreneurs — when an investor expresses interest, you have one or two meetings and then you never hear from them again,” Fein said. “That’s never going to happen with Firebrand. Firebrand is going to be very responsive, typically giving an answer within a few weeks — whether a yes or no.”
With the Sprint Accelerator, Fein said he learned many valuable lessons, including the diligence necessary to properly vet a prospect. Sprint and Techstars injected $3.6 million into 30 graduate firms of the accelerator — $120,000 a piece — in exchange for 6 percent equity of each firm. In total, five firms in the program have relocated their headquarters to Kansas City and more than 10 have retained a local presence.
Techstars’ contract with Sprint expired after its latest cohort of 10 startups, which finished the three-month program in May.
Fein said that Techstars is hopeful to retain an accelerator in Kansas City and is still in discussions with a number of corporate partners. No formal decisions have been made, but the Techstars team is hoping to soon make meaningful headway on a partnership.
“Techstars is taking a very consultative approach with what the next program is going to look like,” Fein said. “We’re trying to figure out what would be the best fit for the next version of the Techstar accelerator in Kansas City. While we’re still fairly early in that process, we’d like to have an accelerator in Kansas City in 2017 and to make that happen, we do have to start getting into deeper discussions with corporate partners in the near future.”
