Episode 62 — Trip Edwards of Dallas Venture Partners
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Transcript:
Geoff Wood: Welcome to the Welch Avenue Show, episode number 62. Our guest today is Trip Edwards, a venture capitalist with Dallas Venture Partners, but based in West Des Moines. Trip is new to Iowa, and he brings with him experiences from places like Boulder, Dallas, and even China. Before we get into talking with Trip, two quick things: First, take a look at our Patreon campaign at patreon.com/welchavenue. That's the place where you can directly help support this show. You can pledge one dollar, or one penny — doesn't really matter, what does is your support.
Second, we're working with Iowa Economic Development to help promote the Iowa Hour at South by Southwest. Check out the Iowa Hour at iowahour.co. This is our state’s showcase at the big festival in Austin next month, and we want all members of our startup community represented. Startups, service providers, and funders--you are all welcome to help co-host. Just click on "register to host" and fill in a short form.
Thanks and enjoy episode 62 with Trip Edwards.
Geoff Wood: You're kind of a new face around the Iowa startup community, so tell people a little bit about what it is that you're doing here.
Trip Edwards: Yeah absolutely. Are we ready to go? Okay, cool. So I moved out to Iowa in September, mid-September, first time here. Very excited. Came with Dallas Venture Partners, we are a seed and Series A fund based in Dallas.
Geoff Wood: Dallas, Texas. Not Dallas County, Iowa.
Trip Edwards: Not Dallas County, Iowa. Although I did have some feelings of nostalgia driving by that sign on 235. So we're a series seed and series A fund. We have quite a few LP's that are based here and have been involved within the entrepreneurial community for quite some time. We added our most recent company to the portfolio back in May. It's a company up in Ames, Iowa called AgSolver. So I kind of led the diligence on that, and in August the fund asked me to move here and kind of keep an eye operationally on what they were doing, and then also plant a flag in the ground for DVP to look for new opportunities and try and help the community wherever we can in terms of growing entrepreneurial initiatives and overall investment that's being attracted to the region.
Geoff Wood: In addition to AgSolver, can you talk about any other investments that you guys have here?
Trip Edwards: Yeah, sure. So we are kind of all across the board. We have four portfolio companies. We're a pretty young fund. We're launched in late 2011, and the first investment we made we actually exited a couple months ago. It was an NFC technology based on mobile-payment company. The second was a factory-automation software up in Chicago that we sourced through the Angel Group that's attached to Notre Dame. It's called the Irish Angels.
Geoff Wood: Oh yeah. It's a guy from Iowa that's in the leadership of that, I forget his name ... We can come back to that.
Trip Edwards: Yeah, lots of great folks there. We've enjoyed all of our time with them. Third company is a company that we actually incubated out of Dallas. It's a loyalty platform for mobile-game developers. We're able to pull a guy named Hal Brierley, who was responsible for a company called e-Rewards. He also created the American Advantage program, as well as a few other loyalty programs. Our CEO is a former head of digital for GameStop, and it was a really fun deal to bring together. And then AgSolver—so, very different kind of industries that we've invested in.
Geoff Wood: Okay. And then Social Money as well?
Trip Edwards: Social Money is, I guess what you would call an affiliate investment. Some of the LP's that are based here have had quite a few entities that they've been involved with, Social Money being one of them. So part of the deal with bringing me up here was to help out operationally with some of the existing entities that we're in--it's called the family portfolio--as well as to focus on DVP-specific opportunities.
Geoff Wood: And you office out of Social Money's office in West Des Moines?
Trip Edwards: We do, yes. So I kind of float around a bit, I don't really have my own home. Which is really a model that DVP is taken since its inception. We like to be on the ground with the companies that we invest in, and so we choose to office with our portfolio companies. Not only does it alleviate some of their pressure to make rent payments and things like that, but we're always right there when they need us, if they do. So I spend Monday/Wednesday/Friday typically at SmartyPig, as well as another company that is I guess another affiliated investment here in downtown. And then Tuesdays and Thursdays up in Ames with AgSolver.
Geoff Wood: And how did you find DVP?
Trip Edwards: So personally I, after school, moved to China where I started in and I guess you could say sold out, to my partners a kind of education consulting company that was doing a lot of different exchange type programs between Chinese and U.S. high school students. From there, I went to work for a small Chinese-based venture fund, but given my liberal arts background at UC Boulder, I did not know how to read a balance sheet, understand what was happening from the income statement to cash flow, etc., so I wasn't adding much value and decided that I had to go back to business school. So in August of 2012, I picked up all my stuff in Beijing, headed back to Dallas where I'm originally from, and joined the MBA program there at SMU. SMU has two student-led funds, one is a public equities fund. It's about five million dollars. Students essentially sit in a room and trade stocks for a semester with guidance from a professor.
Geoff Wood: Not just a lab experiment, they're actually trading stocks?
Trip Edwards: They're actually trading stocks, yeah. And then the second fund is what they call the venture fund, and it's a little smaller. It's maybe three or four million dollars. They've been in existence, I guess, for about ten years. But essentially, they'll recruit students and then place them in groups of two at different funds around the city, and the students will then due diligence alongside of those funds and then make a recommendation back to the advisory board at SMU on whether or not they think we should invest. And so the fund that I was placed at was DVP, and that happened in January of last year, and ran through May, and we both decided that we liked each other and I tricked them into hiring me. So, here I am.
Geoff Wood: That's pretty awesome. I have an MBA from Indiana, and we did not get to do that. But the VC and private equity classes were my favorite classes, so I think that would have been an awesome experience.
Trip Edwards: Yeah, it's really great. SMU, I think, is a school that's been very good at plugging into real-life opportunities for students, and one of the LP's in our fund is very active with Iowa State University. He's actually trying to bridge some of those gaps for undergrads. So it's giving them opportunities beyond just the typical corporate internship, giving them exposure to real-world startups. Or, in SMU's case, the ability to understand what happens behind the scenes of a venture fund, because so few people get to really understand what that looks like.
Geoff Wood: Yeah, that's great. So you came with DVP, they asked you to move up here. First impressions of Iowa? You've been here what, six months now?
Trip Edwards: Yeah. You know, the winter's not quite as bad as I had anticipated which is good. I was kind of telling myself all along that it's going to be the coldest I've ever been in my entire life, and so I was kind of trying to play some reverse psychology on myself. But, the first, I guess ...
Geoff Wood: I think we call that "managing expectations."
Trip Edwards: Managing expectations, yeah exactly. There's a buzz word for everything. The first few weeks was amazing. I was just completely inundated with the farmer's market. I live downtown and pretty much right on top of that, so that was really fun just to see all the activity and new faces and people that were out there. I actually managed to find the Chinese Association of Iowa, which, coming from Beijing and Dallas and then into Des Moines, I was really happy to find that. I've since kind of gotten plugged in with them a little bit.
Geoff Wood: They have a big festival, right?
Trip Edwards: They do a ton of stuff, yeah. Especially for Chinese New Year, which will be coming in a few weeks. So yeah, great group.
And yeah, I mean it's been different. I mean it's a little slower paced, coming from 21+ million people in Beijing and then to six or seven million in Dallas, and then to three or four hundred thousand in Des Moines. But I think everyone here is very approachable, everyone here is very genuine, and that whole kind of six degrees of separation thing goes down to about two or three. Which has just been really, really cool. I've gotten to be a part of things and meet some people that I didn't really anticipate would happen, so it's been really fun.
Geoff Wood: Yeah, I think the degrees of separation thing is a big part of what I've been able to find success with. Since we moved… we’re from Iowa—we were gone for five years in Indianapolis, came back in 2009—and it was amazing how fast it was. If you have a diligent plan to meet the community, anybody I could come up with was like one introduction away. And everyone's willing to make that introduction. The types of things that ... The publication and now Gravitate, I don't know that I could do those things in Indianapolis, which is only three times the size of Des Moines, but they've been able to come together in this community. Every kind of wants to be a part of it. I found that really cool too.
Trip Edwards: Yeah, it's especially easy when you come in with checks you're willing to write. People definitely want to talk to you then. (laughs)
Geoff Wood: That's true. You've been getting involved in Eastern Iowa, doing some classes and office hours at the Startup Accelerator. What are you finding with those companies, or have you done them yet?
Trip Edwards: I haven't done them yet. They start at the end of this month. So yeah, really looking forward to that. Eric and David at the Iowa Startup Accelerator, really appreciate those guys opening some doors and ... Yeah, so we'll be starting open office hours at the end of this month, I think the 23rd. You can look at my Twitter feed, @tripedwards, and it'll have a link to office hours for the first week. And then we start, I guess, something that Eric is initiating called Venture Week. We're going through Brad Feld's book on how to be smarter than your venture capitalist and your lawyer. So really excited for that, it sounds like it'll be somewhat of a roasting scenario. I think the guys from Next Level and myself will be on a panel and just kind of answering some questions and all that.
Geoff Wood: That's awesome.
Trip Edwards: Yeah, really looking forward to that. The ability to, again, kind of blow past all the bureaucracy and red tape and just have these meaningful conversations with people about how to help their businesses grow. With no real expectations is, I think, incredibly valuable.
Geoff Wood: Yeah. We've been doing the office hours thing here on First Friday for a few months now, and Next Level's done it, Veridian Credit Union has done it, and BrownWinick did it for the first time on the legal side. And it is really interesting to just kind of ... I don't know that any one of those three entities had made any money off of anybody that they've talked to, but people get such a high out of helping somebody at that early stages. If anything, they're making relationships that may pay back in five years, right, when they are ready to raise around, or five months when they are ready to raise around, whatever that is. And that's just on the VC side.
Yeah, I think that's really cool. It's cool to have a community that supports that.
Trip Edwards: Yeah, I mean I think it comes with the responsibility of being a VC. You've got to help foster the community, and how it develops. And even if you don't stand to make any money out of it, I think there's still--I think at least among DVP's perspective--a need that we have to make ourselves available. 'Cause these are tough conversations to have. To some extent, VC's can be fairly intimidating. And I think I'd like to say publicly that we don't need to be.
Geoff Wood: Yeah, I think that makes a lot of sense. So they're intimidating, I think there's also a piece of mystery around that too, which this is probably helping diffuse, of like "Are there VC's in Iowa? Can I approach ... " Maybe that places in the intimidating thing too. I just think since I've been paying attention to the startup community here, which is going on six years now, access to capital has always been everybody's number one concern for the community. So now that there is capital, I don't know if it's enough or the right kind of capital, but people--I'm not sure they know how to use it.
What sort of deals are you seeing, then? Are you guys actively doing due diligence on deals here now, or is that something you're just prospecting for future?
Trip Edwards: Yeah, I mean a little bit of both. We've gotten pretty close on one deal that I don't really feel comfortable talking about quite yet.
Geoff Wood: Sure, it's not that kind of podcast. (laughs)
Trip Edwards: (Laughs) But it's really exciting. I think the one thing that I found that's really encouraging about some of the Iowa companies we've interacted with thus far, is that there's this persistent focus on creating value rather than higher valuations, if that makes any sense. They're real businesses, or trying to work towards a road map to profitability rather than just capturing a bunch of eyeballs or proving out some mythological concept. It's real entrepreneurs who have identified a problem and are creating a solution for it. And as long as we continue to see more of that, we'll be here for as long as it takes. It's definitely what you want to see from a VC's perspective.
Geoff Wood: Does that compare well to the Dallas community that you guys have seen?
Trip Edwards: It does. And that was kind of one of the original theories with which DVP was funded, is that Dallas is a market that was underserved for venture capital, and that there were actually real companies there that deserved venture capital attention beyond the Sevin Rosen fund that was just there. Iowa is very similar. I think Dallas has fallen victim to a little bit of the Silicon Valley 'Let's go out and make a bunch of relationships and build some great technology, but not really have an eye on what's happening with our cash, and how much we're burning, and when we're actually going to be profitable.' And just expect everybody to buy into the dream, right. There's certainly companies in this market that are that way as well, but I think on the whole you see less of that.
Geoff Wood: Dallas is close, basically in proximity to Austin, right? And I think of Austin as one of those cities, I guess Boulder, you've experienced there as well. Those are some of the cities we look at as, not necessarily comparable to Des Moines but ... When people say "The Next Silicon Valley" I don't think anybody's really interested in that, I think people are more interest in the next Boulder, or the next Austin. Has that helped or hurt Dallas in being that close to Austin, but much, much bigger than Austin, right?
Trip Edwards: Yeah, that's a great question. And I don't know that I have anything really insightful to say to that. Every city's got it's personality, and I think Dallas has somewhat fallen victim to more kind of corporate landscape. But we think that's really interesting because it makes for a very unique exit market. So you've got some of these Top Fortune 100, Fortune 50 companies, that are headquartered there that have a habit of swallowing up smaller, more innovative companies.
And so we really like that aspect of Dallas. We're also very active in Austin, and very close to a lot of the funds that are there, and we see a lot of deals that come out of Austin. There's a lot of collaboration back and forth. Texas, I think, is very similar to Iowa. And Austin and Dallas you might be able to compare to Cedar Rapids, Iowa City, and Des Moines. There's just a lot of spillover.
There's a lot of pride that comes out of being from Texas, there's a lot of pride that comes out of being from Iowa. Just because there's an opportunity or something happening in Austin or Dallas doesn't mean that the other's not going to be affected. I think you see a lot more innovation and most of the more technical-minded folks will probably be in Austin, but there's still a lot of spillover.
Geoff Wood: Cool. Best thing about being in Iowa, about you personally being in Iowa?
Trip Edwards: Oh, man. You know, it's an opportunity of a lifetime honestly for me, I mean work-wise. I am just so excited and honored to be here and be able to work as closely with some of the entrepreneurs and the community-builders that I have come into encounter with. I'm also very much looking forward to spring. Not to hark on the weather and everything. Everybody knows it's really cold here in winter.
Geoff Wood: It was like 40 the other day. That's not so bad.
Trip Edwards: Exactly, and that's awesome.
Geoff Wood: That's a good day.
Trip Edwards: I think they knew I was coming, so they just decided to go easy on me the first year. I'm signed up for RAGBRAI so really looking forward to that this summer, Iowa State Fair ... I mean all these things that you hear about being quintessentially Iowan. I'm really excited for the freeze to crack and winter and for all that stuff to come alive.
Geoff Wood: Oh there's one more of those, that's the Iowa caucuses.
Trip Edwards: Okay, yeah.
Geoff Wood: It'd be interesting to get your perspective after that, 'cause having lived out of state and watched the caucuses, it's very different everywhere else. They're this year, 'cause we get two years of caucuses until the actual voting. So that's your best thing. What's the most surprising thing about being here?
Trip Edwards: Man, that's a great question. Just the perspectives that people have, in terms of being able to look beyond Iowa. I had a chance to travel to Israel this last year, and meet with a bunch of VC's and startup companies, including Wix and a few others that are based there. And these guys almost immediately have to be an international-facing company because they're domestic market is not big enough. I don't want to compare Iowa to Israel, but you get a sense that there is that level of perspective, at least, in terms of the companies that do really well are going to get attention from the East and West coast, right, from larger VC markets, from larger exit markets.
And so I think having that ingrained has been really refreshing. You hear a lot about this Iowa work ethic and it's surprised me as well. It's more than just waking up early and plugging away, day in day out. It's willingness to be resourceful, and held accountable and coachable, which is super refreshing, and to be honest one of the number one things that we look for in entrepreneurs.
Geoff Wood: Nice. Okay, so what's the worst thing about here then?
Trip Edwards: What's the worst thing about being here ... I got to say it, nothing beats Tex-Mex. Dos Rios is good, you know, but it's not Mi Cocina, which is a good spot down in Dallas. I don't know, the worst thing about being here ... I was pretty surprised about some of the rents in downtown. It's a little pricey for what you get. I think a lot of the kind of rent-controlled stuff and just the fact that there's not a lot of availability has pushed some of the prices up beyond where perhaps they should be.
Geoff Wood: Occupancy in rentals is like 99% downtown.
Trip Edwards: Yeah, and I've not confirmed that, but everybody says that. And I feel like on one hand that's a rumor that the real estate agents are just passing around saying 'Hey, we're all going to say it's 99%'. No, I mean you're right. There's nothing really available.
Geoff Wood: Does DVP have a real estate fund on the side?
Trip Edwards: No, we don't. (laughs)
Geoff Wood: Fair enough. What's the one thing that you think this community needs to add, on the startup community side? Like what are we missing, in your experience?
Trip Edwards: Oh, man. It's a little too early for me to say. I'm really excited to see what comes out of Global Insurance Accelerator. I was listening to, was it John the founder of Bawte, talk about his experience at Techstars, and his desire to see investors and/or folks that are involved in the startup community just have a willingness to be brutally honest with entrepreneurs. Every community needs that. Dallas is no different, San Francisco is no different, and Des Moines' no different. I feel like Des Moines, just because there is that level of genuineness and people unafraid to speak their mind, I think that there's a potential for that to really take off. As much as the community can focus on being brutally honest with entrepreneurs about their value propositions, about the time they're spending on certain features for products, the better off the overall community will be.
Geoff Wood: Yeah. Has anybody referred to the "Midwest Maybe" with you yet?
Trip Edwards: No, I haven't heard of that.
Geoff Wood: As my limited investing days were kind of poking around when I was first getting involved in this community, somebody had mentioned that to me. That from the entrepreneurial side, the worst thing is getting the "Midwest maybe", where nobody wants to tell you no, they're not going to invest in your company, you're just always maybe and then they hope you don't follow back up with them. 'Cause nobody wants to be that guy didn't invest in the company.
Trip Edwards: That's China, man, right there.
Geoff Wood: Is it really?
Trip Edwards: Yeah. They do not like to say no. I don't know if it's a saving face thing or what.
Chris New: Kind of the opposite of the soft no and the hard no. Or the getting three no's in a row, that's your no, normally. Except for Iowa.
Geoff Wood: Where can people find out more about you and DVP?
Trip Edwards: Sure, yeah. We've got a website, www.dallasventurepartners.com. We're on Twitter and LinkedIn and all that kind of stuff. Shoot me an email, trip@dallasventurepartners.com, or find you and get in touch that way. We're here, we're open and willing to talk to anybody and look forward to planting some further, deeper roots here.
Geoff Wood: Great. Well, thanks for stopping in today.
Trip Edwards: Absolutely, thanks.
