Eric Mathews of Start Co on Building a Diverse Founder Ecosystem

July 20, 2017

9:20 am

Tennessee is known as the country western capital of the world. What many may not know is that there is a bubbling tech ecosystem in Memphis that is slowly but surely building up their diverse startup community and churning out some quality startups.

Eric Mathews is the CEO of Start Co, a venture development organization in Memphis, is an icon in the city and is dedicated to this long haul of building his community.

This time for the #StartupsEverywhere, series, Eric talks with me about building a diverse founder population, overcoming capital hurdles and the long term ROI when people invest in their community.

What’s your role in your ecosystem?

I am a champion for community and entrepreneurial change and have been working to build the startup ecosystem in Memphis for over a decade. In 2008 I founded Start Co. where I currently serve as CEO.

Can you tell us a little more about what Start Co. does?

Start Co. is a venture development organization that supports early stage, high-tech, high-growth potential startups with business and technical assistance, mentorship, programming, and capital access. This takes the form of community programming like 48 Hour Launches, office hours, and various competitions. We also run a number of mentorship-driven accelerator programs to help teams build sustainable startups. Finally, we provide post-acceleration support for growing startups. Of course, all of this work also entails building a broader ecosystem of support resources for our founders, from professional services to investment capital and more.

What’s the most exciting thing that has happened in Memphis in the past year?

We have seen more Start Co. teams break even and raise significant rounds of capital for scaling up, which is having a positive impact on the broader economy in Memphis. Four startups from our most recent cohort have raised over $1 million in funding. Another one of Start Co.’s 2015 graduates, Front Door, is actively seeking several million in funding to hire additional employees and grow its real estate platform. Overall, Start Co.’s graduate companies have enabled over 250 jobs to be created in our community. Looking ahead, I think we are going to start seeing more significant raises and even greater job creation.

What is the biggest challenge you face in Memphis?

The things that keep me up at night are limited access to later stage capital and the skilled talent necessary for rapidly scaling high-growth startups. These aren’t unique problems necessarily, but they are uniquely challenging to solve in Memphis. Memphis has one of the highest poverty rates in the nation and low educational attainment, and even though our population is very young, it is also more impoverished and less educated compared to peer metro areas. This means that most of our discretionary resources are going towards these more pressing macro issues, rather than entrepreneurial development. However, it is critical that these macro challenges are addressed in order for our ecosystem to be more fruitful. Thankfully many inside and outside of Memphis believe in working on both social impact and the jobs of tomorrow.

What are some of the inputs that have helped your ecosystem grow?

From the very beginning, we made it clear to our partners and investors that there are two types of “ROIs”—returns on investment and returns on involvement—and the only one that we could guarantee at the start was return on involvement. As a result, those who have championed our ecosystem have always understood that ecosystem growth takes time and that they had to look at the long road for a return on their support.

I think of it as a 20 year journey, for the first five years you’re simply getting people up to speed and you see a lot of failure, for the next five years you’ve figured out what works and can build out that model. Over the following five years, that model can be scaled, and the final five years are the harvest time, when founders have exits and become the next generation of mentors and investors. This loop being completed is the first step in building a sustainable ecosystem.

Our partners understand this and have given the entrepreneurial infrastructure in our community an opportunity to mature organically. This has really made all the difference in the world and has provided the air cover to let a small experiment in economic opportunity grow up. Does that mean we are done growing or that more and greater resources are not needed? Absolutely not. I’d say we’re just entering the third phase of scaling up. We’ll have to double and triple down on this work to get the returns on investment in the next five to ten years, but the foundation has been patiently laid.

Talk about the unique features of your startup community.

The diversity of our founder population is something that would be pretty hard to find elsewhere —40% of funded founders in the accelerator programs are minorities and 40% are women. As we are in a majority minority city we aren’t satisfied though. We ideally want the demographics of our founders to match those of our community. I think we’ll get there.

A founder pitching at Start Co.

A founder pitching at Start Co.

Are there specific public policies that have enabled innovation or startup growth in Memphis?

Our work has been funded mostly from private sources. However, there have been a number of public initiatives to help bolster the Memphis startup ecosystem. In particular, Tennessee state government initiatives like LaunchTN have contributed meaningfully to our work by increasing access to capital pools, angel tax credits, and grants for operations. The city of Memphis has also stepped up even more so recently. Recognizing the value of Start Co.’s action-oriented entrepreneurial training, the city partnered with us to launch Propel, a 12-week accelerator program focused on minority owned businesses. The city is funding the initiative, and Start Co. is running it.

What are you doing to get the word out about the Memphis ecosystem?

We regularly attend national events like South by Southwest and the Consumer Electronics Show. We also make trips to San Francisco a couple of times a year. We’ve seen a big net benefit from building relationships across the US. We’ve found fantastic national partners like American Airlines and IBM, and we’ve engaged various national investors. In fact, coinvestors located outside of Memphis probably represent almost a third of invested funds now.

We’ve even flown to New Zealand to meet with policymakers to discuss startup ecosystem building on behalf of our sister institution, Lightning Lab, which is based in Wellington and Auckland. For perspective, Wellington is about the size of Little Rock and Auckland is about the size of Memphis. It turns out that most of the world looks more like Memphis than Silicon Valley and folks around the country and the globe are interested in learning how we built a startup ecosystem in a tough, if not unlikely environment.

Biggest lessons learned?

The power of curating a culture. If people are the hardware of an ecosystem, then culture is the software. We have been very intentional about building a community in Memphis that embraces core values like paying it forward, focusing on the founder first, and championing inclusion, empowerment, and mutual trust. There can be a tendency towards bro culture or lot’s of ego in other places, but we want to ensure that we’ve created a community that will be highly desirable and sustainable in the long run. We even codified this “software” with the Memphis Ecosystem Pact.

A graphic from Start Co.'s Founders' Toolkit, which helps founders get through the startup valley of death. 

A graphic from Start Co.’s Founders’ Toolkit, which helps founders get through the startup valley of death.

What are some startups to watch coming out of Memphis?

Preteckt is a platform that predicts when long haul trucks will breakdown in the future. It is up and running in major fleets and has interest from original equipment manufacturers.

Front Door is disrupting home selling by facilitating a flat fee commission with full service agent representation. They have technology support that smooths the homeselling process end-to-end and have already saved homesellers $2 million in commissions.

Graph Story is the first provider of an enterprise graph database in the cloud. With major Fortune 500 company clients, they are enabling businesses to conduct in-depth data science in a fraction of the time and cost of traditional databases.

Read more about ecosystems around the country here at Tech.Co

This article is courtesy of Engine's #StartupsEverywhere series, a campaign celebrating the diverse, vibrant entrepreneurial ecosystems that are taking root in every corner of the country. Through weekly profiles of startup ecosystem leaders, the project showcases exciting developments in a variety of rising startup communities. If you are interested in having your ecosystem featured, shoot an email to [email protected].

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Emma Peck is a policy analyst at Engine, a nonprofit that supports the growth of technology entrepreneurship through economic research, policy analysis and advocacy on local and national issues.

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