VIDEO: Northern Nevada’s startup ecosystem growing strong

RENO, Nev. — In 2013, the entrepreneurial landscape in Northern Nevada was a barren desert.

Only recently removed from being rocked by the Great Recession, that year Reno-area startup companies brought in a small cluster of new jobs (50) while raising droplets of venture capital ($2 million), according to the Economic Development Authority of Western Nevada.

Five years later, the horizon for both entrepreneurs and investors looks vastly more fruitful and green — in more ways than one.

Halfway through 2018, regional startups have already poured in 210 new jobs and raised a whopping $24 million in capital (a $22 million jump from 2013), according to EDAWN, putting it on pace to easily surpass the $35 million in capital raised by area startups in all of 2017.

“I think the most fascinating thing is that, five years ago, we didn’t have a single company to point to what success looked like,” Bryan McArdle, vice president of entrepreneurial development at EDAWN, said in a phone interview with the NNBV. “And now we have a broad spectrum of companies at all stages — from companies that are at $1 million to $10 million in revenue to companies that are raising big rounds to bootstrap smaller startups.”

So what caused Northern Nevada’s seismic startup shift? For starters, six years ago EDAWN, under the helm of then-new CEO Mike Kazmierski, put a narrow focus on entrepreneurial development in the region.

Key players in the uptick of new jobs and raised capital are tech startups, which have surged into the greater Reno area over the last five years. With a lower cost of living and labor, and a higher chance of sticking out, the Biggest Little City has been growing into a mini-Silicon Valley.

In other words, not only is the ecosystem trending upward, but it’s showing no signs of slowing down.

“The major metropolitan areas are so oversaturated right now,” said McArdle, pointing to the Bay Area as the prime example. “If you want to work in a cool tech startup company, San Francisco isn’t the greatest life choice at the moment. So these second cities are really starting to see resurgence around the tech entrepreneurial spaces.

“And it’s exciting to have Reno in that small group of cities that are succeeding in that.”

A SOUND INVESTMENT

Of course, no startup ecosystem succeeds — or even exists — without a seed capital ecosystem. And as the tech space has exploded in Northern Nevada, investors have taken notice.

Just ask Wendy Alderman, an independent investor who had been interested in backing area entrepreneurs for years. It wasn’t until two years ago, though, that Alderman saw opportunities begin to take shape in the region.

“It’s so exciting because I have always said (Northern Nevada) needs to do something more, that relying on distribution, mining and gaming are not going to get us into the future,” she told the NNBV. “Seeing it finally happen is amazing.”

In the process, Alderman said, it’s sparked a collaborative approach among investors in order to keep startups here, and in turn, bring more in.

“No one is in a position to underwrite a deal 100 percent by themselves,” she said. “A lot of other investor ecosystems its ‘I’m going to get a deal and not you.’ I think the underlying understanding, from an investor standpoint, is we know we will do better and be more successful if we work together.”

Ozmen Ventures, a seed and early-stage venture capital fund, also started two years ago in an effort to help ramp up the investor ecosystem in Northern Nevada, said Kerem Ozmen, principal and managing director of the Reno-based fund.

The influx of tech startups, Ozmen said, has provided incentive for not only local investors, but also those from neighboring California and Oregon and beyond.

“Tech is obviously the hottest space for investing,” he said. “Even though it’s great having diversity and a lot of different types of companies coming up, tech is so well known as the highest growth potential for venture.”

GROWING THE STARTUP COMMUNITY

For Ozmen, the tech startup that “changed the dynamic for Reno” was Breadware, an Internet of Things (IoT) development company that uprooted from Santa Barbara and planted in Reno in April 2017.

“It was the first example of a real tech company with promise that brought in investors from all these different regions,” Ozmen said of Breadware, which currently has four investors, including Ozmen Ventures. “And it was an example of … these companies can not only survive in Reno, but they can really thrive.”

According to Pitchbook.com, Breadware is on the heels of completing a seed round worth $2.7 million. Earlier this year, the IoT development company was honored locally by NCET as the tech startup of the year for 2018.

“We never would’ve received that type of attention in California,” Breadware CEO Daniel Price said of the NCET award, which only validated the company’s decision to migrate some 350 miles directly north. “Nevada, and Reno in particular, is really trying to brand itself as an up-and-coming tech epicenter. There’s this forward-looking enthusiasm grassroots type culture going on here. We wanted to be a part of that and be able to contribute to it and be benefited by it.”

Another Reno-based tech startup echoing that sentiment is Talage — despite the fact the software company, which provides a digital marketplace for small business insurance, struggled initially to find investors in Northern Nevada.

“I’ll be honest, raising capital in Northern Nevada was difficult at first,” said Adam Kiefer, Talage cofounder and CEO.

Consequently, Talage went to San Francisco and got plugged into an accelerator for four months. In May, the company returned to Reno with three Bay Area investors in tow. Soon after, a fourth investor, Battle Born Venture — Nevada’s state venture capital program — followed suit.

On June 27, Talage announced that its operation had secured investment and is now offering expanded services across the country.

“Once we had the buy-in of the Bay Area and had Bay Area investors take the lead, it was easier to get that follow-on investment from Northern Nevada,” said Kiefer, who graduated from the University of Nevada, Reno, and played on the Wolf Pack football team. “We’re really proud to be a Nevada company and have Nevada backing.”

NEXT ON THE HORIZON

Kiefer said he hopes Talage can serve as a “flag-bearer” for the region’s “young, but maturing” startup community.

“I think there are a lot of people that really want the ecosystem to succeed up here,” he said. “That’s step one: the want. And step two is people coming in with resources. You see all these people lending their mentoring time, which is a great start. And you’re getting to see a little bit of capital, which is the next critical component in terms of actually growing a startup ecosystem.”

Like Kiefer, Price and others, all the investors and startup CEOs the NNBV spoke with all see a bright future on the horizon in Northern Nevada.

Kathie Priebe, an investor of Sierra Angels, the longest-standing angel investment group in Northern Nevada, sees the stream of startups channeling in from the Bay Area only growing stronger. Priebe is also an investor of the Golden Seeds Angel Network chapter in Silicon Valley.

“I see a lot of activity, I see a lot of interest,” Priebe said. “Because I’m in the Bay Area at least once a week, I’m hearing companies are very interested in moving out of the Bay Area, if they can. I’m upbeat on our ecosystem. I sincerely believe that there is a tremendous amount of wealth available for investment here.”

Ozmen feels a significant boost will come once area startups start having big successes and big exits. He thinks it’s only a matter of time.

“I think in the next five years, Reno is going to be one of the larger tech hubs on the West Coast, where people are going to come not just for the startup money or the tech community, but also because of the lifestyle,” Ozmen said.

Added Kiefer: “If you can have successful exits and show some return, I think the investment will follow quickly in Northern Nevada.”