Wednesday, July 16, 2014
Why Mucker Capital Is Putting More Money To Work In LA Startups
Story by Benjamin F. Kuo
For the last few years, startup accelerator MuckerLab has been helping very early stage companies define and grow their businesses, using the accelerator model and small investments to get companies to the next stage. Recently, the team behind MuckerLab has made a subtle shift--becoming Mucker Capital (www.muckercapital.com)--focusing on seed stage investments. We caught up with Erik Rannala, co-founder of both, to understand the move and why Mucker Capital felt like it needed to put more capital to work in local, seed stage startups.
Talk about the shift from MuckerLab to Mucker Capital?
Erik Rannala: We haven't so much made a shift, in a sense that we're doing what we've always been doing, which is seed stage investing in companies. What we've done now is ramp up the size of our seed investments, and started to do more of them. The way we view it, is we're finding the best entrepreneurs in Southern California, and finding ways to work with them at the seed and pre-seed stage, and working pre-seed and smaller investments that are raising $1M to $3M in funding. This allows us to participate in a slightly larger way in those rounds. Our seed investments are in the $100,000 to $500,000 range, roughly, and the accelerator still has the standard arrangement we've had.
What made you decide you needed to put more money into companies here?
Erik Rannala: Really, it's the quality of the companies in the market, plus the level of activity. When we started doing MuckerLab, we were already doing both seed and pre-seed investments. We spent our early days validating the hypothesis that Los Angeles is a good market for seed stage investments through MuckerLab. We made eleven small angel and seed investments during that time, but didn't really publicize it that much. This has always been part of the same plan, and although we had more focus on the accelerator initially publicly, we also had made a handful of seed investments, on a smaller scale. Now that we've been up to this for a couple of years, and we've seen the quality and quantity of startups in this market, we decided to ramp that investment activity up.
What's the biggest thing you've learned in your time in this market?
Erik Rannala: Honestly, I continue to be pleasantly surprised t how many good startups there are in this market. When I moved here from the Bay Area two and a half years ago, before we started MuckerLab, I had only been watching the market from afar. I hadn't worked or lived in LA, in the ecosystem. Once you are here, and in the midst of it, you start to see not only the quality and quantity, but the diversity of companies here. I think that people from outside of LA think the ecosystem is focused on just a couple of verticals. Everyone thinks that it's all about media and content because of those big industries in town. However, we see a much broader diversity and breadth of things here. We've invested in security software, software-as-a-service, marketplaces, and many other categories I think people wouldn't necessarily think--looking from the outside--would exist in LA. There's a breadth and depth and diversity of types of companies and talent here, which is really pretty amazing.
Having been here for awhile, is there anything you think entrepreneurs ought to be doing more of here?
Erik Rannala: One thing, is I feel like entrepreneurs should be reaching out not just to us, but reaching out to other people in the ecosystem, building relationships, and really talking with other entrepreneurs, venture investors, and angels. I think they do that, but the more they do that, the more it will contribute to their success. One of the things that really drives a successful ecosystem is that community of relationships. I think lots of entrepreneurs view that they have to do things themselves, that they have to build it, and get it done. I think the more there is a sense of collaboration across companies, the more the riding tide will lift all boats. The more collaboration and collegiality, the more people ask for help, the more they get to know each other, the more they'll build relationships. That will tighten the connectivity between companies and people, and the stronger we'll get.
Finally, what's on your list of goals for the next year?
Erik Rannala: Honestly, our goals are relatively the same. Find the best ten to fifteen companies at the accelerator or pre-seed level, the best ten to fifteen companies at seed level, and find ways to work with them. Usually, that means we invest in them, or that they go through the MuckerLab accelerator. We want to find the best entrepreneurs and work productively with them, typically through an investment. That goal has been pretty consistent and will remain consistent over time.