On October 29th, NFC hosted its 2021 Annual Meeting. We were joined in person and virtually by many friends of the firm as we provided an update on the exciting events of the past 12 months. We owe a tremendous thank you to our Limited Partners (LPs) for their continued support. NFC LPs provide far more than just capital to our funds: they are co-investors, mentors to NFC and our portfolio companies, and a steady source of deal referrals in our region. NFC’s mission of funding entrepreneurs of impact, utility, and value in the Rocky Mountains wouldn’t be achievable without our LPs. The NFC annual meeting serves two purposes. First, we welcome the opportunity to communicate our investing strategy, portfolio performance, portfolio company milestones, and future outlook to our investors. LPs also heard from several NFC portfolio company CEOs, which this year included Quique Nagle, Founder and CEO of Advisr, Erik Udstuen, Founder and CEO of TwinThread, Mark Ranalli, CEO of Biosqueeze, and Corey Thuen, Founder and CEO of Gravwell. We heard from many LPs that they left the meeting inspired by the passion and vision of these CEOs. Second, the annual meeting forces us to reflect on our activities of the past year and review our outlook for the future. How have market conditions changed? How are the investments we are seeing today different than in the past? How does our investing process need to change and evolve? Can we be doing more to support our portfolio companies? What more can we be doing to support the regional venture / entrepreneurial ecosystem? This post is meant to share the general takeaways we communicated to our LPs at the annual meeting. |
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| State of Venture in the Intermountain West |
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| Market conditions in venture are fast approaching exuberance. Median pre-money valuations for the types of companies we typically invest in (US B2B and IT) increased from $27 million in 2020 to $40 million in September of 2021. The median late stage VC backed company is now a unicorn, with a valuation of $1.1 billion. VC firms are raising record sized funds and deploying capital at furious paces. VC funding in Q3 of this year was double the Q3 2020 total. Importantly, these conditions are not exclusive to coastal venture markets; we see similar trends in the Intermountain West today. While these conditions can be positive for companies, which can raise more capital at favorable valuations making rounds less dilutive, it makes for a challenging environment to invest in. However, even with froth in markets today, NFC is still finding attractive opportunities, highlighted by our most recent investments in Biosqueeze and Gravwell. |
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| Even with record amounts of venture capital being raised and deployed, up and down the Rockies companies face challenges raising funding. We recently conducted an analysis of venture funding across the United States and found venture funding per capita in the Intermountain West has been and still is a small fraction of venture funding in coastal states. This creates significant headwinds for IMW companies during the journey to growth capital. In 2021, venture-backed companies in the Intermountain West (B2B and IT) raised 83 percent of what their coastal counterparts raised at the Series Seed and just 78 percent of what their coastal counterparts raised at the Series A. Chronic underfunding puts IMW companies and founders on an uneven playing field, which requires scrappy capital efficiency in order to compete with their better funded coastal peers. Growth firms deploying capital demand companies meet the same milestones to secure funding regardless of geography, putting IMW companies at a systematic disadvantage. This is exactly the challenge NFC has been addressing in Montana since 2015, with spectacular results thus far. Since NFC’s founding, the ability of Montana founders to raise venture capital has fundamentally changed. We have shown the slide below to our LPs at the last several NFC annual meetings to highlight the impact NFC has had on venture funding in the state. Montana is fast approaching the one billion dollar milestone of total VC dollars invested and more national firms than ever are interested in Montana companies. Importantly, for every $1 NFC has invested in its Montana portfolio since its founding, $9.52 of outside capital has been invested in our Montana portfolio companies. We are deeply proud of the impact NFC has had on the accessibility of capital in our home state. |
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| We believe regional VC firms will continue to play an important role expanding capital availability in other IMW states. Entrepreneurs in Idaho, Wyoming, Nevada, New Mexico, and Arizona face many of the same challenges as founders do in Montana, and NFC will look across the region to find and back the best entrepreneurs in the Rockies. |
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| Funding Innovation Across the Intermountain West |
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| The NFC team has continued to expand, more than doubling since the last annual meeting. |
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| Over the past year, NFC has added four new team members. Latham Turner joined as an operating partner, Kristen Suddath as a senior associate, Garrett Leach as an analyst, and Mandy Culver as an executive assistant. The new team members provide the leverage NFC needs to capture investment opportunities across the Intermountain West. The entire NFC team continues to be excited by the opportunity we see up and down the Rockies. Recent travel to Wyoming, Idaho, Nevada, Utah, and Colorado reinforces our belief that our firm can play an active role funding companies currently underserved by venture markets. At each NFC annual meeting in the past few years, we have shared this CB Insights map of the most active VC investors in each state. This year, after making our first seed stage Idaho investment in Gravwell, we are humbled to be on the map as the most active VC investor in both Montana and Idaho. We are thrilled to be playing an expanding role in venture markets across the Intermountain West. |
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| We continue to be amazed by the capable and visionary founders and entrepreneurs already in and moving to our region. Companies such as OnX, TwinThread, Biosqueeze, Advisr and many others in our portfolio are having impact on a national and global scale. While the COVID-19 pandemic has been difficult in many ways, it has also accelerated the inflow of financial and human capital into the Intermountain West, providing the inputs for continued creation of innovative and impactful companies. We presented this slide to our LPs at the meeting, highlighting the involvement of our firm across communities in our region. NFC is playing an active role in university and tech ecosystems in the Rockies, supporting founders and diversity through multiple mechanisms, partner Les Craig produces a podcast, and partner Will Price continues to write about Rocky Mountain venture on LinkedIn. |
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| We maintain a robust confidence in the Intermountain West as a stellar place to live, work, and invest. All of us at NFC are humbled by the quality of people we work with and the impactful missions and values of the companies and individuals in our orbits. It is a privilege to play this important role as a regional VC firm, and we look forward to continuing to unlock the potential of entrepreneurs across the Intermountain West. The NFC Team |
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If you know a great company in the Northern Rockies, send them our way!
Email us a deck at [email protected] or reach out to us on our website. We would love to hear from you! |
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