How NestMint fits into Iowa's Venture Capital ecosystem

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NestMint hopes to fund Iowa companies that have garnered support from their local lawyers, bankers, accountants and economic developers.

Earlier: 

• NestMint fund a sign that Iowa companies can grow here via Des Moines Register
• Greater Des Moines Partnership Launches Iowa Equity Investment Fund press release via the Greater Des Moines Partnership

The first step on a new journey can be the most intimidating.

NestMint, an early-stage fund announced yesterday at the i2iowa investors' conference in Des Moines, hopes to make that step a bit easier for Iowa's would-be entrepreneurs.

The first NestMint fund, the Founders' Fund 2014, hopes to raise $1 million. Of that, it could invest up to $50,000 per company, but Tej Dhawan,  principal at Startup City Des Moines and a co-creator of NestMint, estimated an average investment would be $25,000.

“What we are trying to do is that early, early early stage,” Dhawan said. “From a tech perspective, a company that's coming out of Startup Weekend would be an ideal candidate, because they could be the ones that could verbalize their idea, their business concept and all of that. Verbalize it not just to a consumer, but to their banker, their accountant, their lawyer.”

And, those service providers will play a key role in the process. Among the eight requirements to apply for funds are four letters, from a local banker, lawyer, accountant and economic development professional.

Dhawan hopes these connections can help companies grow where they are, anywhere in the state.

“We are not trying to do this just for the four big urban areas – this will be edge to edge," he said.

NestMint will act as an umbrella organization, which could have multiple funds underneath it. Dhawan will operate as the fund manager for the Founders Fund 2014, and make investment decisions with a five-person board. Any accredited investor in Iowa (either an individual or organization) can invest into a NestMint fund or create their own using the open-sourced documents.

The terms for the entrepreneurs - for example, what amount of equity would be exchanged - have not yet been posted on the NestMint website. Dhawan noted that the fund is not specifically for tech companies or for high-growth startups - a promising brick-and-mortar business could apply as well.

Dhawan and Mike Colwell, director of the Greater Des Moines Partnership's Business Innovation Zone, led the announcement. Although those two are the main contact points for Plains Angels, a resource group for angel investors which recently expanded to Eastern Iowa, NestMint is not officially related to the angel group. But, it could serve as a feeder.

“It's that stage where someone will very frequently kill their business,” Dhawan said. “We want to say, yes, you can get it ready, to the point where a Plains Angels or another Angel group can look at it."

How NestMint fits into Iowa's Venture Capital ecosystem 

Earlier: 

• Follow the money: our definitions and reports on terms related to venture capital

• Take the deep dive into Eastern Iowa's venture capital ecosystem: Troy Miller's full paper on the status of VC, as of February 2014

When Troy Miller looked at the venture capital ecosystem earlier this year, he identified the lack of a formal seed fund in Iowa as a key deficiency. One will be created when Eric Engelmann opens the Iowa Startup Accelerator in August - the 10 accepted teams will each receive $20,000 at the beginning of the intensive program in exchange for a six percent equity stake.

While NestMint will be investing about the same amount, and will launch at about the same time (founders hope the first fund will start deploying capital in September, according to the website), the key difference seems to be that NestMint will be open to different types of companies. The accelerator is specifically geared toward high-growth-potential tech startups.

"When there's healthy competition, the consumer wins.  In this case, there is an additional source of seed funding, which is an additional option for the consumer (in this case, the startups)," Miller wrote.

My take: $25,000 seems like a relatively small amount in the tech startup world - consider ClusterFlunk's $100,000 angel round or Higher Learning Technologies $1 million seed round. But, it's likely enough of a runway for an entrepreneur to tell if their idea has legs before seeking additional investment.

What do you think? Let us know in the comments.