In an interview with Simon Rakoff, General Partner at Fortify.vc, a Mid-Atlantic fund for technology startups and active investors with specializations in cyber security, infrastructure, mobile and enterprise platforms, we have a candid discussion about innovation, the future of technology funding and how the government has helped startups and small businesses.
What is your definition of innovation and why do you think it’s important?
Innovation is about creating new ways to make people’s personal and professional lives better. So there are two pieces to innovation as I see it- the first is novelty and the second is the value it brings. A new technology or service that doesn't improve people’s lives is not innovative by my definition. Real innovation happens when someone sees a problem and comes up with a creative solution to that problem, and the result of that solution is evident in the quality of the lives of the people who use the product or service.
Explain the concept behind Fortify.vc.
Fortify is a seed stage venture fund and accelerator. The concept, simply put, is that very early stage companies need several things to have their best chance at success. Those things include a high quality team, a robust network of advisors and mentors, a supportive peer network and, of course, funding. Fortify brings all of those things together and makes them available to our portfolio companies. The Fortify partners are start-up folks ourselves and so we bring a real world understanding with us to the portfolio companies. We've been in their shoes and have raised capital, developed technology products, built teams, negotiated deals and lived the full spectrum of emotional ups and downs that are part of the start-up process. This shared experience and appreciation for what they are doing allow us to really connect with the portfolio teams and help them in very meaningful ways.
Where do you see the future of technology funding heading in the next 10 years?
There are two really interesting dynamics at work right now. On the demand side the costs to launch certain types of new tech companies have come down precipitously over the last few years thanks to:
1) The proliferation of mobile devices
2) The availability of cloud-based infrastructure services
As a result, early stage companies simply don't need as much capital to achieve real traction as they used to. On the supply side there are fewer US venture funds now then there were five years ago and I suspect that trend may continue. However, angel investors in the US are becoming more active, and crowd funding may shape up as a significant source of early stage funding in the near future- although there are still many questions to answer and issues to work through on crowd funding. My sense is that all of these things will come together and will result in an increased availability of funding for tech companies in the US.
What has been the most challenging aspect of starting up Fortify.vc so far?
Time is really the biggest challenge. We like to spend a lot of time with the companies- being as helpful as we possibly can. Supporting our portfolio companies is the best part of what we do but we also have to make sure we are continually supporting the larger ecosystem, participating in important policy discussions at the local, regional, national and international level and, of course, looking for those next great companies. Balancing these things can be challenging- but it never feels like work.
What has been the most rewarding?
Seeing the portfolio companies grow and develop is what this is all about and there is really nothing more rewarding that that. I've been fortunate enough to be there when one of our companies launches their first product, signs up their first customer and receives an acquisition offer. There's just nothing better than watching them experience the results of working hard with focused purpose.
Do you believe the government should do more to aid small businesses like Fortify.vc? If so, what should they do?
Both the DC city government and the U.S. Federal government are doing an incredible job supporting small business- particularly tech companies. Under Administrator Mills’ leadership, the US Small Business Administration has done a remarkable job making resources available for entrepreneurs and organizations who support them around the country. They've taken significant steps in streamlining the process to identify and tap into a vast array of resources that help make entrepreneurship possible and, as a direct result, create jobs.
Likewise, Mayor Gray and his administration have shown a deep commitment to supporting small businesses in the District. So much so that DC was recently ranked the #1 U.S. city to go if you want to start an emerging technology company.