Post-36|86: VC Mitchell seeks dealflow, Nashville affiliate candidates
ANDREW Mitchell, the Consumer/Retail-focused founder of Brand Foundry Ventures (BFV), is following two Tennessee startups, scouting for a possible network affiliate here and raising money for BFV's $50MM Fund II.
New York- and Austin-based Mitchell served on a panel of startup pitch judges during last week's 36|86 conference in Nashville last week. Chattanooga startup Torch (VESTA Technology) won, taking home the $50K cash prize. Torch offers a wi-fi router to help parents curate media content accessible to their children.
Charlie Brock, CEO of 36|86 sponsor LaunchTN said last week's judging was "very close," adding that some investors attending said this year's field of 36|86 startups was "our strongest field yet."
Mitchell also said the contest was a tight one, with Torch winning the favor of the group of 36|86 judges "by a fingernail."
Mitchell, 38, regularly makes tough decisions as portfolio manager for Brand Foundry Ventures, which he established in 2014.
He honed his decision-making skills through earlier successful investments in such companies as Birchbox, Warby Parker, Events.com, Chloe+Isabel and others, according to BFV literature. His LinkedIn is here.
Earlier media coverage said BFV's first fund closed at $20MM. Mitchell said that fund now holds stakes in 16 companies and has some dry powder remaining for "three or four more deals" and reserves for follow-on transactions.
Overall, said Mitchell, BFV investments tend to fall in the $200K-$300K to $1MM range, and portfolio companies tend to be high-growth, high-margin and preferably disruptive consumer e-commerce plays, riding a continuing wave of consumer disengagement from bricks-and-mortar shopping toward online shopping experiences.
Mitchell said BFV looks for opportunities to provide an attractive startup's first institutional check in a true Seed round totaling perhaps $1MM.
"I want to touch and feel" the product, said Mitchell, explaining that his firm typically opts-away from situations in which proceeds of a raise will be dedicated to continued software development.
Instead, startups of interest to BFV have often raised $300K or more through founders, friends and family; have made some market entry and have charted a growth map; and, though revenue is not required, may be generating $10K-$15K revenue per month, Mitchell added.
BFV's typical Consumer startups will target such markets as San Francisco and New York, and some robust lower-tier markets.
Asked whether Nashville and Tennessee can establish clout in the tech-driven Consumer startup arena, Mitchell said that's ultimately up to entrepreneurs.
For, he said, entrepreneurs like 36|86's winning Torch Founder Shelley Prevost must ultimately determine where they will make their stand. If adequate capital, business savvy and market access can be secured in-state, then Tennessee's comparatively low startup operating costs and other advantages could carry the day.
Meanwhile, he said, Launch Tennessee and other actors should continue telling the story of the state's startups, ensuring that institutional and strategic investors in larger cities regularly read or hear about investments in Tennessee.
BFV's Fund II recently had its first close and is soon likely to announce its first investment, said Mitchell.
He said he would very much like to complete some transactions here, partly because he knows strong teams can achieve a lot more in Tennessee's lower-cost business environment than in such major money-center markets as San Francisco or New York.
Mitchell confirmed he's tracking two Tennessee startups that -- although "a little young" -- might get a nod from the new fund, which generally seeks early-stage and emerging-growth companies for its portfolio.
BFV funds are drawn to "high gross margin emerging brand concepts in the E-Commerce, Mobile, Consumer Products and Consumer Devices categories," according to BFV materials provided to Venture Nashville.
In addition to investment, BFV offers gratis to help its portfolio startups connect with sales, marketing and other advisors via BFV's "Collective" network or by other routes. BFV accepts no fees from any party for such referrals to members of the Collective.
Though Mitchell says he's regularly in touch with Brock and other Tennessee business contacts and, for now, can keep an eye on Nashville himself, he'd welcome hearing from Nashville firms interested in becoming members of BFV's Collective network.
That said, in order not to "waste everyone's time," he emphasized that folks interested in exploring the Collective should know that BFV seeks only affiliates that have team members who are heavily experienced and of the highest caliber personally and professionally.
Upfront, he said, firms interested in joining the Collective should already be keenly familiar with the reality that early-stage companies require "high touch" services -- despite their often-meager ability to pay, all of which usually translates into reduced advisor fees.
Current individual investors in BFV funds include executives from Lazard, Sun Apparel, Talenti Gelato, Super Valu, Haagen Dazs, John Varvatos, Under Armour, as well as general partners from private equity and hedge funds, foundations and others, according to company materials.
BFV also says it has at least one strategic relationship with an undisclosed consumer growth fund. VNC