One of my VC friends from the Valley tweeted a recent Crain's article by George Deeb on Style Seek at me. It's a new start up that tried to raise money in Chicago. He told me he hopes the article isn't reflective of the attitude here.
George chastises the Chicago community for not investing. But that is not exactly true. I know some Chicago people that wrote checks for the deal. So, all is not what it seems.
If you don't know about Style Seek, it's a pretty cool concept. They have a bunch of men's fashion bloggers that work with the site. The bloggers recommend fashion, then a search engine delivers perfectly targeted content for the shopper to buy.
Will it work? Dunno.
I saw the concept presented. I didn't invest. It's not that I wasn't interested, I was. However, men's fashion isn't a particularly hot market despite Bonobos and Trunk Club. When I am around women, and because of my family I am around A LOT of women constantly, they talk about fashion. Fashion engages them. When I am around men, we never talk about fashion. They not only have to prove the concept, but they have to prove the market. Men's stores around the country are in a lot of economic pain, and it's not just because of the economy.
Can companies raise money here? Sure they can. Plenty do. Since November, I think I have seen at a minimum, 60 deals. Not all of them great but many are intriguing. I have seen them through HPA, my office hours, had them sent to me by my network and have spent time with entrepreneurs as I travelled around the midwest. Style Seek isn't the only fish in the pond. As an angel investor, you only have so much capital to go around. You can't write a check to everyone and the economic concept of scarcity becomes a real living thing.
The other thing that sometimes hangs a deal up is the terms. I don't remember all the particulars on Style Seek, but I seem to recall they had an uncapped convertible note. Personally, I would not invest in a convertible note that is uncapped. From talking to other investors I know in Chicago and all over the midwest, they wouldn't either. I know they do that in the Valley. Some in the midwest do. But, as an angel investor I am assuming enough risk. Shouldn't I at least have a general idea of the valuation I am taking the risk at?
Style Seek has a good roster of investors. But just because you have a good bunch of investors doesn't guarantee success. In 2008, I invested in Win Detergent. It was the official detergent of the US Olympic team and FIFA's World Cup. It had distribution all over the US. Had a loyal following. It's spokesperson was a gold medal winner! Had a nice roster of investors. How could I lose? It went bust. I lost everything. Since going broke and washing us all out, the company has reconstituted itself. Maybe the next investors will have better luck.
Midwestern investors aren't as risk loving as coastal investors. I'd accede that point to anyone. We are our own breed. But it doesn't mean we don't take risks. We do. Maybe the problem isn't the midwestern mentality. Can't we have an honest disagreement about markets, potential, and deal structure?
I am glad Style Seek filled out their round. I signed up for their website and look forward to trying it out when they launch. Personlly, I like to dress well and have a weakness for shoes and great tailored clothes. No doubt, Style Seek will need another round of financing. Perhaps they will knock on my door again. If they don't and are wildly successful, I missed a good deal. It won't be the first time and won't be the last.
My only question, why didn't George invest?
UPDATE
I was incorrect. There are some midwesterners in the deal as George alluded to. I misread that.
