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VEGAS INC COVER STORY Can Nevada startups overcome their biggest struggle? STARTUPS, FROM PAGE 1 In spite of the city's recent startup boom, there remains a small number of local investors willing to put cash into tech companies. And the funding gap could stanch tech development in the valley, as most startups earn paltry rev- enue and could easily flop or stagnate without outside capital. Local entrepreneurs and investors point out that it's always hard for tech startups to raise money and build thriv- ing businesses, no matter where they are based. It's also common for start- ups to look beyond their home cities for funding. But if the number of finan- ciers in Las Vegas kept better pace with the number of startups in the valley, it would be easier for local entrepreneurs to hire employees, develop products and diversify the state's economy. As it is now, the local tech scene is rela- tively small and not widely diversified. There's only one big local non-gaming employer – Zappos – and many firms are small startups focused on social media. The biggest local source of investor cash for techies is the $50 million Ve- from Zappos CEO Tony Hsieh and other Zappos executives. The fund so far has invested in nine startups an average of $300,000 each. Beyond that pot of money, Bell, a 34-year-old Las Vegas native, has raised about $225,000 for his 9-month- old website, which helps stylists book appointments and sell hair products. His biggest investor so far is a local ra- diologist, whom he met two years ago through a mutual acquaintance. "I know a lot of people are talking about Las Vegas tech startups, but there's very little funding," said Bell, who is based downtown in a South 4th Street office. Startup founders always have to dem- onstrate to potential investors that they have a strong executive team and solid business plan. But Las Vegas has fewer local investors than other regions, and it can be hard to raise money here, Rumgr CEO Dylan Bathurst said. Bathurst's year-old Internet classified service raised $500,000 from Hsieh, two other Zappos executives and Resort Gaming Group CEO Andrew Donner, whose company bought industry said. Tech startups need inves- tors who also are good mentors and can improve the businesses, not just provide them capital, said Bathurst, a 26-year- old from Kansas. ••• There are dozens of startups in the valley, although it's unclear how many are people's side projects or actual full- time businesses. Typical startups have one to three em- "It should be hard. But is it impossible? No. Are there ways that you can increase your likelihood of getting funded? Absolutely. But none of it's easy." Andy White, VegasTechFund partner the old City Hall downtown and is leasing it to Zap- pos for headquarters. Unlike tech hubs Boston, New York City and Austin, Texas, where many tech investors have partners, few money gasTechFund, which includes money men have people on the ground here. Investors often want to be a short drive from the companies they fund, so they can easily monitor them. Additionally, most wealthy Las Vegans pickings to find local tech-focused in- vestors, said Tommy Bell, founder of Salon Share. it's slim made their fortunes from casino and real estate deals, and despite their busi- ness savvy, they don't always understand the tech world, people in the technology ployees and are run out of apartments or small offices. Until owners get inves- tor capital, the companies usually are self-funded or financed by family and friends. Local executives say there aren't any venture-capital finance firms — groups young, that somewhat-successful tech companies — with offices in Las Ve- gas. And there are only a few "angel" in- vestment groups locally, but they either are new or relatively inactive. Angels social polling company Wedgies, women-focused retailer Ecomom and the bowling website Rolltech. the Each week, White and his partners speak with 30 companies that want cap- ital, he said. "It should be hard," White said of rais- ing money. "But is it impossible? No. Are there ways that you can increase your likelihood of getting funded? Absolute- ly. But none of it's easy." Some Las Vegas startups get more typically invest in unproven startups and spend far less per deal than venture capitalists. VegasTechFund, tech-investment the valley's largest group, was formed only a few months ago. So far, it has in- vested in nine companies at an average of $300,000 each, partner Andy White said. Its deals usually are part of a broader capital push involving other investors. The fund's investments include online | 12 NOVEMBER 2012 | 15