Ross Baird’s new baby boy was born on the 4th of July, an auspicious precursor for his new book, which is filled with love of country and solid suggestions for reviving places outside the venture capital hotspots of the Bay Area, Boston and New York.
Baird, the founder of the venture capital firm, Village Capital, is smart enough to acknowledge that the labor of his wife, Jen, outstripped his own in writing The Innovation Blind Spot: Why We Back the Wrong Ideas―and What to Do About It (Amazon, IndieBound). Still, the book is a must-read for investors and a needed corrective to the dominant (and largely inaccurate) storyline about startups and VC funding.
Rather than living in the golden age of entrepreneurship, we are in the midst of a 40-year low in the rate of new business starts. Outside the top 20 markets, more firms are dying each year than are being born. The vast majority of VC funding goes to the usual hotspots, and only tiny percentages fund entrepreneurs who are women or people of color.
Baird tells the story of a fellow UVA grad, Jerry Nemorin, CEO of Lendstreet, which helps low-income people refinance student and other debts at reasonable interest rates. About his early fundraising challenges, Nemorin told Baird, “Venture capitalists are all about pattern recognition. I’m a black guy in central Virginia solving poor people’s problems. I’m zero for three.” (LendStreet, now based in Oakland, Calif., has subsequently raised tens of millions of dollars and helped thousands of people refinance their debt).
Overcoming such blindspots is not only about equity and fairness. Baird points out that investors who look for companies and entrepreneurs in overlooked geographies and demographics can pay less and achieve equal or greater returns. Smaller investment funds historically outperform larger ones, he says, and funds that invest in the middle of the country do just as well as those on the coasts — and pay roughly half for their stakes in equivalent companies.
The decline of entrepreneurship is also hurting job-creation and community health. Small and medium-sized companies produce the bulk of new jobs and local companies are more likely to support Little Leagues and local nonprofits.
“The jobs that we are losing for average middle-class people are not coming from automation or offshoring. They are coming from increasingly consolidated big companies and a dearth of startups,” Baird told me in our interview. “If you’re worried about jobs in Tulsa, you need to think about the businesses forming in Tulsa. Those are the firms that are going to employ people.”
Baird sees the makings of a popular, even populist, movement to restore hollowed-out American cities with local entrepreneurs backed by community banks and new forms of capital. Village Capital has pioneered a form of peer-review, in which entrepreneurs in the firm’s training programs themselves pick who gets follow-on capital. Baird says that results in a more diverse portfolio — and better performance.
“The big battle line in the next decade is not left versus right or liberal versus conservative,” he says. “It’s big versus small and medium.”
With a winning platform, a sunny personality and a new book, it was natural, even predictable, to ask about Baird’s own political ambitions. For his answer, you’ll have to listen to the podcast.