James Burgum is co-founder and Managing Director of Arthur Ventures. Based in Fargo, Arthur Ventures is the leading private equity firm in North Dakota and sits at the center of the nascent startup community of the Red River Valley. Arthur Ventures has recently been in the process of creating their second investment fund, and has been organizing the first annual Cultivate conference series.
We sat down with Burgum to explore what’s new with Arthur Ventures and the business community of which they’re a part.
EP: Tell us about Arthur Ventures’ new investment fund and how it is an evolution from the first Arthur Ventures Fund.
JB: I think, when I look at our first fund, in large part it was a giant experiment to see if we could figure out this thing called venture capital and if there was enough demand for it. One of the concerns we had putting that first fund together was would we actually see the deal flow? Enough quantity, enough quality deal flow to find opportunities that were investible. We certainly largely proved ourselves on that one – there’s more deal flow than we ever anticipated, and we’ve learned a lot.
We ended up deciding to put together a second fund, but we wanted to build a team up first. I think we needed to bring more deal transaction experience on the team. Our new team members have done a lot of that. Just a tremendous amount of experience both in terms of everything that goes into deals, but also what makes deals successful. We’ve got a really good team now that understands not only what it takes to do a deal and make an investment, but also what it takes to scale and grow a business.
At the end of the day, Arthur Ventures is really trying to position itself as a business-building firm. Now we’ve got a little diversity we’re bringing on the team and we’re excited about that.
EP: What sorts of developments have you seen in the Red River Valley and what makes the region exciting for startups?
JB: There are some amazing things happening in the Red River Valley. I think we have some natural competitive advantages here. Talking recently with some of the guys from Sequoia Capital, they asked us “why Fargo?” We said there are a couple of reasons. One, when you think about building a startup in Silicon Valley, the amount of competition for talent and engineers…we think we have just as good a talent base, we have just as good a capability, and we just don’t have as much competition for that talent in this region. Within this 90-mile radius, we’ve got a lot of young talent being churned out every year from the major universities, so we think there is a tremendous opportunity. If you look at Silicon Valley, every happy hour is a job fair and it’s so easy to go from place to place to place, and there’s a lot of churn. Here, if you want to build a big business and dominate a market segment, this is as good a place as any to do that. The other joke that I throw out is that it gets cold here in the winter…we look to work, because what else are we going to do? Culturally, it’s just a fantastic place to work and live, and be part of a community where people really care about one another and want to work with another.
EP: How do local Universities play into the startup scene and how are they doing right now?
JB: I think we’re on the right track. The local research universities understand the challenge and want to be a part of supporting the entrepreneurial ecosystem. When you’re doing 100s of millions of research annually, you have to figure out a way to take some of those dollars and make sure we have opportunities to commercialize some of the research that’s occurring. I’ve learned in working with the universities over the last ten years that there are ways to become more efficient and effective at doing that, and I think the leadership understands that. This is a national issue. I heard the president of the University of Minnesota recently say that there are two types of universities out there – those that get it and those that don’t, when it comes to research commercialization. They are doing some amazing things there in terms of a seed fund and a venture fund for students and faculty trying to commercialize ideas. Those are the kinds of things that make you say, hey, these guys get it. I think NDSU President Bresciani and Provost Rafert get it. There’s huge opportunity and we’ve got to keep improving all the time.
EP: What startup company would you cite as an example of one that you admire, and why?
JB: I am impressed with what Dwolla is doing. They’re kind of the rockstar for the Midwest and have attracted a lot of attention nationally. They really are taking an approach we like to see, which is fixing broken systems. There are all sorts of systems that are broken. One of the systems that we’re taking on is healthcare. We sit here and listen to politicians and leaders trying to figure out how to save our country from the disaster that is our healthcare system. But our approach is that it’s not going to be solved by politicians in Washington DC, it’s going to be solved by entrepreneurs here on the Prairie, using technology and innovation to disrupt the system. We think we have to provide the tools and the insight for people to make different decisions and change the incentive model around healthcare. Entrepreneurs like the guys at Dwolla looked at a broken system and said “we’re going to attack that head on.” That’s the kind of stuff we get excited about. I’m really looking forward to finding those kinds of game changers for our next fund.
EP: Tell us about the Cultivate events and how they came about.
JB: The background on Cultivate is that we had our first fund and all these partner companies of ours were going through similar experiences. They were different companies, in different stages and different markets, but at the end of the day when you’re trying to build a company, everyone faces the same roller coaster and a lot of the same challenges, from building teams, to building organizations, to building culture. There are so many things these guys could learn from each other, we just said let’s get these guys in the same room and let’s share.
The Cultivate experience was originally an opportunity where we brought partner companies together with other key members of the Arthur Ventures community and said today’s a day where we’re going to step back from the chaos and we’re just going to be vulnerable about the good and the bad and share mistakes and what we’ve learned. We’re going to bring in people that have been through it before and have scaled startups into billion dollar companies.
Then we said, we’ve got all these fantastic people coming in but we’re just sharing within our partner company ecosystem. A broader mission of Arthur Ventures is building an ecosystem throughout the region, where we’re inspiring entrepreneurs, challenging people to take risk, and we’re changing culture. So we decided to do a public event and try to cultivate each of us, individually, as risk takers and entrepreneurs. That was the idea behind Cultivate.You. A lot of people go through life thinking of a lot of ideas, but they never do them. Cultivate.You is about inspiring those people to take action.