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Russ: This is the BusinessMakers Show, heard on the radio and seen online at thebusinessmakers.com, coming to you today from downtown Austin, Texas, at Capital Factory, and I'm with the founder, Josh Baer. Josh, welcome to the BusinessMakers Show.
Josh: I'm glad to be here, and welcome to Capital Factory.
Russ: Well, thank you. I'm glad to be here. It's quite impressive, what I've seen just getting to this table, but tell us about Capital Factory.
Josh: Well, Capital Factory is the entrepreneurial center of gravity of Austin. Pretty much any city that's not Silicon Valley is always comparing themselves to Silicon Valley and saying, "How do we be more like Silicon Valley?" and as I've been there and visited, I feel like one of the major things that they have going is density. It's that everyone there is focused on startups and technology and thinking about the same things, and you go to a Starbucks and there's somebody pitching a VC and somebody writing on the back of napkin and somebody else meeting a cofounder, and so in many ways what we've done is recreate our own little Silicon Valley here in Austin, where we have 50,000 square feet of startups right in the middle of downtown, and when you come here, it's like being in Silicon Valley. Everywhere you go, people are working on tech startups. They're thinking about tech startups. There are investors and press and government officials and other people coming through to meet with the startups, and it's a community center where there are meetups and events and classes and all kinds of other things going on to support that.
Russ: Okay, let's say I've got a startup, and I'm watching this right now and I want to be part of it. Can I just come in and say, "Sign me up"?
Josh: Well, you know, it's - being part of a community is - makes a lot of different options. So there are tons every night of the week, there are free events and meetups and classes going on here that anybody can participate in on and sign up in online, and they can find those on our website, and then there's kind of phases of involvement. So then when you have - start to have a real company, you can then apply to work here and to have a desk or a membership or to use the conference facilities or things like that, and then as you're maybe a little bit further along, you might apply for funding or mentorship and other types of services that we have to offer.
Russ: Okay. So if I wanted to just attend a class or something, is - does that - is there a charge for that?
Josh: There's a variety of them, but I'd say more than 90% of the classes and events here are free. They're organized for free by someone who's volunteering their time. Hundreds of people attend, and nobody pays to be there, and they're - it's just kind of a community event with people teaching and helping each other. It's Ruby on Rails and iPhone programming and search engine marketing and lots of different topics, and then there are some events that are paid, where maybe it's real class curriculum content or other types of things like that.
Russ: Okay. So you have these different categories. Tell me - I mean, I was impressed when I walked in, the number of people and the amount of people. So how many real serious startups are there here in earlier stage? Help us understand that.
Josh: You know, there's definitely a range. We have over 150 startups working here right now, representing about maybe 400 different people, and there are a lot of those companies that are one or two person companies, and I don't know how you judge how serious that is, but they're probably pretty early going and they're trying to find their way. Maybe they're doing a little consulting on the side or other things like that, and then we have many others that start to grow, and they start to have five, ten, fifteen employees. About that time, they start - usually start looking for somewhere else to be. Now some startups try to overstay their welcome a little bit, in a good way, because they just don't want - they don't want to leave. It's a really great place to be. So we've had people get up to 30-40 people here, but mostly it's small teams. It's a handful of people. Up to 10-15 people is kind of the sweet spot.
Russ: Okay. Now obviously, most of these people are probably searching and desirous of funding. Does some of that take place here as well?
Josh: Oh, for sure, and I would actually start - I'd take a step back, and I'd start with talent. People talk about funding a lot, but the number one challenge for every kind of company, big companies, small companies, Silicon Valley or Austin, is talent. It's getting the right people, and if you have the right people, funding's not so hard, and so one thing we - that we do is we really work to try to make this a talent pipeline, and that's part of hosting all these events and meetups. It means that thousands of entrepreneurs and programmers and designers are coming through this space every month, which is what those people want to tap into, and so that's the foundation for it, and that attracts entrepreneurs. It also attracts investors and others that know the talent's here. So then on top of that, we have a bunch of things designed to help companies get funded. First of all, we have our own basically group of angel investors that are our mentors involved here, and so these are successful entrepreneurs. They've built and sold companies themselves before, and they also are angel investors.
Russ: And they're like - there's some sort of official membership to be an angel investor at Capital Factory?
Josh: It's an invitation only type thing, right, and we got about 30 of those now, and so the first thing when companies get involved in our incubator is they get to sign up for office hours. They get a calendar where they can see, "Oh, Bob Fabbio's here and Dean Draco's here and Jonathan Koon's here," and they can go sign up to meet with them and tell them about what they're working on, and there's no obligation for investing in any of that, but very commonly, 75% of the time, the startups are finding their first investors through those meetings, and then once they've got some really great entrepreneur as their first investor, it's a lot easier to get that next investor to come on. In addition to that, we have demo days twice a year, which are opportunities to get up and pitch in front of investors, and the Central Texas Angel Network, which is the angel group here in Austin and one of the largest and most active in the country, they do all of their activities and meetups here as well. So we've constantly got hundreds of investors coming through for them too.
Russ: Okay. Well, I'm sure a lot of our audience has been interested in everything that you've said so far, but they're also business people and they're also real curious about the business operation. So this is a for-profit operation, correct?
Josh: I hope so someday, not so much yet.
Russ: Being for-profit doesn't you're making a profit.
Josh: Doesn't actually - making a lot of money, right. You know, I - it is a for-profit operation, and I think one of the big reasons for that for us is about control and being able to control the destiny of it. We do actually really operate it more like a non-profit. To start with, nobody is here because they think this is how they're going to get rich and make lots of money. I think people will get rich and make lots of money this way, but all the mentors and investors that are here are here because they really enjoy it, because it's fun. They like connecting with first time entrepreneurs and helping them and sharing their experiences, and they want to be in this environment and this energy, and that's the foundation of it. That's - when I sell people on being a mentor, it's, "This is going to be so much fun. You want to come do this," and so I'd say that's the foundation of it, but it is a for-profit venture, and we have this big, beautiful space in the middle of downtown -
Russ: Yes, you do.
Josh: - and we got to pay rent every month.
Russ: Yes, you do.
Josh: So we also - everybody that's here pays -
Russ: It's kind of like the penthouse in this building.
Josh: It is. We're on the top floor.
Russ: We're on the top floor.
Josh: We have beautiful views all the way around of downtown Austin, but it costs a lot of money to be here. So everybody that's here pays rent. Everybody - every desk is covered and paid for, and then on top of that, we invest in them as well, and that kind of timeframe is a seven to ten year timeframe of seeing returns. So we've been doing it for four or five. So we -
Russ: All right, just around the corner.
Josh: We've had a few liquidity events and a few companies get acquired, but we're still kind of ramping up towards that.
Russ: Okay. I'm also assuming this is probably open 24 hours a day.
Josh: Well, yeah, I mean, there's stuff happening here 24 hours a day. So there's people working here all the time. On the weekends, there's hack-a-thons and other kinds of meetups happening. In the evenings, there's constantly things going on. So yeah, it's - there's stuff happening here all the time.
Russ: Right. Now you had this idea, and correct me if I'm wrong, because you've got some experience for sure doing your own startups, right?
Josh: I started my first company when I was a sophomore in college in the first dot-com boom in the '90s, and I was really fortunate. I had a lot of great mentors. I was a good networker, and I was able to connect with people through my university, with people through - that I'd worked with in other ways, and I was - I think I was always able to have some great mentors around me, but for a lot of other people, that's not so easy, and it's hard to get started and hard to get things going, and so that was really the inspiration for this was being able to get together with other people like me, other successful entrepreneurs that enjoyed working with new entrepreneurs and enjoyed investing in them, and get those people together to help support these up and coming entrepreneurs.
Russ: Okay. Do you think you'll ever find another driver for this big bus, because you're going to go off and do your next startup again?
Josh: Well, that's a great question. I mean, I think my wife would appreciate some help, and fortunately as we've grown, we've been able to have lots of other amazing people come in and join the team and help with that. So by no means is this something that I do all by myself.
Russ: Right, right. Well, Josh, I really appreciate you sharing the story with us.
Josh: Yeah, no problem. Thanks for coming.
Russ: You bet. That wraps up my discussion with Josh Baer, the founder of Capital Factory, and this is the BusinessMakers Show, heard on the radio and seen online at thebusinessmakers.com.