There was too much money on the line for the three dozen or so local executives in attendance to ask softball questions.
During three presentations Jan. 29, some seated in the California Avenue offices of Kern Venture Group asked how the entrepreneurs standing in front of them intended to scale up and start claiming a bigger share of their market. Others in the audience wanted to know how the companies planned to spend potential investments of as much as $200,000.
"They were very rigorous," Bakersfield businessman Morgan Clayton, one of KVG's general partners, said of his fellow panel members, who he described as a "very, very, very, very smart group."
As happens in the television show "Shark Tank," one of the three companies making an investment pitch that night was eliminated from further consideration. Two others were selected through a series of votes to move on to face greater scrutiny by KVG's two managing partners — and, possibly, negotiations that could result in an investment.
More to come
Later this month it's scheduled to happen again, with two or three new companies making their private pitch — and on it will continue, monthly, for two or three years until the county's first angel investor group has doled out the $2 million to $4 million it is raising for the benefit of investors, as well as the local economy and the community as a whole.
Notably, neither of the companies that made the cut is locally based. But one of them, a San Luis Obispo water-usage data company called Flume, has an employee in Kern. And the founder of the other business, Irvine's P.S. Let's Eat Inc., a food company focused on nutrition and consumer convenience, grew up in Bakersfield.
This expanded definition of local benefit wasn't a deal-killer for one of KVG's general partners, Bakersfield business consultant Sheryl Barbich.
"We're not eliminating the potential to invest in things that might be a really good investment of the group that's not Kern County, as long as there's some tie," she said. "Our intent is to be primarily focused in the county."
One of KVG's managing partners, John-Paul "JP" Lake, said by email both companies would use investment money to expand sales and marketing in order to grow their revenues faster. In exchange for the money, KVG would gain a seat on the companies' boards of directors or serve on an advisory board. Such funds typically do not see a return on their investments for two to 10 years.
No more than about 25 companies would likely receive an investment by the fund. But if the first fund goes well, Lake noted, a second fund might be launched. It's possible some companies awarded a first-round investment could receive money during a later round.
KVG is about more than making money for its investors. The group is working with other private organizations and government agencies to promote entrepreneurship in Kern County, whether it's by establishing small business incubators or helping sponsor amateur business pitch competitions. One percent of the fund is earmarked for competitive grants supporting business students and other aspiring entrepreneurs.
The effort represents Kern's first concerted effort to foster the kind of hyper-entrepreneurial culture that has taken off in major cities across the country. In places like Silicon Valley and San Diego, small businesses vie for incremental investments that can help diversify their local economies, sometimes adding substantial local employment and making millionaires of their founders, executives and investors.
KVG has received "serious" pitch materials from 56 different entities since the investor group got off the ground last year, Lake said. He said the six of them are at a stage where they're ready to make a presentation at an upcoming KVG pitch night. Four operate locally, one works in Fresno and the sixth "could have a direct positive impact on affordable housing in Kern."
Jacob Panero, CEO of local waste-hauling company Varner Bros. and a general partner at KVG, said both companies that prevailed at last week's pitch night demonstrated great potential: Flume has a sound product and strong management, and P.S. Let's Eat, which does business as Elli Quark, looks to do well in the consumer trends of nutrition and convenience.
While the entrepreneurs making their case were savvy, he said, so were the people asking questions.
"I think the process was very interesting, where we had a lot of very experienced people in the room with a good cross-section of businesses" represented in the audience, he said.