John Machacek, Chief Innovation Officer for the Greater Fargo Moorhead Economic Development Corporation, has worked with countless startups throughout our community over the years. He knows their ups, and their downs, but most of all, he knows the questions to ask them. Here are John Machacek’s 10 questions for Carter Steffes, Managing Partner, New Era Ventures.
1. Will you please tell me your New Era Ventures elevator pitch?
New Era Ventures is an early-stage venture capital firm that invests in America’s next generation of startup entrepreneurs. We believe that Gen Z holds the keys to America’s future, and our mission is to identify and support the next generation of founders who are willing to bring a brighter future into existence through innovative technologies. Currently, we operate a venture syndicate made up of over 100 individual members who invest alongside us.
2. These interviews I do are typically with startup entrepreneurs, and normally I wouldn’t consider a venture firm as a “startup.” However, knowing that you created New Era Ventures from scratch and are testing out innovative ways to run it, I thought you’d make a great interview subject about your journey of starting. How would you compare New Era Ventures to a so called startup?
I think the first thing that comes to mind when comparing New Era Ventures to startups is that we kind of started it by accident. My partner Murtaza and I were scouting for a few funds and family offices on our nights and weekends. Eventually, we grew frustrated that we didn’t have decision-making power or sufficient skin in the game. Starting our own syndicate was the best way to solve both of those problems and to start building a track record of our own. After making a few more investments and some personal introspection, we aligned on a mission to build a new venture firm fit for the next generation of founders
Another way we might be compared to most early-stage startups is that we’re relatively unproven, so we’re having to make the most of what we have. Most venture capitalists have some sort of pedigree to lean back on whether it’s from a startup exit of their own, a stint at an elite Silicon Valley firm, or years of operating experience at leading tech companies. We have some unique advantages and experiences to hold on to, but with atypical backgrounds, we must get creative with how we build out our own unique advantages and communicate them.
From an operational standpoint, we’ve thrown many things at the wall to see what works and what doesn’t. We’ve had to hustle our way into deals through timely and/or useful introductions for founding teams. We’ve tested different storytelling strategies and pitched dozens of ideas to investors to see what resonates. We’ve built out internal software to support founders and tested different ideas and features to figure out what’s most useful.
To sum it all up, building New Era Ventures has been an iterative process, and it will surely continue to be well into the future. The day we aren’t testing new ideas and processes is the day that we dig our own grave—just like a startup.
3. When we first met, we had breakfast on the morning you were heading out east to Maryland for grad school for finance. I looked it up; it was August 2021. From then to now, what led you to create the fund and then move back to Fargo?
I look back at August 2021 quite fondly because my life before moving out east was very different, and I was a much different person. I had no idea about the people I would meet or the things I would experience, but I was eager to find out.
My time in Maryland, and eventually New York City, included several adventures between attending grad school, venture scouting, working for a student-founded startup, dropping out of grad school, working for a venture firm full-time, and eventually founding New Era Ventures.
The common denominator in all of my experiences was that my passion and energy were drawn into the startup economy. Since getting my first taste of startups as a student investment scout, I’ve been obsessed with the excitement, volatility, purpose, and extraordinary people within the startup tech community.
When we started New Era, I was living in New York but always kept a close pulse on what was happening back home in North Dakota. In considering where we wanted to build our firm, we felt that North Dakota possessed some unfair advantages and long-term tailwinds for its startup economy at large. The abundance of resources in this region, coupled with the willpower and helpfulness of its residents will make the state an attractive place to do business for New Era Ventures and many others well into the future.
4. So that is a bit of the origin story motivation, but can you tell me more about forming New Era Ventures with your business partner?
My partner, Murtaza Bandukwala, and I met online in a Slack group called “Gen Z VCs” while we were both student investment scouts. We shared deals back and forth for about a year and a half before we finally met in person at one of Charlie O’Donnell’s fireside chats in New York City. Upon meeting and chatting about a few startups that excited us about, we found mutual conviction in one called Mentra. We were eventually able to secure some allocation in their seed round and we partnered with a few angel investors to invest via a special purpose vehicle.
We learned a lot through the challenges of closing that first deal and we rolled those lessons into a couple more deals. The first few months of working with each other allowed us to build conviction in each other as partners. I think that we both admired each other’s intensity and dedication to the work. The decision to pursue something bigger was obvious at that point.
5. Will you please explain to me, and the reader, what a Special Purpose Vehicle is?
A special-purpose vehicle (SPV) is a legal entity allowing multiple investors to pool their capital and invest in a single company.
A few of the benefits of SPVs in startup investing:
- Lower investment minimums, which can then make it easier to get access to early-stage venture as an asset class. For reference, we typically take investor checks as low as $5,000.
- Startup founders can consolidate individual investor stakes into a single entity on the capitalization table, simplifying equity management and reporting for future investment rounds.
- There is strength in numbers. Some SPVs are made up of dozens of investors and sometimes hundreds. When a startup asks for help from its investors, syndicates are often great supporters because there are so many potential helpers involved.
6. To date, would you say there is a sweet spot for New Era as far as the type of startups or investors you are working with?
For startups, we typically invest in pre-seed and seed-stage tech startups with a focus on Gen Z founding teams across the United States. We’re sectoragnostic and have invested across various industries including consumer fintech, cybersecurity, edtech, gaming, and more. We do not lead investment rounds and require a lead investor before participating in any startup’s financing round.
As for investors or limited partners, our investors come from many different backgrounds although the majority of them are current startup founders, former startup founders, startup employees, or big tech workers. We’re open to working with investors from any background as long as they are accredited and align with our mission to support the next generation of startup entrepreneurs.
7. In the time I’ve known you, I have seen how well you have done in developing relationships with a wide variety of people all over the country. You are well-liked and I think that helps as your new connections are willing to make new intros for you to not only broaden your network but get behind you on what you’re working on with New Era. As your network grows and you’re helping connect founders, how are you going about managing that?
Venture capital is a relationship business through and through, and building a Rolodex of potential helpers for your portfolio companies is paramount. These helpers could be investors, customers, potential hires, service providers, industry experts, etc. Once we decide to invest in a founding team, it’s in our own best interest to do all that we can to make relevant and timely introductions for the founding team with the hope that those contacts might have a material impact on the business.
One way that we’re aiming to operationalize and scale this process is through our own internal operating system. In its current state, we’ve built an introduction tool for our founders that allows them to parse through our personal networks and get in touch with anyone who might be relevant by simply clicking “Make Intro.” We have several other new features in mind and are always listening to our customers, the founders, to improve this product. Although our operating system isn’t novel in its current form, it’s the foundation for what we hope will be one of the many differentiating factors convincing founders to work with us over other early-stage investors.
8. Looking at your portfolio of companies you’ve invested in, can you please tell me about any recent ones or companies you’re excited about?
Jokingly, this is like asking a parent who their favorite child is. We’re incredibly proud and honored to be involved with all of our portfolio companies but a few that might be especially interesting for readers are Fizz (joinfizz.com), DeepMedia (deepmedia.ai), Ender (joinender.com), and Textla (textla.com).
Fizz is the student debit card that helps build credit. In a world where student debt is crippli so many young people and prospects for home ownership look bleak for young people, Fizz’s debit card helps Gen Z build credit with no risk of overspending, no interest rates, and nothing to be afraid of. It is credit building for young adults in easy mode.
Deep Media is a Deepfake Detection and AI Safety company that works with the U.S. Department of Defense and large tech companies. The next several months will be an exciting but crucial moment in the company’s history with the Presidential election in November.
Ender is an online after-school club where kids ages 7-13 can explore their interests together through collaborative and supervised games on Minecraft and Roblox. Ender is unique because it creates a safe environment for kids to be creative in the games that they already love. Over time, Ender plans to roll clubs for art, robotics, coding, and more, all with the goal of making kids build employable skills outside of the traditional environments for education.
Textla is an SMS marketing app for small businesses. We’re incredibly excited about what Textla is able to offer to budget-sensitive and low-resourced SMBs who want to communicate with their customers. Typically, if a small business wants to run SMS campaigns, they need to hire developers to build mass messaging capabilities on Twilio’s APIs, or they work with resellers who charge an arm and a leg. Textla offers a low-cost, no-code tool that’s simple and inexpensive—a no-brainer for most SMBs.
9. If you could go back in time to Carter from several years ago, what hindsight advice would you give yourself?
The advice I would pass to my younger self is to be more honest with myself and to find my convictions from within. In the past, I spent too much time working on the wrong things and spending time with the wrong people. I wasn’t engaged enough in my work, and I wasn’t growing amongst some of the people in my life. I knew it but I was afraid of accepting it as truth. Part of learning how to be honest with myself was doing my best to ignore outside pressures and influences who, though well-intentioned, were steering me towards work that I was not truly excited about. Finding true conviction is a prerequisite for doing great work and it’s also a hack for finding your early believers.
I also want to note that I’ve been lucky enough to meet some amazing people over the last couple of years who have taught me, inspired me, challenged me, and helped me believe in myself. I met those people because I was looking for them and because I’ve worked hard to grow those relationships. If I could go back, I’d tell my younger self to find those people sooner.
10. Lastly, in what I describe as my StartupBREW question, what can we do as a community to help you and New Era Ventures succeed?
The best thing you could do to help us succeed is to support local entrepreneurs. As investors, we benefit from a more vibrant startup ecosystem here in our backyard because that means we might see more attractive investment opportunities. For every successful startup entrepreneur in the region, dozens more might feel compelled and supported enough to pursue their own venture.
About John
John Machacek has been helping local startups with the Greater Fargo Moorhead Economic Development Corporation since prior to his position with the GFMEDC. Before joining the team, Machacek was the VP of Finance & Operations at United Way of Cass-Clay and a business banker at U.S. Bank.
If you’d like to learn more about our firm or any of our portfolio companies, you can reach me via email at carter [@] neweraventures [dot] com
