#StartupsEverywhere Profile: Tim Schigel, Managing Partner, Refinery Ventures
This profile is part of #StartupsEverywhere, an ongoing series highlighting startup leaders in ecosystems across the country. This interview has been edited for length, content, and clarity.
Building Entrepreneurship in the Midwest
Refinery Ventures, a venture capital firm based in Cincinnati, is working to build and encourage entrepreneurship across the country—especially the Midwest. Tim Schigel, Refinery Ventures’ managing partner, took the time to speak with us recently about the firm and venture capital.
Can you start by telling us about your background and how you got involved in venture capital?
I started with an electrical engineering degree. After graduation, I did a number of entrepreneurial startup activities. I worked for a small company that had several big companies as clients, including Apple. During that time, I was living in Cincinnati and had an office in Silicon Valley, which was my first exposure to that environment.
In 1998, I entered the world of venture capital, where I worked for nine years in a fund based in Cincinnati with $600 million under management, which made it one of the bigger funds for this area. I started an Internet company while I was at that venture firm called ShareThis and left the firm in 2007 to launch the company. ShareThis grew very fast and had massive reach. We grew from $0 to $50 million in revenue in about three years. After the hypergrowth in 2013, I transitioned to chairman. That’s when Procter & Gamble was starting Cintrifuse in Cincinnati, and asked me to help start the fund of funds. I managed the fund of funds from 2013 to 2017, after which I started Refinery Ventures.
Did you ever consider building your company in Silicon Valley?
There was pressure to move to Silicon Valley when I was the CEO of ShareThis because its headquarters are in Palo Alto. But, my kids were in junior high school and we didn’t want to move them to California. I liked working there, I just didn’t want to live there. I still go once or twice a quarter, and that’s perfect. I’ve had an apartment and an office out there off and on for over 30 years, and that works perfect for me. Also now, it’s a competitive advantage to have an office outside of Silicon Valley. You remove yourself from the echo chamber, and hiring is much easier.
What do you look for in a startup when deciding whether or not to invest?
Our focus at Refinery is early-scale. Some people refer to it as post-seed or series A. I call it early-scale because it’s more forward thinking. Early-scale is a very specific stage that many entrepreneurs don’t understand. Most startup literature details going from market fit to scale, but many companies are not ready for that jump and end up in trouble by thinking they’re ready to scale.
You need to be able to forecast your business and if you only have a million in revenue, you don’t have the operating history needed. This has to be learned in this early-scale stage. Entrepreneurs outside of Silicon Valley can find seed money, but they’re not getting the help from investors that know how to take them from $1 million to $10 million. I see a lot of companies that may make it to $2 million, but that’s not enough.
What are some policy issues that you see impacting the VC industry?
I’m in the Young Presidents’ Organization, and have the opportunity to meet leaders of very successful organizations. There are people who have money to invest but don’t understand venture, so education is needed. If you look at the university endowments in the Midwest, all of their venture money goes to the coasts. They need an incentive to allocate parts of their venture funding to their own regions. I read a stat that stated 57 percent of all venture capital comes from endowments in the Midwest. Venture firms in the Midwest need to generate the returns In order to attract the capital from such institutions. There is an opportunity to get ventures firm off the ground, and after that market forces can take over. As I always say, capital follows growth. States have to put better initiatives in place.
Ohio has the Ohio Third Frontier Program and Indiana has the Next Level Indiana Fund, which are both designed to put more money into venture firms. Too often though, their criteria is not based on performance. It’s based on jobs or office location. It needs to be performance oriented because if the funds aren’t making good investments, it’s not helping anyone. I was hopeful for the Opportunity Zone Program, but so many of its restrictions make it difficult for ventrue. It works really well for real estate investments, but it would be nice if there were some deferred tax incentives for people to invest in venture firms in their areas.
What’s on the horizon for Refinery Ventures?
Growth. We will make a few more investments and then start our next fund within the next year. One of our portfolio companies exited recently within 18 months of investing, which is great. We are continuing to look for boomerangs—people who are from the Midwest working on the coast and want to move back to run a company. I’m interested in meeting people who see the value of building a company in Michigan or Ohio.
All of the information in this profile was accurate at the date and time of publication.
Engine works to ensure that policymakers look for insight from the startup ecosystem when they are considering programs and legislation that affect entrepreneurs. Together, our voice is louder and more effective. Many of our lawmakers do not have first-hand experience with the country's thriving startup ecosystem, so it’s our job to amplify that perspective. To nominate a person, company, or organization to be featured in our #StartupsEverywhere series, email edward@engine.is.
