Zoller identifies dealmakers’ vital role connecting
innovators with entrepreneurs

Ted Zoller’s interest in studying regional entrepreneurial ecosystems took on heightened urgency when the global financial system appeared on the brink of collapse in fall 2008.

The project took nearly three years of painstaking research to identify the central players, not only in the Research Triangle’s economy, but also in 11 other entrepreneurial hot spots across the country.

Zoller said the work got off to a fast start thanks to his Rolodex, stuffed with the names of hundreds of people he had come to know since he began teaching entrepreneurship at the Kenan-Flagler Business School in 1999.

Included were the names of faculty members, students and community members who took “Launching the Venture,” the course he founded and has taught, and that has led to the creation of more than 100 viable companies in the Triangle since its inception a decade ago.

Included were the names of venture capitalists that innovators must seek to acquire the necessary financial backing for turning their ideas into feasible companies.

Included were the names of entrepreneurs – people with the skills, experience and access to money that can turn great ideas into growth companies.

And included were the names of dealmakers who help to form social networks and broker within them to make things happen.

The investor brings funding. The entrepreneur brings business savvy. But the dealmaker, by fusing the two together, brings the all-important power of connection.

“I like to think of dealmakers as serial entrepreneurs,” said Zoller, director of the Center for Entrepreneurial Studies and associate professor of strategy and entrepreneurship at the business school.

“They are individuals who build multiple companies, who invest in multiple companies and who advise and guide multiple companies. These are the people who are the market makers of the economy. They are the critical catalysts who bring innovators, entrepreneurs and investors together.”

Zoller outlined the integral role dealmakers play within the 12 nationwide entrepreneurial zones with a concept called the “Dealmakers Algorithm” that uses transaction data to infer the preferences of investors, which in turn, entrepreneurs can use to identify people to fund their ventures.

His painstaking research, when mapped in graphic detail, brings into sharp relief the relative strengths and weaknesses of the Triangle’s entrepreneurial ecosystem compared to the other 11 regional economies. Those regions are Boston; Silicon Valley, Calif.; Phoenix; Seattle; Minneapolis and St. Paul; Orange County, Calif.; San Diego; Salt Lake City; and Austin, Texas.

Like the Triangle, all have been referred to as “technopoles” because of their heavy concentration of high-tech industries, Zoller said.

Access to venture capital
Even before available venture capital dried up around the country, Zoller was bothered that so many local entrepreneurs could have amazing ideas and still be stymied in taking their companies to the next level because they lacked access to capital.

As he began his research, Zoller sought to find out if innovators in other parts of the country faced similar challenges. Was venture capital more readily available elsewhere, and if so, why?

Because Zoller knew the history of venture capital, he began with part of the answer.

Georges Doriot, a Harvard Business School professor, invented the concept of venture capital when he founded the first venture capital firm in the country in 1946.

But it was several decades later, in Silicon Valley, that Doriot’s concept was transformed into a permanent business that helped spur the rise of the semi-conductor industry in the 1960s, and later, telecommunications technologies that were instrumental in the development of the Internet.

“If you look at venture capital as a marketplace, its home is Silicon Valley,” Zoller said.

By the early 1980s, a new pattern emerged in which venture capital from one part of the country was invested in other parts of the country. It was then that Research Triangle Park and the surrounding region entered the stage as a developing center for entrepreneurship.

What is not fully understood about venture capital is that it spans a continuum from early-stage financing for start-up companies to later-stage financing for growth companies positioned for an initial public offering or trade sale, Zoller said.

His research showed that while the Triangle has been successful at acquiring outside venture capital for start-up companies, many start-up companies have floundered because of the lack of later-stage capital needed to take off.

“I actually think we are deal rich and cash poor here,” Zoller said. “We have the capability of creating a lot of innovative companies, but we don’t have the cash and talent to scale them to the next level, and we don’t have the leadership in the region – the number of dealmakers needed – to get them that cash.

“As a result, RTP has become very good at starting companies but it is not very good at finishing companies. People here can tee up an initial innovation around which a company can be built, but too often they lack either the capital or the business development connections that will fuel the company’s growth.”

The transformation from a startup to a going concern to a scale company requires a constant infusion of new and different talent necessary to lead the evolution of the company and the wherewithal to access the customers that are fundamental to driving the firm’s growth, Zoller said.

“This is directly a function of the region’s network of dealmakers,” he added.

‘Science of startups’
Zoller was named director of the Center for Entrepreneurial Studies in 2009 after having served as executive director since 2005. Founded in 1998, the center was one of the first established at a U.S. university focused on entrepreneurship, and has been consistently ranked in the top 10 university programs nationally in entrepreneurship.

Last month, Zoller highlighted his research on dealmakers to a group of President Barack Obama’s advisers on economic policy when they convened on campus. The group, the National Advisory Council on Innovation and Entrepreneurship (NACIE), is led by U.S. Secretary of Commerce Gary Locke and chaired by America Online founder Steve Case.

Zoller said afterward that the formation of such an impressive group is a sign that the Obama administration understands the critical role that entrepreneurs play in transforming the economy and creating badly needed jobs.

This month, Zoller was named vice president for entrepreneurship at the Ewing Marion Kauffman Foundation, the leading national philanthropy with a specific focus on entrepreneurship. He will guide the foundation’s entrepreneurship programs, including Kauffman Laboratories for Enterprise Creation, a major initiative focused on discovering the “science of startups.”

Zoller compared it to a musician getting to play at Carnegie Hall.

“In the world of entrepreneurship, Kauffman is the platform for impact,” Zoller said. “My hope is that my work at Carolina will both enhance the foundation’s program in enterprise creation, while at the same time allowing me to share new insights with my UNC students.”

Zoller will remain at Carolina and continue in his Kenan-Flagler faculty role teaching enterprise creation and venturing courses.

“Working with and developing Carolina startups is my passion,” he said.

“Holden Thorp has said he has the best job on campus, but I would quarrel with him,” Zoller said. “The best job, hands down, is to be Roy Williams in a winning year.

“I have the second best job because I have the opportunity to work with the most talented entrepreneurs here at Carolina and in Research Triangle Park. I would give the chancellor perhaps the third spot in line.”