Notley Ventures’ Founders Dan and Lisa Graham (courtesy image)

 

Half a decade ago, you could have found Matt McDonnell on a 30-foot sailboat full of high school students undulating in the cold waters of the Atlantic Ocean. For McDonnell, it was a way to teach at-risk kids to persevere though conditions that you can’t control.

The week- to month-long voyages gave everyone aboard a sense of teamwork and community and uncertainty. Those sailing trips could be brutal — crazy weather, dense fog and all the pains of living outside of four walls and without modern plumbing. People had to work together, communicate and endure.

“I had this idea that that would be really powerful for students struggling with education,” McDonnell said. “And I also thought those would be exactly the type of students who would learn better outside of the classroom than in it.”

It worked. Just 60 percent of the kids he worked with were on track for graduation, but after sailing with Matt, 100 percent got their diplomas.

Austin’s startup scene isn’t quite as wild and unpredictable as sailing the Atlantic. But it involves a lot of the same  kind of teamwork, navigating tough times and unknowns that startup founders face as they try to break through the static.

A New Kind of Venture Capital

On President’s Day, I sat down with McDonnell in the back of Cherrywood Coffeehouse, where he was working on his laptop with an iced coffee at the ready even though it was his day off.  That’s just part of the life managing a new venture fund and working with the startups that go along with that.

Last fall, McDonnell joined Notley Ventures, a new form of venture capital  fund in Austin created by BuildASign.com founder Dan Graham and his wife, Lisa. Notley, named after the English abbey where Dan and Lisa Graham were married, is built out of the investments the Grahams have made over the past decade or so.

The firm has two funds — one aimed at for-profit startups with a social impact aspect and another for nonprofit ventures, managed by Sara Levy. The funds are fueled largely by the quarterly and annual distributions from the Graham’s investments, which include companies like Deep Eddy Vodka. While most VC firms thrive off of institutional money, Notley avoids it.

Matt McDonnell, partner at Notley Ventures

“We feel like that really keeps us honest and presenting things that are a really good bet for folks, as opposed to going out and raising money and having that pressure to put a fund of X size to work on a timeline that’s governed by other people,” McDonnell said.

Notley aims to be at the center of an ecosystem of about 50 portfolio companies and a slate of services businesses that can quickly add value to startups with design, marketing, public relations, finance, software development and other specialities.

“Instead going out and hiring different firms, we started building companies to plug into these spaces,” McDonnell said. “The idea is they’re doing some work for portfolio companies but they’re also doing  work for external clients. It’s a way for us to branch out while also providing some of the horsepower to these companies.”

It also helps startups avoid making potentially costly hires for specialized positions. And the firm generally invests about $50,000 into startups that many traditional firms might overlook. McDonnell said the Notley team spends a lot of time networking and talking to talented young people that may not yet have the type of pedigree that traditional VC firms seek out. And Notley, along with its syndicates, invests in companies that may not have yet crossed a select set of benchmarks that larger investors require, which translates to a little more risk with a chance for a significantly better reward both financially and socially.

“We’re hoping for a little more chaos,” he said. “We want opportunities for serendipity to make us successful through luck. And I think that’s something very important about the venture space — to not underestimate the role of luck and timing. Give yourself as many chances to be lucky and be there at the right time with the right resources as possible.”

Notley also invests with other VCs, including Deep Eddy founder Clayton Christopher’s new fund CAVU Venture Partners, typically investing $250,000 or more with specialized investment firms.

“We’re not the right people in Austin to build the next great CPG fund. But SKU and CAVU are the right place,” he said. “I think we’re finding our skill sets around manufacturing, tech-enabled fragmented industries that are unsexy and unglamorous that tend to be ignored by traditional VCs.”

Making Social Good a Part of Every Company

Thus far, Notley is involved with about 50 companies. Among them:

  • Broomly, the on-demand home cleaning and maintenance startup led by former BuildASign employees.
  • Wondercide, the organic flea, tick and home pest control company that sells products at retailers and online
  • recruitHER, the woman-owned tech recruiting company that specializes in matching culturally diverse developers with top notch startups and tech companies.
  • Out of the Box, the startup that creates puzzles and operates The Seventh Room, which provides team-building and problem-solving games in unique ways with improv actors and extensive productions.
  • Notley has also taken over the Startup Games, a twice-a-year charitable fundraiser that pits Austin startups against each other in a series of games, such as beer pong, flip cup and trivia. And now Notley is planning to expand the games to Atlanta before branching out into even more cities to raise money for a wide variety of charities.

For McDonnell, the idea of social good companies versus regular companies seems like an odd juxtaposition.

“For me, it always seems strange that we have to talk about social impact or benefit corporations,” he said. “There are a lot of good for-profit businesses that do really good things, so I don’t really understand that distinction all the time. It’s kind of strange to think  of it as anything other than that’s how you ought to behave in the business world anyway.”

Looking back on his career, McDonnell sees how teaching elementary students, sailing with at-risk kids, and working with startups while getting a law degree have led to his new role.

“I think a lot of those lessons are visible here at Notley,” he said. “We provide a comprehensive system of support for people who want to help themselves, which is just about everybody, and you do it in a way that allows them to actually learn how to fish, instead of just feeding them a fish.”