I spoke on a panel earlier this month about the startup community and the jobs that were being created. I really enjoyed the event and hope to be part of many more discussions on Louisville and it’s business community. After reflecting, I thought I would share some more thoughts on the subject. Hopefully my perspective is useful for those involved in and around the community.

The biggest thing that stood out to me was the subject of tech talent and the perceived shortage in the community. In short, I don’t think there is a shortage of talent. Simply looking from my current perspective, I think there is a shortage of structure for great designers and developers that allows them to learn, perform and do great things.

This is not to say we shouldn’t be developing talent. Louisville and GLI are doing some great things in that area. All the schools in Louisville are getting involved and I think it is wonderful. But I think it is only a small part of the problem.

The biggest problem is the best developers and designers, go to big companies. Why? Because they need something with decent pay and benefits. I’m sure some would like to try something on their own, but the chances of getting some funding to try are basically nil. Big companies have provided a lot for the city, but they dont develop talent as well as a startup does. Why? Because startups give people a chance to learn and grow on their own. No bureaucracy, just them and a chance to do something special.

Louisville should work towards creating an environment with opportunities for designers and engineers to develop and teach themselves in this way. If successful, I think we could see some amazing growth in this community.

So why don’t we have more companies of this type?

Why aren’t there more small companies of one or two developers and a designer working on something innovative? Our structure for financing is part of the issue, but not in the sense that there is not enough money. It lies more in the types of companies that investors currently finance.

There are two types of financing in the Louisville community, angel rounds and A rounds. There is very little institutional seed capital. Angels actually invest small $25-50K amounts of seed money, but angel money and institutional money work differently: one is capital “put to work” and the other is invested conservatively.

Because angels are typically investing their own money, they dont fit the risk profile to fund at these early stages. They are typically a better fit for larger seed rounds. The only institutional money that I know of for tech companies is, Kentucky Science and Technology (KSTC) program that offers $30,000 grants to new companies.

I think some real value lies in giving more smart, young individuals the chance to start a small, lean company and build something amazing. The problem here in Louisville is angels don’t fit the risk profile for those types of very early stage companies and venture funds are looking for later stage companies with customers and revenues.

What can be done to change this?

If there were some institutional money for two developers that could raise $50,000 to try a build something innovative, then we may see more “great stories” about the Louisville tech community. This is not only in companies that could emerge, but more the “tech talent” that will boost as a result.

Point in case: Ever noticed most talented engineers are typically self taught?  I have, and I’ve talked to some development firms that say the same thing about their engineers. They say the best engineers typically come from environments where they have been building their own projects, because there is such a great opportunity to learn on their own.

Once a person with a CS degree, is given the chance to build a company, they will teach themselves as they build. It also gives them the freedom to build things they are passionate about, and that is something I believe is critical to our community. Not only in the sense it develops talent and innovation, but because it creates more exciting, new companies that create more entrepreneurs and investors and enhance the overall life cycle of technology.

That is how the best companies can start and that is how the best developers and designers can learn. Allow them to try something on their own. Allow them to learn, fail and everything in between.

I truly think this is an important step and will lead to the growth of a whole new class of tech talent and a whole new class of tech companies in Louisville.