What’s changed in Big Sky country since the inception of Next Frontier Capital?

What’s changed in Big Sky country since the inception of  Next Frontier Capital? TLDR: Massive Increase in Access to Capital

By Jared Thompson, Associate, MSU 2020

Here’s a venture capital stat that’s never made Term Sheet’s daily headlines….

From $7M to $152M, Per Year

The total number of venture capital dollars invested in Montana between 1995 and 2015 was $114M; $5.7M on average per year, over a 20 year period. And, if we take out just 5 outliers within that time frame - together totaling 83% of invested capital - that number becomes a wee $19M. Just under $1M per year. Re-stated for many of you in more familiar terms, for over twenty years, the average yearly investment in Montana’s entire entrepreneurial and technology economy was just 33 healthy Wagyu cows.

In 2015, we understood that Montana technology companies were severely under capitalized and that there was a tremendous investment opportunity to realize. On the doorstep of 2020, and a few months away from our 5th anniversary, we’re excited to report some refreshed VC statistics. Since 2015, roughly $342M venture capital dollars flowed into Montana companies; that is 12x the annual average from the previous 20 years at a yearly average of $68.4M (2,160 healthy Wagyus). And it’s only growing.  In 2019 alone, for the first time ever, venture capital investment in Montana exceeded $150M dollars.  

What’s changed?

If we take our macroeconomic lens and look back over the last five years, we can see a couple of trends that have contributed to the influx of venture capital dollars.

Take the influx of talent from across the nation, add it to Montana’s already high native rate of entrepreneurship, expanding national access and media attention, a tremendous quality of life… and what you have are all the ingredients needed for a budding entrepreneurial ecosystem.

Except one…

In the immortal words of Jimmy Spicer, the dolla dolla bills, ya’ll.

The final piece of the puzzle, for any entrepreneurial community,  is an active, locally based venture capital fund. This was our thesis in 2015 and it continues to be NFC’s opportunity and privilege. Montana is home to some of the nation's smartest and most resourceful entrepreneurs and until only very recently they did not have access to capital.

Find any of the partners doing what they normally do when they’re not running NFC - Will reading Marcus Aurelius over a Pamplemousse La Croix, Les drilling first graders in infantry tactics in Cooper Park, or Richard meditating on the Central Limit Theorem  - and if you mention these statistics to them you will most certainly make their day. You might also earn yourself a free lunch, but I'm just an associate so don't take my word for it. By far, they are the statistics that make us the most proud...

  • Over the last 5 years, NFC has brought in over a $194M venture capital dollars into Montana, across our portfolios
  • That is, 56% of state-wide venture capital investment is from our portfolios
  • For every NFC committed dollar, we brought in over $7.08 dollars of outside syndicate capital, totaling $174.2M dollars

And the third point is important because investors are just now starting to see Montana as a good investment. A rising tide lifts all ships - and to be sure, for Montana, things are changing.  We predict that places like Missoula and Bozeman are set to become some of the nation's leading startup ecosystems, all comparable to contemporary hotspots like Boulder, Austin, and Lehi. In fact, Bozeman alone was just ranked as the nation's strongest economy with a population under 50,000 for the third year in a row.

For us, we believed this was the case when we started in 2015, but even then, we never could have imagined the kind of opportunity and growth we’ve seen over the last five years.

For those of us on the ground floor, at the center of this flurry of opportunity and activity, it is a unique inflection point in Montana’s story. We continue to be humbled and grateful to our entrepreneurs and LP’s for the opportunity to play a part in shaping that narrative. It is our privilege and our source of  inspiration to work with all of you.


While Montana will always have our primary focus and attention, as we look into 2020 and beyond, Next Frontier aims to expand its regional connections and investment scope throughout the Intermountain West (Utah, Montana, Idaho, Colorado, and Wyoming).

The following highlights some of the foundations of our Intermountain West thesis.

Just like in Montana, low cost of living, influx of talent, and significant market growth are the  catalysts driving entrepreneurial, innovative and resource rich communities.

Venture capital investment increased by a dollar amount of 506% in the last decade, with no signs of slowing down.

Seed deal density, or number of capitalized seed stage companies per million people, has risen significantly in the last decade and now far outpaces the national average.

And yet, even with all of these positive signs, there is still a regional funding gap. If we compare states with similar seed startup densities, we find...

(Note: First, capital here really means access to local capital and is a summation of the dry powder held by all state VC firms. More on that in a minute. Second, Wyoming, Idaho, and Montana are so small they didn’t even make it into the data. We hope to change that in the coming years.)

Why is this the case?

National firms are not investing out of the market at the seed stage, or at least not competitively. This is partly for two interrelated reasons. National mega funds are increasingly focused on evaluating risk through quantitative metrics (think, BVP Cloud Index). The reason for this is that with such a large amount of money, they need to be able to hedge their risk on a quantitative assessment of the companies they invest in; metrics like growth of ARR, CAC payback period, churn, and cash flow efficiency.

For a company to get to the stage where it has these types of metrics, they typically need  about $2-4M in revenue and $1-4M in paid in capital. Thus, the funding gap exists at the seed stage - just before a company takes off and reaches the types of milestones national mega funds are looking for. Investments at this stage are riskier (returns are greater), and they require strong regional connections with people who have boots on the ground working with the entrepreneurs and companies alike. It's not a purely quantitative investment - it's an investment in the team, their story, their product, their focus, expertise, grit...and the list goes on. But the point is, national mega funds don't have, and frankly don't care to have, the regional connections and relationships that lead to those types of insights, and that is why the funding gap exists at the seed stage. Fortunately, we have those relationships.

By leveraging our regional connections, we aim to source the region's most competitive deals (something that we proved to ourselves in Fund 2). From there, the game plan is to use our expertise and national network to help our companies grow, and when they’re ready, work with them to bring together a coalition of tier one syndicate investors (coincidentally, our national mega fund friends).

For those of you who made it this far, Happy 2020. We think 2020 will be the best year yet for Next Frontier and for our companies in Montana and across the Intermountain West. And to our friends, LPs and entrepreneurs, we are grateful for your support and, stay tuned, there is more to come.

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