The Journal of Business hosted Skye Henderson, vice president of venture investments for Cowles Ventures, for its most recent Elevating The Conversation podcast.

The Elevating The Conversation podcast is available on Apple Podcasts, Amazon Music, Spotify, and elsewhere. Search for it on any of those platforms or the Journal's website to hear the entire conversation, but for now, here are five takeaways—edited for space and clarity—from the episode, which runs just under 40 minutes.

1. The market has shifted, and most investors aren't taking big risks. The Inland Northwest entrepreneurial ecosystem is growing. But there's a reset, not just in the Inland Northwest and not just in the United States, but across the world. We've got to understand that this is a different market cycle, in terms of the risk appetite for investors. 

During the ZIRP, or the zero interest-rate environment, there wasn't much incentive to keep cash idle. You invested it, and you might have a higher allocation to all of the asset classes, including a higher risk, illiquid asset class like venture capital. Interest rates skyrocketed from, what, March 2022 into July 2023. That was over 5 percentage points in just over a year. It changes the state of the risk appetite for those investors.

I think there's going to be a lower allocation in the foreseeable future, just because there are other options. You can get treasuries at a much higher interest rate if you wanted to. The public markets are still doing really well, and that's highly liquid compared to startups and the types of companies that we invest in.

And then there also were tons of venture funds that popped up in the last decade, because they could raise money easily. But they might not be able to raise a second fund, if they can't prove that their fund is viable by getting to liquidity events and giving cash back to their partners. That would cause a gap in funding.

2. It's harder for startups to secure funding in a flight to quality. Across the board, it's harder for startups to find funds than it would have been three or four years ago. It's a reset, but I think in a good way, a healthy way.

I think you could say pretty truthfully that there were companies that got funded that may not necessarily have needed to be funded in a normal environment. From after the Great Recession to about 2021, it became the norm.

But the best companies are going to still get funded. I've heard of it described as a flight to quality. And once again, that's healthy. How many companies came out of the Great Recession that are huge, like Google and others? Resourcefulness creates the innovation.

If you look at some of the stories of very successful founders, they talk about how many times they had to pitch before getting the first yes. And that should be normal. I should say no 99 out of a hundred times, because we're trying to find the outliers.

I think it's going to be a great, exciting time over the next few years. It might be more difficult or take longer to raise capital, but that doesn't mean that it's bad. You're going to come out with a more enduring company instead of one that maybe was enabled by getting cash to invest in the wrong things. You're gonna have to choose exactly what you need, what the customers want, and what generates revenue and cashflow.

Over the next few years, we're going to have a lot of quality businesses that will spin up and be able to be invested in, and a lot of bootstrapped companies (ones that don't take venture capital) that are going to be very successful.

3. Aspiring entrepreneurs should talk it out. My advice for entrepreneurs is, iterate your idea. Don't be too afraid of confidentiality. Collaborate. Talk to others. You can talk to myself or to (Ignite CEO) Tom Simpson. There's plenty of people like us who are visible, but there's a lot of people who aren't necessarily visible that we can connect you with. Also, get feedback from potential customers early and often. 

And then, going back probably to the discussion about this market cycle, I think it'd behoove aspiring entrepreneurs right now to bootstrap to some extent early on while they figure out more and get closer to product market fit, which would be just validating their product. If they can't build it, there are resources out there to get the MVP, or the minimum viable product, started. 

It might be the best course of action going forward to pitch your idea, talk to members of the ecosystem, and then get further along before you ask for investment. That will help, because they'll have a better value proposition at the point in time that they ask for money.

4. Bootstrapping companies should ask specific questions before seeking investors. I think of like an inflection point. Are you getting to a point where capital would change the trajectory, or are you just trying to fund status quo? 

We try to differentiate ventures from lifestyle businesses, and lifestyle businesses are fine. If you're bootstrapping and you're paying your bills and you're making a salary that you want, that's an amazing business to be in. 

Venture and outside investment should help fuel growth. If you come to a point where you're trying to enter a new market or you see that an infusion of capital could help you grow faster than a competitor, venture capital can help. If the use of funds creates a situation where one plus one equals four, then it'd be good

But as soon as you take outside capital, you know, you have other people in your ear, like me. You have a board. You've got to get more formal. And then we have to set goals and try to go fast and big. It's not for everyone, but if you have that drive, we can connect the dots and see if that's the right vision for the next step.

5. Locally, the goal is to fund companies that grow here. I do want to be a part of the growth of the broader community with the best of the best of these companies. I would love to find the next Itron, a company that goes public and stays local. That'd be the ultimate goal.

Enduring companies that can stay local will have jobs that require different skill sets, jobs in manufacturing all the way up to engineering, marketing, and sales. All of those graduates from our universities here can aspire to go to work here. We'd have fewer boomerangs. I do want to be  part of that. 

And ideally, a lot of the investors are local, and we're returning money that stays in the community.