University of Arkansas

Walton College

The Sam M. Walton College of Business

Episode 119: Bobby Franklin on Venture Capital Supporting the American Entrepreneurial Ecosystem

April 14, 2021  |  By Matt Waller

Share this via:

Bobby Franklin is the president and CEO of National Venture Capital Association, which advocates for public policy that supports the American entrepreneurial ecosystem. During his talk with host Matt Waller, he explains what venture capital is and the difference between terms like seed funding, angel funding, and VC funding. He also discusses the history of the venture capital industry in the U.S., the misconceptions some have about the industry, and how important it is to the U.S. economy.

Learn more about National Venture Capital Association.

Episode Transcript


0:00:07.8 Matt Waller: Hi, I'm Matt Waller, Dean of the Sam M. Walton College of Business. Welcome to Be EPIC, the podcast where we explore excellence, professionalism, innovation and collegiality, and what those values mean in business, education and your life today.


0:00:26.8 Matt Waller: I have with me today Bobby Franklin, President and CEO of the National Venture Capital Association. And today we're gonna be talking about Venture Capital. He is also the chair of the board of Venture Forward, and Bobby graduated from the Walton College before it was called the Walton College, in finance and banking in the '80s. Bobby, before we talk more about your career, and I do wanna talk about that, I would like to talk a little bit about Venture Capital. What is Venture Capital?

0:01:06.5 Bobby Franklin: Yeah, it's a great question. And surprisingly, I think the answer to that question changes over time. I remember getting asked on CNBC very early into my tenure, which is now a little over seven years at the National Venture Capital Association, and the answer I gave then, it's one that I think still holds, but I'll give it to you here, and that is, Venture Capital to me is institutional investment in entrepreneurs and young companies, and it typically is from some of those earliest investments in that company all the way to when there's probably an exit, or we many times hope that there is an exit, which is a positive event for the company and the investor. So I think of Venture Capital everywhere from early stage, seed stage investment to growth or expansion investment. Some of the numbers and the data that we report on a quarterly basis, you have to explain it, and sometimes the explanation goes into, "Well, look, there's a venture-backed company that has further rounds of investment, even though some of those invested dollars weren't raised by venture capitalists," but it's a big swath of the period in the life of a startup company.

0:02:36.2 Matt Waller: Well, you know, in Northwest Arkansas, Venture Capital, the concept of it is starting to grow, there's more funding available to companies, there are more companies seeking funds, and part of that's because there's more of a high-tech ecosystem starting. But I'm embarrassed to say, back in 1996, that's the first time I'd ever heard about it. And I had a software company, but back then, the internet wasn't what it is today. Knowledge wasn't just as diffuse as it is today. I couldn't just Google Venture Capital. What is it? I didn't know, I'd never heard the term, I don't believe, until someone suggested I try to get some. And I said, "Well, what's that?" They looked at me like I was an idiot. But there's so many other terms, and I think it would be good for our students and listeners to know about some of these. We hear about seed funding, angel funding, VC funding, would you mind distinguishing between those a little bit?

0:03:43.1 Bobby Franklin: I'd be happy to. So angel funding is really talking about the source of the funds. So an angel investor is investing usually their own money. There are a couple of hybrid examples where angels will get together and there's certainly an angel list and there's different models out there. But by and large, when people will talk about angel investing, they're talking about going to somebody that has the means to write a check themselves. It helps them create the concept that they have thought about and are passionate about, and a lot of times without that angel investment, they couldn't get to the step where they might go to a Venture Capital investor. And so angel investing, to me, sits alongside Venture Capital investors.

0:04:32.2 Bobby Franklin: And inside Venture Capital, I think of it in the traditional sense, which is a firm is going out to raise a fund, so they have investors into the Venture Capital fund. They're going out to raise money from endowments, from pension funds, from Sovereign Wealth nations, sometimes, from any large pool of capital that's looking to diversify their portfolio, is going to look to put a little bit into the alternative asset class, and this is squarely in the alternative asset class, high-risk, but you would expect an high reward should things turn out right.

0:05:19.4 Bobby Franklin: So angel investing then goes to Venture Capital investing, then potentially goes to kind of an exit perhaps to a private equity company, which tends to then buy an entire company itself. Unlike venture capitalists and many angel investors where they're pooling with other investors in a syndicate round to make an investment into an entrepreneur or to the company. And when you talk about seed stage, seed gets redefined a lot, and it sort of depends on what the market's doing, how much money is available at the early stage, and so I think an angel investor could make a seed stage investment, and I think a Venture Capital investor could make a seed stage investment.

0:06:03.9 Matt Waller: So why is the Venture Capital industry important to the US economy?

0:06:10.9 Bobby Franklin: So when I go up to meet with members of congress, senators, House of Representatives, and I describe what the Venture Capital industry is, one of the ways I describe that is to help them understand that if you look at data, Coffman Foundation actually looked at this years ago, and they said, "If you look at, let's say, Fortune 500 companies, if you look at them as a group, they will contract in bad times, they'll lay people off, and in good times they will expand back," but over time, that category of companies hasn't really increased net new jobs. Same way, if you look on the other end and you think about Mom and Pop entrepreneurs. Mom and Pop entrepreneurs start companies all the time, and unfortunately, Mom and Pop entrepreneurs sometimes go out of business. But when you look at the category overall, similar to large companies, there's not a lot of net new job creation on that end of the company size spectrum, we'll say.

0:07:23.5 Bobby Franklin: And so what you start to realize is over time, net new job creation comes from young high-growth companies, and that is the sweet spot for what Venture Capital investors tend to invest in. So if you think about it from an economic perspective on behalf of the country, then you should be focused in on young high-growth companies is what will lead to greater economic opportunity in the country. And for that reason, we believe Venture Capital is hugely important to the success of the country and to the success of job creation. Completely new industries many times are created by venture-backed companies who are taking enormous risks, but they have really bold visionary entrepreneurs who can see things that frankly, just as their lobbyist, I can't see.

0:08:24.8 Matt Waller: Well, it must feel good, Bobby, to be in your position, heading up an organization that is promoting one of the best sources of future growth of our country, and not only in terms of innovation, but in terms of employment. How did you get interested in this in the first place?

0:08:48.4 Bobby Franklin: Well, I've been very lucky and very fortunate. I guess to tell the whole story as succinctly as I can, I graduated there from, as you called it, before it was named the Walton College in 1989, and my degree in finance and banking with an emphasis in financial management was heavily pointing me towards Wall Street. I was in Dr. Kennedy's portfolio management seminar course. I love that course, actually...

0:09:21.6 Matt Waller: I need to interject something here. I don't know if you know this, but we're coming up on the 50th anniversary of the portfolio management class, the class you're talking about. The University of Arkansas was the second or third business school in the world to have a student managed portfolio fund, and we're gonna have a big reunion this coming fall. Sorry to interrupt, I just wanted to interject that.

0:09:46.7 Bobby Franklin: No, I'm glad you did. I wanna be there if I possibly can. What I was gonna say is, the course when I was in school, Dr. Kennedy accepted 12 students, and I didn't get in, and I went to him and I pleaded my case. And he made an exception and he let me in, so I was the 13th student, I was the baker's dozen. [chuckle] Now that I look back and know that I've had a fairly long career in Washington being a lobbyist, that I sort of point back to that, well, some of the ability to be able to talk my way into something happened some time ago, and I had something there. But in any event, I took his class, I wanted to go to Wall Street, a lot of my friends in that class, and certainly friends in classes a few years older had made the track to New York and had found jobs in analyst programs on Wall Street, etcetera.

0:10:43.4 Bobby Franklin: But in the meantime, I didn't have a job in New York, but I did get offered a six-week internship on Capitol Hill for a senator from Arkansas. And I thought what a great opportunity that might be, and as I say in many of my speeches, I came to Washington for six weeks, and I'm still here 31 years later. But I had a wonderful opportunity to spend time in the US Senate working for David Pryor, he retired. I actually then for a short year and a half, went to a consulting firm and represented the University of Arkansas as well as all the other land grant colleges and universities, and specifically they hired me to help them get a piece of legislation through. And a year and a half later, we got it through and we had a Rose Garden signing ceremony, and it was a great fulfillment of something that was important to the University of Arkansas and others.

0:11:38.8 Bobby Franklin: And typical Washington story, I went to breakfast with an old colleague from Senator Pryor's office, and he asked me what I wanted to do next, and I said, "I'm not sure." And that night he went to a fundraiser for a senator, and he was with a lot of other companies that were Arkansas based. And the woman that ran the Washington office for Alltel made a passing comment, and said, "Gosh, I'm tired of going to these fundraisers. I'd like to hire somebody to do my Hill work." And he paused for a moment and he asked her, "Well, do they need to know telecom issues?" And she said, "No, I can teach him Telecom, they just need to know the way around Capitol Hill." I got hired as a lobbyist for Alltel, great home state company, and got to do that for several years, and then the woman that hired me ended up leaving Alltel, and Scott Ford, who was then CEO at Alltel, asked me to take her position and running the DC office for Alltel. And I did that for a while. I then got asked to move over to the trade association for the wireless industry, that at the time was, they'd just hired Steve Largent, he was a former Republican member of the House of Representatives representing Tulsa, Oklahoma. Many people will remember his name as a Seattle Seahawk wide receiver and a member of the NFL Hall of Fame.

0:13:08.6 Bobby Franklin: And he had gone back to run for governor of Oklahoma and lost by a couple thousand votes, and he ended up getting hired to take on CTIA, which is the Wireless Association in Washington. And Scott Ford asked me to help Steve get ready to take over. And Steve and I hit it off, and he ended up convincing me to leave Alltel and be his head lobbyist and basically represent the entire industry as opposed to just one company. I did that for a couple of years, and then he asked me to be his Executive Vice President, his number two, so I helped manage a very large trade association in Washington representing the wireless industry for almost eight years. And I got a call one day from a head hunter, and they said, "NVCA." And I said, "I've never heard of it." And they said, "Well, it's called the National Venture Capital Association. And we're looking to bring on a new president and CEO. The former one is retiring after 22 years, and you have a background in helping run a large trade association, so you know a lot of what is necessary for a trade association to be successful in representing its industry."

0:14:24.2 Bobby Franklin: So really, they would have loved if I would have had Venture Capital experience, which I did not, but the fact that I had public policy lobbying experience, and the fact that I had a trade association management experience, is why they became interested in me. I convinced them that I was the right person for the job, and they convinced me it was the right industry to represent.

0:14:47.3 Matt Waller: Your boldness in asking into the portfolio management class, Dr. Kennedy's class, it's amazing how many stories I've heard in my over two years of doing this podcast of some very successful people that that is a common trait. They are persistent and they ask. I think persistence is so important. But I'd like to go back to Venture Capital for a second. There's some really well-known success stories in Venture Capital, but most of them are not known, but from your perspective, what are some of your favorite stories of Venture Capital successes?

0:15:33.2 Matt Waller: Let me start by reciting some interesting findings that an academic paper found back in 2015. Ilya Strebulaev is a professor at Stanford, at the business school there, as well as his partner, Will Gornall, who I think now is at a university in Canada, but they went back and looked at all companies that had gone public between 1974 and 2015, the point in which they looked at these companies. And the reason they picked 1974 was because in the '70s... In fact, the National Venture Capital Association was created in 1973, and it was after some of the early venture capitalists came to Washington, went to the White House and lobbied for a reduction in the capital gains tax rate. They got that. In addition, they lobbied for a change in the so-called prudent man rule, that at the time had prohibited pension funds to be able to invest in alternative assets. So those two changes back in the early '70s are what most people point to as the birth of the modern day Venture Capital industry.

0:16:55.3 Bobby Franklin: Now, you can read books about the Rockefellers and others that would call themselves venture capitalists well before the '70s, but with the changes allowing pension funds to be able to be LP investors and a drastic reduction in the capital gains rate, those are the two significant changes in Washington that most people point to as the birth of the industry. So if you look at companies that went public from 1974 to 2015, it turns out 42% of those companies were venture-backed, that same set of companies at that time were responsible for 63% of the market cap. So on average, they tend to be more valuable companies. And the illustration that we give policy makers is if you look at that study, it also showed that those venture-backed companies were responsible for 85% of R&D spending.

0:17:57.8 Bobby Franklin: So it gives you a sense of the types of companies that tend to be backed by Venture Capital investors. I think you're right, it's helpful to give examples and company names so people have a sense, and for me, it's thinking about Genentech, which was really one of the first modern biotech industries that has now led to wonderful industry. Apple was venture-backed, Steve Jobs went to Venture Capital investors trying to get them to back the ideas he had. You fast forward to today and you think about, "Well, we're in the middle of a pandemic, as we sit here and talk." Moderna was venture-backed, not only was Moderna venture-backed, but Moderna was completely hatched inside a Venture Capital firm called Flagship Pioneering out of Boston. They basically said, "We wanna create a company that can take this MRNA, can take some of the bio-tech advancements that have happened and be able to make new drugs, or in this case, vaccines, at a quicker pace than can many of the competitors in this industry." There are significant companies that have created entire industries. And by and large, what they have in common is they had an amazing entrepreneur who was persistent and convinced some venture capitalists who have a bit of expertise and knowledge in given areas that it just might work.

0:19:39.7 Matt Waller: It really has given our country a competitive advantage, so clearly. And that's one... The study you cited is really impressive, but it's even more impressive when you think about it in comparison to other countries. But it is one of the reasons why I wanted you to be on my podcast actually, because I think there's so many misconceptions about it, and so many people really don't understand that it's just important for our future. The part of our economy that's based on Venture Capital and high-tech high-growth firms is great. One of the things that Silicon Valley has that's so remarkable is the ecosystem. Someone can take a job with a high-tech, high-growth company, maybe it doesn't do so well, they switch to another one. And it's accepted there. People look at their resumes and they think, "That makes sense. That's what I did." Until they get the one that really hits.

0:20:44.8 Matt Waller: And I had a friend once who told me, when I had my software company... We're trying to hire a CTO. And he said, "This person said 20 years of experience." He said, "One year of experience 20 times. This person's had 20 years of experience." I said, "What?" But I think that one benefit of being in an ecosystem where you can switch is you get lots of... Yeah, maybe you don't have 20 years in the same company, but you learn so much from the variety which gives you insights into how the businesses work. And I know in Northwest Arkansas, that's something we're working really hard to try to drive. The university is trying to improve, as you know, technology commercialization. We're trying to get more invention disclosures from faculty and students, and we're getting more, but we're also trying to encourage high-tech people to move here to Northwest Arkansas. So we've created an ecosystem here. We have better restaurants, we have biking trails, we have some of the best mountain biking in the world, in Northwest Arkansas.

0:22:02.1 Matt Waller: We're doing a lot of things to try to attract people who can serve as a part of this. As you know, Plug and Play is here. They have a vertical here that focuses on retail and supply chain management high-tech high-growth companies, and some of the companies I've seen through their deal flows are just remarkable. And I think there's gonna be more verticals of those kinds of things added in the future. But I know the first time I went to Plug and Play, which is in Sunnyvale, California, I remember looking on the wall and seeing Dropbox and PayPal and all these companies and thinking, "Wow, they started out just as little groups with two or three people trying to get money from an accelerator, trying to get some advice from someone who has a little more experience, and now they've changed the game."

0:23:01.5 Matt Waller: But anyway one other topic I'd like to touch on, if you don't mind, it is private equity. You already mentioned private equity, and you talked about how sometimes they'll buy the whole company. I noticed in Northwest Arkansas a few years ago, we had plenty of private equity, but very little Venture Capital. Is that true in a lot of places, or is that not?

0:23:25.2 Bobby Franklin: It is. I've worked very closely with a trade association here in town that represents the private equity industry. At the end of the day, when you think about private equity and Venture Capital and even real estate kind of partnerships, for a lot of the issues that we have to work on, it's very similar. It's a partnership that bands together and they go raise a fund, and they have expertise, a VC and expertise in identifying entrepreneurs and high-growth young companies, a private equity firm has expertise in a given area, like you said, pulling other companies and finding synergies and even being able to put in management teams that can perform better, and then real estate partnerships that look at development, look at opportunities to create value.

0:24:15.7 Bobby Franklin: They're all very similar in the way they're structured. It's a partnership raising a fund to make investment, to make a return for their investors. And so a lot of the issues affect us all, but each sort of has its unique specialty. And I think you're right. I think private equity is very much specialized in knowing how to take a more mature business and how to create more value, just like a venture capitalist knows how to take entrepreneurs, and they've done this so many times that they understand the pitfalls that entrepreneur who may have never started a company before is going to run into and they can help guide them through the challenges of scaling up from an idea to a successful revenue-generating company.

0:25:11.3 Bobby Franklin: I think you find private equity and you find certainly real estate partnerships all over the country. And one of the things that I'm proud about since my tenure at NVCA is working hard to try to change the data that we share. And you said it you sided, there is a ton of money concentrated in three geographies in this country, and that should change, and we wanna change. Frankly, we're seeing some of it change now during the pandemic. Well there have been a few fairly high profile VC firms in the San Francisco Bay area that have decided to move elsewhere. Some of it is around the cost of living in California and how much it takes to hire engineers, which many times for a high-tech company are the people that you need to get a company off the ground, and when you're competing with the likes of Facebook and Apple and all of these other companies, then your inputs to creating your company had been priced a lot higher than if you went to other parts of the country where you can hire talented engineers that just happen not to want to live in the Bay Area.

0:26:30.2 Bobby Franklin: So I feel like it is something that can change. But it doesn't mean that Silicon Valley's going away. What I hope is that we create lots of micro-entrepreneurial ecosystems in given regions, because the reality is there are entrepreneurs everywhere, there are great entrepreneurs located in the most remote parts of our country, but if they don't have that ecosystem of both capital and experience and service providers, be that lawyers or accountants or others who understand what it takes to start and grow a company, then they're gonna have a really difficult time getting their idea into reality.

0:27:22.6 Bobby Franklin: So I hope that some of the things that we've started, we now have an online course called VC University, it's under the hospices of venture forward. And the idea for a venture forward is let's have a group dedicated and focused on making sure the industry becomes a better version of itself, so that means having a more diverse, equitable, and inclusive Venture Capital industry. And it's democratizing access to education about Venture Capital. So that wherever you are, you can take an online course and understand term sheets and waterfalls and all sorts of terms that are important to the Venture Capital industry that you may not have had access to if you don't live in one of those three geographies or go to a top school. I think there's hope. I think there's opportunity. I think there are a lot of people that are hopeful that we can have vibrant ecosystems to support entrepreneurs, knowing that they are everywhere, and I'm optimistic.

0:28:37.9 Matt Waller: For those of you listening, Venture Forward can be found at, it's a great website, and the National Venture Capital Association's website is It also has just tremendous resources. I've come through it several times, we point our students to it as well. I would say the Walton College is really proud of what you've accomplished and what you represent. Thank you for all you're doing. And thank you for taking time to visit with me today.

0:29:12.2 Bobby Franklin: Thank you, Dean Waller, I enjoyed it.

0:29:16.3 Matt Waller: Thanks for listening to today's episode of The Be EPIC podcast from the Walton College. You can find us on Google, SoundCloud, iTunes, or look for us wherever you find your podcasts. Be sure to subscribe and rate us, you can find current and past episodes by searching BeEPIC podcast, one word, that's B-E-E-P-I-C podcast. And now Be EPIC.


Matt WallerMatthew A. Waller is the dean of the Sam M. Walton College of Business, Sam M. Walton Leadership Chair and professor of supply chain management. He is also the host for the Be EPIC Podcast for Walton College.


Walton College's EPIC values -- Excellence, Professionalism, Innovation and Collegiality -- are the heart of Dean Waller’s podcast. Since the beginning of the series, Waller has interviewed business professionals, industry experts, CEOs and Walton College students to bring listeners first-hand accounts directly from the entrepreneurial world.


Waller is an SEC Academic Leadership Fellow and coauthor of “The Definitive Guide to Inventory Management: Principles and Strategies for the Efficient Flow of Inventory across the Supply Chain,” published by Pearson Education. He is the former co-editor-in-chief of Journal of Business Logistics. His opinion pieces have appeared in Wall Street Journal Asia and Financial Times.


Waller received an M.S. and Ph.D. from Pennsylvania State University and a B.S.B.A., summa cum laude, from the University of Missouri.

Walton College

Walton College of Business

Since its founding at the University of Arkansas in 1926, the Sam M. Walton College of Business has grown to become the state's premier college of business – as well as a nationally competitive business school. Learn more...

Be Epic Podcast

We're sitting down with innovators and business mavericks to discuss strategy, leadership and entrepreneurship. The Be EPIC Podcast is hosted by Matthew Waller, dean of the Sam M. Walton College of Business at the University of Arkansas. Learn more...

Ways to Listen

Listen on Apple Podcasts
Listen on Spotify
Listen on Google Podcasts
Listen on Amazon Music
Listen on iHeart Radio
Listen on Stitcher