Building a Board for your Startup – Noses In, Fingers Out

There’s an old saying, “If you want to live long, choose your parents well.” This came from Dave Berkus of the Tech Coast Angels during the Angel Capital Association Summit in San Diego held earlier this month. Dave sits on ten for-profit boards. He went on to describe how entrepreneurs can prolong the life of their startup by choosing their board members well. As an angel investor you may be invited to sit on the board of a company. Dave provided sage advice on the subject.

The first question to the entrepreneur sitting up a board is why are you building the board?
1. Advice or governance?
2. Do you have outside investors?
3. Do you need legal expertise or expertise otherwise?
4. Source of appeals for management?
5. Do you know what you don’t know?

The entrepreneur faces risk on several fronts with the board because the board can
1. Hire/fire the CEO
2. Influence/control the strategy
3. Withhold approvals for funding, acquisitions, and more
4. Become misaligned with the management

Dave advises the entrepreneur to
1. Not stack the board with family and friends
2. Balance the board with financial, operational, and industry experience
3. Determine the frequency of the meetings. For a startup, a weekly meeting is not uncommon.

The board has a legal responsibility. The first is the duty of loyalty to the corporation and the second is the duty of care to the shareholders. Dave recommends setting up two committees—the audit, and compensation committee.

Dave summarized the board’s posture as “noses in, fingers out.” The board should know what’s going on but they should let the management team operate the company.

Compensation for the board is typically in the form of stock options usually amounting to 1% over 2 to 4 years. Cash is rarely used and stock grants create tax events. The stock options are usually non-qualifying and are priced at the last transaction price. Dave also noted that common stock is worth about 1/5 of preferred shares so that factor must be taken into account as well.

As a board member Dave looks for the “bottleneck.” “Who or where is holding us back?” He then focuses the group on that problem. Dave noted the “every $3M” crisis. The first $3M crisis comes when the company reaches about 20 employees. The first crisis is the financial crisis, thus the company seeks funding. Those who grow the business then reach the organizational crisis – how to organize the people into an effective team. Finally, the company reaches the product crisis usually related to quality issues.

For those who will sit on a board, D&O insurance is a must. A $2M policy will cost $6K to $7K. The value of the policy is in the legal representation it brings and not just the dollar value of coverage. Dave noted that he has been sued four times.

You can find out more about Dave Berkus and his philosophy in Extending the Runway. The book is priced rather high because the proceeds go to the Boy Scouts of America.

Best regards,
Hall T.

ACA Conference Summit 2008 – Angel Investment is Becoming an Asset Class

I attended the Angel Capital Association Summit held in San Diego this year. The number of attendees grew from 325 attendees to 370 this year. While it’s a nice growth it’s not quite as dramatic as last year’s which went from 150 to 325 in one year.

The ACA now has 163 member groups representing 6,760 investors. Over 50% of the groups forecast increased deals and dollars for 2008. Trends this year for angel investors include:

--University-connected angel groups rising
--CleanTech groups forming
--More women involvement in angel investing
--More co-investment by region
--More communication with angels on a worldwide basis
--Growing relationship with VCs

The ACA continues to develop as an organization. Their goals for this year include:

--Public policy committee development
--Regional collaboration committee
--Offering D&O insurance to member groups
--Partnership with the National Venture Capital Association
--More research into angel group investment returns through a partnership with Dow Jones VentureOne

From the conference it was surprising how many attendees came from outside the US. The other major trend was the growth in the number of sidecar funds. Over half the angel groups have one. A sidecar fund is one in which the members invest a set amount and the funds are applied as an add-on to the deals the members fund. This provides both diversification as well as a means for investors to join the investment without having to commit time and effort to the process.


Also, angel investments were referred to several times as an “asset class.” I haven’t heard that before but given the traction around startup investments which most VCs have left behind for later stage deals we may be seeing the rise of a new asset class for investment. During the conference one speaker noted the slowing growth of the Venture Capital community. VCs had $300B invested in 1995 and in 2008 only $380B. The speaker defined VCs as a “compensation scheme in search of a business model.”

If you are interested in angel investing from an historical point of view you may want to check out Georges Doriot who was one of the first angel investors. You can read more about him in his book called Creative Capital.

Best regards,
Hall T.

Alexia Erlichman of Music Gorilla talks about starting Music Gorilla

Alexia Erlichman of Music Gorilla talks about starting Music Gorilla to highlight unsigned musicians, how she leverages South by Southwest, and how she came to Austin.

What is Music Gorilla?

Music Gorilla is an online service company which provides unsigned musicians access to film, TV, video games and songwriting opportunities and to play at major label showcase events among other things.

How did you come up with the idea for Music Gorilla?

Lawrence Erlichman came up with the idea from interaction with musicians in Austin. He’s an entrepreneur in general. He saw musicians needed access for their music to get out there. You don’t necessarily need to make a record with a major label to become known and, right now, even if you tried, you’re not likely to get one since they’re not signing a lot of new artists. Musicians are using MySpace and Facebook to get their music to fans and sites like ours to find success.

How do you make money?

Mostly Membership fees with a few other revenue streams. Placements happen but can be infrequent at times so it’s hard to live off a percentage of placements.

How about advertising?

No. The site is industry focused and is not highly trafficked by the general public.

How did it start?

We built it up from nothing. We self-financed it ourselves. It’s built up a reputation in our industry. We even have a partnership with Starbucks. They had those Hear Music kiosks in some of their stores a few years ago. They missed the technology because the kiosks burned CDs but you couldn’t plug your MP3 player or iPod into it to download music. They selected artists from Music Gorilla to highlight in their kiosks.

Are they going back after it?

No. They developed a partnership with iTunes to place their music there.

How many users do you have right now?

We have about 1000 Artist Members and 300 industry members use the site and 10,000 fans. S0me artists register as fans first to check it out so some of those fans are prospective artists.

There are quite a few music sites out there. I just read about one in Scotland where the registered members decide which artists get to play in the festival. How are you different?

There are a ton of music sites out there. On most of them, you can just put a profile on their site with your music. They are not at all geared toward the industry. We are one of the few that markets to the industry. We also showcase the artists in showcases such as those that take place during South by Southwest. We also do a lot of film, tv and songwriting submissions where we put together a cd and send it to the music supervisor or producer for the project. They don’t necessarily want to download it from the internet.

When did you launch the site?

In February, 2003.

Have you ever done any cross promotion with music festivals like the ACL Music festival?

ACL is less our target market because they showcase established artists. South by Southwest is a more interesting festival for us. We used to have a booth at South by Southwest but the longer it goes on the better venue it becomes for artists who are already signed. Record labels are breaking their bands to the public and other industry at South by Southwest. We now do our own showcases during South by Southwest by getting our own venue. They wanted to select some of our artists and place them in venues all over Austin. We decided to do our own showcase because they charge a significant amount for an afternoon party. We couldn’t afford that so we do our own events and have done so for the past four years. We bring in an A&R rep to give feedback to the artists we showcase so it’s quite helpful to the musicians.

How much are you trying to raise?

$150K to $200K.

Are you trying to expand?

There’s no need to expand geographically because everything is done online and we have members all over the world.

So what would you use funding for?

Marketing and advertising to get the word out on the service. We want to get articles into the magazines such as Billboard. We have found that when people find out about our services they sign up because the membership fees are reasonable especially for the amount of opportunity that we provide.

How did you get to Austin?

Randomly. I used to work for Robert De Niro as a production assistant. I was driving across the country after college when there was a film/TV strike in New York. Austin was one of the places we visited. We returned to New York three days after September 11th, 2001, and the city was shut down. I later decided to return to Austin because it’s such a laid back city and they have a great film community which is what I was doing at the time.

Best regards,
Hall T.
***

Global Moot Corp 2008—Judging the Best of the Best

I judged the Global Moot Corp competition again this year. Run by Rob Adams it is the Superbowl of business plan competitions since the entrants have won a competition elsewhere. This year 38 teams competed with just under half coming from international. The competing teams’ plans ranged from social software to medical devices to clean tech and more. The winners this year were:

Third Runner-up: OvaGuard from Thammasat University, Thailand, cultivates market dominating Phalaenopsis, growing highly demanded orchids.

Second Runner-up: qcue from the University of Texas at Austin provides a white label software application that transforms existing box offices into efficient markets.

First Runner-up: Klymit from Brigham Young University uses noble gas enabled fabric to control the temperature of the clothing.

2008 Global Moot Corp Champion: NeuroBank from Carnegie Mellon University. The company developed a breakthrough proprietary technology for minimally invasive extraction, isolation, expansion and cryopreservation of adult neural stem cells.

The full list of participants can be found here. It’s interesting to see how the local culture impacts the business focus of the presenting teams. The Thailand team always focuses on family-style businesses. Last year the Thai competitor focused on prawns while this year they focused on orchids. Universities with strong medical centers focus on therapeutics and medical devices. The Brigham Young team this year focused on climate-controlled clothing. The quality of the plans continues to climb and the number of teams actually starting the proposed business continues to increase as well.

Best regards,
Hall T.
***

I2P Product Competition – Developing Technologies for the Market

I had the opportunity to judge the UT Idea2Product Competition in which engineering students take a technology and productize it for commercial purposes. The goal is not to create a business with a management team per se but rather to turn technology into products that solve a problem in the market. Steve Nichols of the University of Texas has been running the competition for 8 years now. As he indicated the top three goals of the competition is education, education, and education. Steve travels extensively to bring more universities into the program with a particular emphasis on international universities. The global version of the competition includes submissions from over 40 universities.

This year the competitors include:

ProTrix – uses protein templated nanocrystals in the floating gate layer of a semiconductor device to double the capacity of flash memory chips.

Avatarus – uses a technique to encode a large number of 3D data points to represent a 3D object. They plan to use it for scanning the human face into a digital avatar for video games.

Turn2Live – uses semantic web techniques to characterize live music events and deliver the information through the web and mobile applications to users.

Bevo-MEA – uses lower cost materials to replace the platinum used in the membrane electrode assembly of fuel cells to reduce the cost of a fuel cell system.

Bevo-MEA edged out ProTrix to win the competition. This is a great event for generating exposure to the many technologies within the University.

Best regards,
Hall T.

DBLive Team Talks about Solving the Landscape Irrigation Water Waste Problem in the U.S.

Chris Eckhoff and Tom Fairey of DBLive talk about saving a huge amount of water in the U.S. with their predictive landscape irrigation control technology, and give their fast pitch.

What is your offering?

DBLive has a technology that enables its Irrigation Decision Device (IDD) which retrofits existing irrigation controllers and reduces water use by predicting future soil moisture based on 31 current and forecasted environmental variables such as precipitation, soil type, wind conditions, cloud cover etc.

What do you have that is unique?

Automated, global, point weather forecast. It enables weather-aware devices. For years weather forecasts have been given to people, but now we have them going directly to devices so the devices can make decisions about the future without human intervention.

There are five levels of technology in our software engine, each building on the one before. Together they represent a significant barrier to replication by our competitors.

1-Automatic, global, weather-forecast engine
2-Point forecasts for the actual latitude and longitude
3-Scaled up to more than 70 on-demand five-day forecasts per second
4-Ability to overlay weather forecast layers on any electronic map
5-Point-forecastfor soil moisture

You can see a demo of the Point Forecast technology at www.infoweather.com. It presents a Google map that lets you find your target point anywhere in the world. Move or zoom the map and left click on any point to receive a five-day weather forecast for that point.

What is your target market?

Our primary target market is the 25 million home sprinkler systems in the top 100 metropolitan areas of the U.S., and it is addressed through water distributors like major city utilities and municipal utility districts.

What is the hardware unit?

It’s called the Irrigation Decision Device (IDD) and can be installed on existing irrigation system controllers in ten minutes. The unit makes a decision each day whether to allow or suppress the irrigation system’s watering schedule using a small amount of proprietary data broadcast via satellite or FM wireless from our data center.

Are you in pilot tests?

For more than two years. We completed tests at Southwestern University where we did a 4.5 month side by side comparison with an industry standard “ET Smart” irrigation system and our solution saved over 43% against that system. We did pilot tests at Sun City in Georgetown and we saved 83% of their usage, a number higher than usual because of an unusual amount of rain last spring, and the fact that they don’t adjust their water usage based on current or forecasted weather.

What about the city of Austin?

The city of Austin has adopted 20 strategies to build, over ten years, to a 10% peak day water savings at a cost of $1.14 per peak-day gallon. They are uncertain about the ultimate success of some of these strategies. If Austin mounted a rebate strategy on DBLive’s IDD, it would save the same 10% at a cost of only $0.44/peak-day gallon. That’s a huge cost savings. Austin is still giving away toilets. The IDD would save 4 -5x what a toilet exchange saves. The staff of Austin’s water utility worked hard to identify and obtain council approval for their 20 strategies, and they are not anxious to revisit the issue. The elected officials are concerned that we need to save more water and are beginning to understand that an IDD rebate program could produce the desired savings at one third the cost of the 20 adopted strategies.

How many units have you sold so far?

In addition to those purchased by Southwestern University, Harris County Water Control and Improvement District #132 has bought 50 units to start installing in the 264 residential sprinkler systems in their district. We have only received our first production units from our out-sourced manufacturer this month. Eleven more MUDs have added the IDD to their list of conservation devices approved for existing rebate programs.

What’s the biggest issue?

The sales cycle to large cities is slow. They can take up to 2 years to make a purchase decisions. There are more than 400 Municipal Utility Districts in Harris and Montgomery Counties alone (Houston area). They have much shorter sales cycles, and they are our first adopters.

How much does each unit sell for?

$125 per unit in quantity. The IDD’s installed cost is comparable to that of rain accumulators, which are required by law in 15 states, and for which there are established rebate programs. The professionally installed cost of an IDD is comparable to that of a rain accumulator.

Can we hear your FastPitch?

DBLive has the ingredients to become a $300M company:
1) A team of achievers: diverse, experienced, and determined to make it happen,

2) A breakthrough technology with significant barriers to competitors. A complex technology, but such a simple first product that the man on the street understands it in seconds,

3) A market exceeding $3 Billion,

4) A plan to make it happen,

5) An exciting, green product. The population is growing like bacteria but the water supply is static. The best way to make supplies last is effective water conservation.

In two years of testing, this device has saved no less than 40% of water used by expensive competitor systems.

It retrofits existing sprinkler controllers, forecasts soil moisture, and suppresses watering if there are wet conditions ahead.

Its $125 price fits city rebate programs, enables wide spread adoption.

It’s already manufactured and sold.

The public is ready for this green product – and this green company.

Come and join the fun

Best regards,
Hall T.

Steve Wagh of Lakeside Mediations talks about the Mediation Process

Steve Wagh of Lakeside Mediation talks about the mediation process, how it works, and what drives some to reach a resolution.


Why did you get into mediation?

One of the worst things that can happen to a businessman is to get involved with a lawsuit. Whether it is over IP, partnerships breaking up, an unhappy employee, or changing a CEO, I’ve been through all of this. The first thing you do is go to your business lawyer. He or she tries to help you out by sending some tough demand letter. If that doesn’t work, you go get the “hired guns”; the litigators. Then it will cost $20K to $30K or even $5oK for each round and a year or more of turmoil. A pending lawsuit definitely impacts your business negatively. Suppliers and partners don’t want to get involved with a company when it’s going through litigation because they don’t want to get dragged into it. Win or lose, it can kill your company.

Most litigators admit that even if everything seems to be in their favor, they still run the risk of losing a jury decision. If you lose in court, it’s a disaster. If you win big, it will probably get appealed and stay locked in the courts for another year or so. If you win a monetary judgment, you’ll get only about 50% of the stated amount – the rest goes to the lawyers and court costs.

So I asked my trial lawyer friends how often they actually go through a trial? They said maybe only once a year because 95% to 98% of all their cases settle before their trials begin. Judges are busy and oftentimes demand you first try mediation. From a lawyer’s point of view, mediation doesn’t compete with their business because they’d rather settle earlier than later. A settlement is considered a “win” for their client and them.


So how does one get started in mediation?

There’s a forty hour course one takes to get certified.


How does mediation work?

As the mediator, I’m not the judge or jury or arbitrator. I don’t decide who’s right or wrong. My job is to be totally neutral; working hard with both parties to see if there is any way I can help them come to a fair settlement by the end of the day. Instead of a judge or jury making the win or lose decision for them, this is their chance to work out a reasonable deal between themselves.

I know the fear that one has when faced with the possibility of litigation. Sometimes that helps drive people to work harder on the mediation because they know if this doesn’t work they will have to go through depositions, interrogatories, and expert witness testimonies, and the cost is going to be huge in both money and time.

If we don’t reach a settlement by the end of the day there’s no harm, no foul. Nothing said or done at this mediation can be used later in court. I keep strict confidentiality. I can’t tell the other what each one tells me in confidence, unless they say it’s okay. The fact that you almost reach a settlement or were willing to compromise on some issue can’t be used in court, either. Either party can change their mind at anytime.


How does it work from a practical point of view?

I start with both parties in the same room unless they are so bitter that we have to start by meeting individually. We discuss the ground rules for the mediation and make sure we all know the issues and the stakes. After that, I may or may not break them into smaller groups in different rooms so that they feel comfortable laying all their cards on the table for me. Sometimes they don’t want to talk or don’t know what to talk about so we start off talking about their background or the business. After awhile they start to vent about the issues that are on the table and from there we can move forward. So often they don’t know how the other feels because they haven’t been talking to each other. I get to hear both sides of the story and might be the only one who really sees the whole picture.

Even if they don’t come to a settlement during the mediation, the process usually highlights the history of the conflict and narrows it down to a few key issues that can be addressed in the following week or so.


How are you different from other mediators?

There are many attorney-mediators in Austin because they take mediation class as part of their CLE-continuing legal education requirement. Most mediations are for divorces, car accidents, personal injury or medical malpractice. That requires some level of experience with the legal process. I only handle business disputes where I bring 40 years of understanding and experience. If the parties talk about software development and how one is taking code from the other, I understand what they are talking about. If it’s a CEO or employee issue, or a partnership problem, or a contract issue – I’ve been there. I want to help the same people I’ve worked with for so many years. No one should have to go through unnecessary litigation.

How often is mediation successful?

About 75 to 80% of the mediations resolve.

How much does it cost?

Mediators have different rates. I charge $2K for most full-day mediations, with each party paying half. There’s no other compensation from the process.


What do you find rewarding?

When I take on a case, sometimes it starts out with both parties so very far apart and angry, it seems like they’ll never come together. But by the end of the day they usually do. And then it’s over for them. No more bitterness. No more expense. No more effort. And no more stress. It’s a huge relief. That’s what makes it worth the while.

Best regards,
Hall T.

Amy George, Melissa Nathan and Paige Davis of Blue Avocado talk about reducing a shopper’s carbon footprint at the grocery store

Amy George, Melissa Nathan and Paige Davis of Blue Avocado sit down to talk about reducing a shopper’s carbon footprint at the grocery store, the size of the grocery bag market, and gives a FastPitch for the company.

What is the Blue Avocado Company all about?

We’re a lifestyle products company. When you look around the world people are starting to ban plastic bags. Thirteen cities in the US already have proposals on putting a ban in place. Customers are going green and in the area of bags there are no alternative bags that have a comprehensive system and are committed to reducing their customer’s environmental impact through education, packaging, materials, and their supply chain.

How big is the bag market?

It’s a $1.9B industry. With the urgency global warming presents, customers know they have to have to change their lifestyle to make a difference. We want to make choices easy, functional, and fashionable.

What does the system include?

It is a multi-component system that addresses the need for insulation for hot/cold items, ventilation for produce and durability for bulk items. We also have an “avocado pod” that clips on your keychain that has a self-collapsing single bag for last minute shopping needs. Nobody has taken the bag to the next level here in the USA. There are examples in Australia and Germany that demonstrates there is a market for it and of course that is a great deal of awareness for the need.


Why do you call it the “blue” avocado?

Blue stands for blue sky which represents our commitment to reduce carbon emissions in the air – by eliminating plastic bags, using recycled materials in our products, and implementing a smarter supply chain. The avocado represents that we all have some ‘green inside’ – even if we don’t look like the stereotypical environmentalist.

What is your channel to distribute the product?

In our early research 70% of shoppers indicated they would buy it at the store but we see an online channel is also important. Retailers are looking for ways to manage the proposed bag bans. Major retailers in Austin such as Wal-Mart are coming out with plans to manage this. In addition to a high-end line, BlueAvocado is offering retailers a private label opportunity.

What is the competition like?

There are definitely bags out there but what no one is addressing is the need for the next level of a bag which has a system with a purpose. We’re providing a bag for the entire shopping experience. It’s compact. It’s got its own carbon footprint. It’s all there.

How much can each bag hold?

Twenty pounds per bag.

What are the bags made of and when will it be available?

Recycled polyester. The majority of the materials are recycled. We’ll start our beta program in July.

What’s the status of the product?

We’ve developed three industrial prototypes, are producing our first samples for pre-sales activities, and are in negotiation for our first order.

Can you give us your Fastpitch?

We are producing more carbon dioxide than the earth’s environment can handle. Almost half of the carbon dioxide you put in the atmosphere today will still be there when your grandchildren are born. So what can we do? At BlueAvocado™ we are passionate about creating lifestyle products for millions of consumers - making it easy to “do good and get it done”™. Our first product is a grocery bag system to help shoppers reduce their carbon footprint by offering an alternative to today’s petroleum-based disposable bag. It reduces the hassle of shopping and reduces our carbon footprint by introducing an eight piece, durable system. Some countries around the world are introducing plastic bag bans including China. BlueAvocado is an Austin-based company seeking $1M in angel funding to pursue the $1.9B market. By 2010 we want to make the earth 5 billion pounds lighter. BlueAvocado invites you to join us on this journey.

Best regards,
Hall T.

Ed Dato of Data Recognition talks about creative ways of Fund Raising

Ed Dato of Data Recognition talks about creative ways of raising funding for hardware products, why he never entered entrepreneur contests, and why audited financial statements from the beginning help close the sale of his company.

Most people think there are only two ways to raise funding: a bank or an angel…OTM (other people’s money). But there are at least 2 or 3 other ways to do it. Your back pocket is one of them. (That is another blog to explain the very simple formula that allows you to spend no time raising money and all of your time selling).Your manufacturer or subcontractor is another. They could be your partner. It’s in their interest to work with you.

Do you know any manufacturers that look for that sort of deal?

Absolutely. There are all kinds of deals they look for. I’ve done it before. It was a small deal but they had to buy the tooling. I made an arrangement to give them a SPIF on every unit they made. I gave them sole source as long as they could make the volumes. It just depends on how creative they are. They are in the manufacturing business. They need one thing desperately, customers. If they get a SPIF on top of it, that’s great. The only way they lose is if they screw it up. It’s better than giving your equity away. It also incentivizes the manufacturer to help get the cost down by relaying out the boards, and redesigning the product so it goes through the manufacturing process faster and cheaper. Now you’ve got someone who knows the manufacturing side of it to help you improve the product. Then when a competitor comes in, and don’t tell me there’s not going to be a competitor, you’re prepared to drop the price if you need to because you have taken the cost out of it. Ironically, I stayed with them when our volumes justified outsourcing to Asia for lower prices. I did so because of their loyalty and commitment to me when I needed them. That is a partnership…and we all need partners to succeed!

You’re an entrepreneur by background. What were some of your early efforts to innovate?

I remember in the late 60s/early 70s, a drummer in my band and I who decided to build a nifty product – a digital alarm clock. They didn’t exist at that time. So we went down to Radio Shack to buy the parts and it actually worked. There was not any market for it at that time. No one was in the business then. I went to the Senior VP of TI and I showed it to him. At that point, I was 25 years old. He said it was really an incredible product but when TI, Casio, and National Semiconductor get into that business they are going to crush you. And that’s exactly what happened. They came out with alarm clocks, wristwatches and calculators and it totally crushed us. Fortunately, I listened to him and moved onto the next great adventure.

Are you doing any angel investing now?

I was until last week, but the stock market is just awful, but it’ll come back. I think I have some ideas that can help entrepreneurs. If you’ve never ridden a horse it’s hard to teach someone how to ride a horse. I’ve had my share of failures and successes. When I ran my own company back in the 90s, I never entered into any of those competitions that Inc. Magazine ran, and people asked me why. I told them that those things won’t generate one new lead for my product. It’ll only generate phone calls from attorneys and other service providers wanting to sell me their services. It would never sell another barcode data collection product or service. We marketed only to those who would buy from us.

When did the business start?

We started in business March 13, 1989, after 25 yrs. experience and 1 year of intense planning and modeling the business. We didn’t know from the beginning that we would sell the business. In fact, we didn’t think we could ever sell it to a 3rd party. But we sold it in 2000 to Brady Corporation. When they contacted me I knew we had 90 days to complete the deal. If not, they were going to suck my brains out negotiating the deal, taking my time away from running the business, and lower valuations because the chief salesman was in negotiations and off the job. What made a 90 day close possible and a cash closing on Feb. 29, 2000 was the fact that we had audited financial statements for the previous three years from one of the national firms. Soon thereafter, the national firms were significantly reduced in size and stature. That fact is evidence that behind every idea that is well conceived and executed, there is definitely the spice of luck that we all need to attain our goals.

Best regards,
Hall T.

The Rice Business Plan Competition 2008--Getting Bigger and Better

I participated in the Rice Business Plan Competition again this year. It’s my third year running and I must admit it’s quite impressive how the quality of the business plans and presentations has risen each year.

This year the program showcased 36 teams (28 from the USA, and the 7 international), with prizes totaling $675,000. About 20% of that is in-kind services. About 1/3 of the presented plans were companies that are up and running as a business. The surprising news from the conference is the number of previous year competitors who have gone on to launch a company. It was about 50%.

There are 170 judges of which 53 are from venture capital, 21 from an angel community, and 18 from private equity. I enjoy judging the competition because I learn a great deal about the industry from talking with the other judges and listening to the questions they ask.

I judged the life science competition and have done so for the past two years. Two years ago, almost none of the plans had a strategy for achieving FDA validation. Today, most have a fairly sophisticated plan for how to do it at the lowest price possible. Two years ago, most plans sought $2M with the goal of creating a pharmaceutical company which was completely unrealistic. Today, most plans focus on partnering with a pharma company for clinical trials and then licensing the technology after trials finish. Today, some of the plans still emphasize the science, but the winners are those who can present a business case including productization, go to market strategies, and financial numbers with some backing.

Business plan competitions have grown substantially in the past few years. There are quite a number of business plan competitions available to the student today. For a general list check out this link.

The top six finalists this year are:

Etoh Pharmaceuticals, University of Chicago—a triple drug combination for treating alcoholism.

Qcue, University Texas at Austin—dynamic pricing solution for concert promoters.

Enexra, Harvard University—reduces cost of silicon wafer-based solar cells by 30%.

Filigree Nanotech, Wake Forest University—improves battery performance through silver nanowire.

Klymit, Brigham Young University—noble gas-based insulation in clothing.

Microtransponder, University of Texas at Dallas—uses subcutaneous neurostimulation device to mitigate pain.

Best regards,
Hall T.