UT Venture Fellows program – A Great Learning Experience

I met with Jim Nolen the other day and he updated me on the UT Venture Fellows Program. Venture Fellows are recruited from the UT MBA program for a two semester course. Twenty candidates are nominated and elected to the program by the alumni of the previous Venture Fellows class. Members get the opportunity to work in various capacities at VC firms such as performing due diligence, market validation, developing an M&A package for a company’s acquisition and more.

I was then invited to give a talk on angel investing to the group and found the audience intrigued with the prospect of working with angels in addition to venture capitalists. In my talk I highlighted the fact that angel investors in aggregate invest more than VCs. The VCs are just better at PR than angels since angel groups are more fragmented. There is a shrinking number of VCs but a growing number of angels and angels groups in the state of Texas. Startups need less money today and than previously due to increased efficiencies in business due to outsourcing and other factors.

I was impressed with the program as it provides real, hands-on experience to students before they graduate. As we know from working with startups, that is sometimes the difference between success and failure.

Best regards,
Hall T.

Attracting Angels Seminar – It’s All About Networking

I had the pleasure of speaking on a panel this morning hosted by the Austin Business Journal and Fish & Richardson on the topic of “Attracting Angels”. On the panel with me was Fred Stowe of Order Corner -- a company in which CTAN made an investment, and Steve Vandegrift, a long-time member of the entrepreneur/investor community. Kin Gill moderated the discussion.

Steve vocalized what many in the investment community already know – VC funding in Austin is almost gone. The funds in the 1990’s have invested their dollars and are now trying to make their portfolio companies work. Rudy Garza has G51, Brian Smith has S3 Ventures, and there is Austin Ventures, but that’s about it. Most of the deals are now angel deals anyway. What used to take $5M to startup a company can in many cases be done with $500K due to the cost of business going down thanks to the web, email tools, outsourcing, and the like.

Angel investing is back in a big way. They run in five to seven year cycles, and a new cycle was kicked off in 2006. I attended the Angel Capital Association meeting in 2006 in which there were 150 of us attending. This year, the same ACA conference had twice as many people. Across the board, angel groups are seeing a resurgence in membership and dealflow. Certainly, the Central Texas Angel Network is seeing a surge in membership and deals. We get about 30 deals a quarter submitted to our site.

Fred Stow echoed the comments of Steve and highlighted the need to network to find funding. He also mentioned that in his experience the angel groups in Austin, Dallas, and Houston, each had unique characteristics. Dallas is focused on retail, Houston on energy and biotech with a leaning toward “old money” and Austin towards more eclectic deals with risk. Each angel group has its personality and should be taken into account when looking for funding. An angel should bring more than just dollars to the table. An Angel should bring contacts and expertise as well.

In submitting deals to the Central Texas Angel Network, we look for investment by the founder – just to ensure “skin in the game.” On software deals we also look for market validation. It’s hard to talk about business models when you don’t have any customers. There has to be some vetting of the business model in order to get traction with investors. The costs of acquiring/supporting a customer as well as the revenue from that customer are important to know before seeking an angel.

Most angel groups seek deals that are raising at least $200K. We rarely see deals like this. Most are seeking at least $500K. The audience asked about “baby angels” in so far as are there people who will invest in deals that are lifestyle businesses? While there are not official groups for this type of investor, there are individuals who like these deals. It’s all about networking.

Best regards,
Hall T.

Eureka Instruments – Water Quality Instrumentation

Austin is an environmentally conscious city which gives substantial attention to water quality in the area due to assets such as the Edwards Aquifer and Barton Springs.

I met Stuart Garner earlier this week at an Entrepreneur training CTAN holds at the MCC building. (The training gives entrepreneurs some insight into how angels fund deals and the session also covers the Emerging Technology Fund program.) Stuart runs a successful startup making water quality testing instruments, called Eureka Instruments. Eureka designs and markets water-quality instruments called multiprobes. Multiprobes measure such parameters as temperature, pH, salinity, dissolved oxygen, and water level. Biologists use the devices to measure the quality of water impacted by the effects of urbanization or a contaminant spill.

The water quality market has been growing steadily for 30 years at about a 15% per annum rate and is about a $60M market place. It’s great to see innovation applied to protecting the environment.

Best regards,
Hall T.

Minggl—Social Networking of Social Networking Sites

If you’re an avid social networking user you know the drill. Login to Facebook and review your profile. Login to MySpace and check your favorites. And so on and so forth. Each social networking site has its own login and password requirements. But what if you could login just once and all your sites are now accessible? That’s what Minggl does for you.

It can update photos and videos from anywhere across the web and consolidate friends lists and organize them better.

The entrepreneur behind the scenes is Dewey Gaedcke who according to his LinkedIn profile holds the survival record (5 days without water) in Kilauea Volcano national park in Hawaii. Dewey talks about how Minggl gives the user the ability to bring all of one’s content, whether if by YouTube, Flickr, MySpace or any other site, and consolidate it into a package that can be placed by the user in a position on the web and even change the access priority on the content so the user controls what others can see.

Best regards,
Hall T.

Springwise – Source of Innovative Ideas

Are you looking for that innovative idea that will inspire your next startup? I found a source called Springwise that captures new ideas from around the world. In the current edition, I found “Mobile Marketing at Music Festivals” an interesting idea. Instead of holding up a lighter during a concert to register your affirmation of a song, how about holding up a mobile phone with a lighter glowing on the display? How about applets you can download to help you find others in the crowd?

How about parties for foodies? In these events, you need only get a group of people together. Consultants bring the food to the meeting for you to sample. It’s a direct sales technique but for a free meal of new and interesting cuisine it sounds like a lot of fun.

Then there’s “Ridesharing with a Twist” which utilizes social networking sites to help people find carpool rides that are more interesting. Finally, there’s the “Scoring for Simpler Shopping Comparison” in which a web site gives a single number score (1-100) for a product. Most sites provide data covering several screens making comparisons difficult.

In each of the examples above, Springwise highlights a startup in that space so you can dig into the idea and see how they are executing it. I recommend you check it out as it may spur some ideas for your own startup.

Best regards,
Hall T.

David Altounian’s iTaggit—Keeping Track of Your Personal Stuff

I had my morning coffee at Uno’s today with David Altounian who now runs iTaggit which is an internet site that lets users organize and inventory their personal assets such as jewelry, artwork, etc. They generate revenue from advertisements, and referrals to service providers.

David has an interesting history going back to Dell where he ran Dell Labs for several years before moving on to startup Motion Computing the maker of tablet PCs. Along the way he picked up an MBA at Chicago’s Kellogg school of Management. According to David, his post-career goal is teaching Marketing Strategy in a university. I asked how he came up with the idea for iTaggit. While in university he saw numerous services that managed people’s financial assets but nothing that managed their physical assets. From that observation he concluded that people needed better tools to keep track of their stuff for insurance purposes, and other reasons.

David went on to talk about iTaggit’s growth. They just released an eBay Auction function on iTaggit’s site. It lets the user tag one of his items to sell on eBay and an eBay pop-up let’s the user customize the HTML for presentation of the item and brings all the relevant information from iTaggit’s database into the eBay posting. He recently upgraded the user interface and found a nice increase in business. In one case, the simple change of a background color made a big difference.

David talked about the benefit of taking less money in a startup rather than more. It teaches you how to spend more carefully. Motion only raised $6M but could have reached for $30M or more. He also spoke about finding the right fit between the entrepreneur and the investor. Sometimes the money is available but the funding source needs to fit well with the startup.

Best regards,
Hall T.

Phurnace Software – Made Java Applications Easier to Manage

Most people in town know Phurnace Software because they’ve made quite a splash in the past year. For those who don’t know, Phurnace makes software that accelerates the deployment of Java applications. Founded by Daniel Nelson while at UT, Phurnace now resides in the Austin Technology Incubator.

Larry Warnock recently took over as CEO of the startup. Larry has quite a history with startups. He developed a startup in the Bay area which was acquired by Siebel. He came to Austin to join AV Labs and then moved on to Zilliant and Vignette before landing at Phurnace.

I met with Larry recently and learned more about Phurnace’ offering. Java applications require a great deal of customization on the enterprise software environment. There are literally hundreds of parameters that must be set and adjusted for the web services layer in the network – of which there are three main standards. Phurnace builds scripts into its Java application development environment and manages these parameters for the user.

Although Larry wouldn’t divulge revenue or sales stats, he did say they are seeing traction in the marketplace. Phurnace is a great example of startups coming out of UT. In the case of Phurnace they won the UT Moot Corp competition last year.

Best regards,
Hall T.

Armida Technologies – Wireless Video Surveillance

Having worked in the wireless space for some time now, I can tell you that wireline replacement is a real motivator for customers to switch to wireless systems as soon as they are “good enough.” The cost to wire an industrial location ranges from $2/ft up to $2000/ft, which makes wireless a no-brainer if a solution is available.

Armida Technologies brings wireless to the video surveillance market. Their value-add is their software which encrypts the signal before sending it. In case of interference, they can still recover enough of the transmission to give the user a clean image.

You can see Armida and other wireless companies in the upcoming Wireless Seed Stage Forum held by the Austin Technology Incubator on October 17, 2007.

Best regards,
Hall T.

Stormchaser Technologies – Automated Trading Systems

Stormchaser Technologies offers an automated trading system that uses algorithms to make day trades. The user loads in a select basket of stocks, and the software determines what trades to make. If the user wishes, there’s an automation features that takes complete control of the trading process. Robin Abraham, the CEO, calls it the “black box” technique in which the software does everything. There’s also the “grey box” mode in which the software offers trading advice, but the user determines what trades to make and enters them manually.

Robin spent several years consulting for IBM and even dabbled in real estate for awhile. He found dissatisfaction with trading systems because they couldn’t be automated nor could you use different platforms. He started in 2000 and came out with the first version that was a simple trading system. Over time he grew the tool into an automated trading system.

His philosophy on trading is that everyone has their own philosophy and that’s what makes a market – everyone has their own view. He wants to cater to those with unique ideas about trading. His trading system pulls from several different philosophies on money management, trading schemes, and portfolio management.

Robin indicated that one advantage of automated trading is that it forces discipline on taking exits and stops. The emotion factor in manual trading sometimes overtakes one’s better judgment. Automated trading helps with that. His other philosophy is the user should be able to develop once and implement many times. So the user could develop a trading strategy and then implement it on numerous platforms without the cost of redevelopment.

Stormchaser is targeted at the active trader with special tools for the swing trader. You can go to the Stormchaser web site to download a seven day free trial.

For next steps, Robin is developing new trading systems that leverage 3rd party developers into the process such as the Aurora and STXtreme systems.

Best regards,
Hall T.

Video Leverage – Professional Video Generation

I work at a large company in Austin and for many years our sales team would video tape sales conference presentations so others could check out the tapes and review the materials. Essentially, one of the salesmen would setup a camcorder on a tripod in the back of the room (about 100 feet from the presenter) and hit “record.” He later transferred it to a VHS tape. The image of the speaker was almost imperceptible, the voice inaudible, and in general the quality low.

An administrator kept track of the tapes for checkout and had a bookshelf full of them, all carefully labeled and archived for several years. One day, in passing, I asked, “So how many tapes have been checked out?” She replied, “Oh, no one’s ever checked out a tape. “ From that experience it became clear that viewing a video tape of a presenting person is a different experience from viewing a live presentation. The video viewer can check out of the session by simply hitting a button. Five minutes of viewing a video is equivalent to an hour of viewing a live presentation, which is why just taping a presentation and then transferring the raw footage onto a tape does not translate well.

I met with Andy Choquette from Video Leverage in Austin to plan a video shoot to be shown at the upcoming Open4Business conference event. Andy brought up several of the production quality issues one needs to keep in mind for shooting, producing, and displaying video footage. With video coming to the internet, the need for quality video grows dramatically. As Director for the Central Texas Angel Network I’m seeing more and more emails with links to a video pitch from the entrepreneur. I also find some entrepreneurs communicate their business proposition better in a pitch than in writing. Since it’s much easier for an investor to watch a ten minute video pitch than to read a lengthy business plan, it won’t be long before this is the standard in the industry.

Best regards,
Hall T.