Marlene Smitherman of Critical Connections talks about the medical records problem, why the RHIO initiative failed, and what generates the most revenue in a medical records company.
What’s the main issue with medical records in healthcare today?
There’s no single place to store and retrieve electronic medical records for patients. Most records are still paper.
What is Critical Connections about?
We’re in the healthcare information business. You hear in the media about the mess the healthcare industry is in with respect to medical records and communication. The doctors, outpatient physicians are in the dark about information.
What is your background?
Several years ago I was working in Fort Wayne, Indiana and they came to me to see if I could put together a one-record system so everyone could look in one place for the entire medical record of a patient. I started looking into IT technology and found that no one understood the healthcare environment and how you work with that environment. I came back to Austin and went to the Travis County Medical society and said I have a request and I don’t know how to answer it. Can you help me better understand what physicians need. I spent two years working with a group of 60 physicians to understand their needs to bring physicians together so they could readily share data. The first thing is to not change their workflow. Also, managed care has changed the dynamics of the doctor/patient relationship that the doctor has to see at least 30 patients a day just to keep a practice up and operating. That means the doctor can spend only about 10 minutes with each patient. If there’s anything that takes you 3 minutes longer with that patient means there’s fewer patients treated.
From that engagement, I came out with a requirements document to create a universal patient medical record. To start a business I needed funding. First, I went to VCs, but found it was the wrong place to raise money. A medical records company wouldn’t turn a profit quickly enough because we’re changing the way an entire entity – doctors, hospitals, etc, operates. If we’re successful, the way patients receive medical care will change dramatically. It will take some time to implement but if we’re successful, it will be huge because no one has figured this out yet.
I started to contact groups and institutions in the healthcare industry and raised some funding -- about $4.5M so far.
The business model requires us to create an entity at a local level that is physician owned. The only way doctors will buy into a solution like this is peer to peer. Sending out salesmen is not going to work. Once you have that entity in place there’s an opportunity to build other products and services – one of those is group purchasing. There are also transaction fees.
How do you convince doctors to come together?
We’ve already done that. We call it the connected cluster. It starts with the primary care physician and we connect to the specialist groups he refers to. We are taking this to the next level to create a regional co-op. The charter is being filed today. We intend to connect 500 doctors this coming year. We are also looking at Dallas, San Antonio, and Houston to create a regional co-op.
We don’t require the doctor to change what they do as long as they are capturing data electronically.
Why did the US government fail at this?
The whole electronic medical records effort did not achieve the goals set for them. The RHIO idea or Regional Health Information Organization was tried by the US government but with little direction. Last year there were 200 groups working on this. Today there are only 22 or so that havew actually achieved a modest level of data sharing and it’s mainly in the sharing of lab and radiology data. Most projects failed because it was a top down initiative focused on the technology. The challenge is getting people to work together. We were able to build the trust of the physicians.
In your system, who pays for the services?
It’s very untraditional. Doctors pay a nominal membership fee. The physician group purchasing entity can generate significant revenue through rebates. The electronic data will build up into a substantial database which could be sold by the doctors to pharmaceutical companies and others—this is where most of the revenue comes from. There will also be transaction fees on various other services.
How big does a region have to be, to create a co-op?
A co-op requires about a million people to sustain it.
Do you have a trial up and running?
We’re running the trials now with 16 clinics accessing the data.
So what are you raising funds for?
Critical Connections needs equity partners to take the technology to the next level. We are electronically registering patients. We’ll have 300,000 patients registered by the end of this quarter. We’re bypassing the second phase and going from pilot to production.
So how much are you seeking to raise?
Between $2M and $5M.
Best regards,
Hall T.
Wednesday, February 20, 2008
Friday, February 15, 2008
Linda Marroquin of FrogPad Solves the Keyboard Problem for Mobile Devices
Linda Marroquin talks about the alternative keyboard market for mobile devices, bootstrapping the company and her plans for growing the company in the future.
What is FrogPad?
It’s a one handed keyboard that’s very easy to learn. It’s a breakthrough in technology that you can learn in only seconds. We’ve been manufacturing and selling the product for over four years. We’ve been self funded by yours truly. We have a USB version and a Bluetooth version both in left and right handed models. Probably 50% of my buyers are Mac users. 40% are mobile innovators interfacing to tablets or mobile phones and 10% are for those with assistive technology—stroke patients, Amputees. Of all the alternative keyboards available, no one has sold as many units as we have.
How many have you sold?
10,000 units.
Where did the idea come from?
The inventor was a Japanese man who was trying to translate text. He would hold the text in one hand and would try and type with the other hand. He found that was hard to do and so he invented the FrogPad concept to help with one-handed keystroke translation.
What will make this product take off?
In the last year and a half, I’ve been waiting for the launch of a particular technology – the multi-touch screen which Apple launched on the iPhone. The second thing I’m waiting for is the market for wearable computing. This year the government will buy 1.4M units for the military so the market is here. I’m getting orders from companies supplying government applications and orders. The military is buying 1.4 million wearable computers this year according to IDG. You can get to 40 words per minute in about 3 weeks of practice. It’s easy and fast to learn. I’m not going to replace the computer keyboard, but rather be considered for use with the mobile device. 19 billion mobile devices will be manufactured in the next 4 years. This is a niche product, yet the niche is huge.
So how will you take advantage of this?
Immediately, I want to develop two new products. First, on your iPhone now you have a keyboard and when you go into keyboard mode it takes you into single touch mode. We can leverage the multi-touch screen for our use. The multi-touch screen allows us to develop a downloadable version of the FrogPad called SoftFrog that would let us leverage the keys like the ones you have on the iPhone on a multi touch display. We could develop a “FrogPad lite” version. The second is to develop a newer version of my Bluetooth unit. I want to develop a sleeker looking FrogPad that’s more iPhone looking and could be wearable.
I always want to hold onto the shirt tails of Apple because they have a go-to-market strategy with Apple to get into their stores. This next month Apple will release the SDK for the iPhone. It’ll take us 6 months to develop SoftFrog. Also, I want to put it on the Apple Dashboard. I also want to put it on the Apple tablet. A tablet is a one handed device because you hold it with one hand and then type with the other. My one-handed keyboard will work with a wide range of products including computers and mobile devices. It enables portability. Paul Allen is developing the Flip Start. It’s a full PC that’s miniaturized.
What is your business model for the new products?
For the downloadable version it will be licensing. Automotive GPS and home automation/entertainment are key markets. Along with gaming and all mobile phone applications. Also the keyboard can be licensed to Volkswagen, Sony, etc.
Have you talked with the people at Motion computing?
I haven’t. I’ve used the last four years to prove the model. People are buying it. It’s a solid product. We don’t have product that comes back. Now I’m starting to look for money. You know as well as I do, that business development is an expensive endeavor. Each product will cost about $250K each.
What is your current staffing level?
Just me. I outsource everything.
Who do you need to hire to fill out the team?
I’ve already identified them. Some of them are on my advisory team. I need a CTO to help develop the new products. My best skills are in sales so I could use someone for the CEO/COO position. We need someone committed to the military market, another focused on Apple, and the last is for K-12 and assistive technology– for those who are disabled. Right now we have over 10,000 soldiers coming back from Iraq who have lost an arm.
What other markets could you pursue?
I’m also interested in pursuing the gaming industry. It can integrate now with the XBOX and Playstation 3. I need to get the word on it. I could use funding to get the word out on that.
Best regards,
Hall T.
What is FrogPad?
It’s a one handed keyboard that’s very easy to learn. It’s a breakthrough in technology that you can learn in only seconds. We’ve been manufacturing and selling the product for over four years. We’ve been self funded by yours truly. We have a USB version and a Bluetooth version both in left and right handed models. Probably 50% of my buyers are Mac users. 40% are mobile innovators interfacing to tablets or mobile phones and 10% are for those with assistive technology—stroke patients, Amputees. Of all the alternative keyboards available, no one has sold as many units as we have.
How many have you sold?
10,000 units.
Where did the idea come from?
The inventor was a Japanese man who was trying to translate text. He would hold the text in one hand and would try and type with the other hand. He found that was hard to do and so he invented the FrogPad concept to help with one-handed keystroke translation.
What will make this product take off?
In the last year and a half, I’ve been waiting for the launch of a particular technology – the multi-touch screen which Apple launched on the iPhone. The second thing I’m waiting for is the market for wearable computing. This year the government will buy 1.4M units for the military so the market is here. I’m getting orders from companies supplying government applications and orders. The military is buying 1.4 million wearable computers this year according to IDG. You can get to 40 words per minute in about 3 weeks of practice. It’s easy and fast to learn. I’m not going to replace the computer keyboard, but rather be considered for use with the mobile device. 19 billion mobile devices will be manufactured in the next 4 years. This is a niche product, yet the niche is huge.
So how will you take advantage of this?
Immediately, I want to develop two new products. First, on your iPhone now you have a keyboard and when you go into keyboard mode it takes you into single touch mode. We can leverage the multi-touch screen for our use. The multi-touch screen allows us to develop a downloadable version of the FrogPad called SoftFrog that would let us leverage the keys like the ones you have on the iPhone on a multi touch display. We could develop a “FrogPad lite” version. The second is to develop a newer version of my Bluetooth unit. I want to develop a sleeker looking FrogPad that’s more iPhone looking and could be wearable.
I always want to hold onto the shirt tails of Apple because they have a go-to-market strategy with Apple to get into their stores. This next month Apple will release the SDK for the iPhone. It’ll take us 6 months to develop SoftFrog. Also, I want to put it on the Apple Dashboard. I also want to put it on the Apple tablet. A tablet is a one handed device because you hold it with one hand and then type with the other. My one-handed keyboard will work with a wide range of products including computers and mobile devices. It enables portability. Paul Allen is developing the Flip Start. It’s a full PC that’s miniaturized.
What is your business model for the new products?
For the downloadable version it will be licensing. Automotive GPS and home automation/entertainment are key markets. Along with gaming and all mobile phone applications. Also the keyboard can be licensed to Volkswagen, Sony, etc.
Have you talked with the people at Motion computing?
I haven’t. I’ve used the last four years to prove the model. People are buying it. It’s a solid product. We don’t have product that comes back. Now I’m starting to look for money. You know as well as I do, that business development is an expensive endeavor. Each product will cost about $250K each.
What is your current staffing level?
Just me. I outsource everything.
Who do you need to hire to fill out the team?
I’ve already identified them. Some of them are on my advisory team. I need a CTO to help develop the new products. My best skills are in sales so I could use someone for the CEO/COO position. We need someone committed to the military market, another focused on Apple, and the last is for K-12 and assistive technology– for those who are disabled. Right now we have over 10,000 soldiers coming back from Iraq who have lost an arm.
What other markets could you pursue?
I’m also interested in pursuing the gaming industry. It can integrate now with the XBOX and Playstation 3. I need to get the word on it. I could use funding to get the word out on that.
Best regards,
Hall T.
Wednesday, February 13, 2008
Ross Kennedy of Seatsub Solves the Seasons Ticket Holders Problem
Ross Kennedy of Seatsub talks about the idea behind his new startup; how to get honest feedback on your website; and why offshore software development is not a great idea for every startup.
How did you come up with the idea behind Seatsub?
Like our CEO, Scott Tachiki, I was a season ticketholder a sports team. While having a beer with a management personnel from one of the teams I joked to him I was one of his best customers because I kept renewing my season tickets but I rarely used them. I was shocked when he replied that I was one of his worst season ticket holders. “Wait” I responded “I renew my season ticket plan at the first of every year, pay in cash well before the season starts, and don’t show up. How do you get better than that?” He said, that’s the problem – you never show up. Teams make money off the parking and the concessions which include things like merchandise sales and food and beverage.
So why didn’t I go to the games? The real problem is finding someone to go to the games I can’t make. Look at the pain you have to go through. You have to make phone calls and send emails to find someone to take over the tickets if you can’t go. Rarely does anyone ever get back to you right away because they have to check with their families before accepting and you can’t have a short phone call with your friends and family, even if you know in the first 30 seconds of the call that they don’t want your seats. After you’ve done that a few times, and gone through that process you just stop trying. In a season there are 72 games not counting the post-season playoffs that you have to fill.
So I set about trying to solve those challenges and remove the barriers that people face. There are social networks that help people get connected, but they don’t solve a real problem or create a tangible value. I wanted to create value for the consumer. And there are literally hundreds of ticketing companies, but no one is focusing on actually driving attendance.
So how do you add value to the consumer?
We save the consumer time and allow them to reconnect. If you’ve ever owned season tickets then you know what it’s like to look at a drawer full of unused tickets at the end of a year. We also found that in many cases up to 90% of season tickets are owned by companies. The tickets are bought with the intention of giving the tickets to clients, employees, and others. So at the end of the year, if the tickets aren’t used someone gets in trouble for not having found enough people.
How much is a fan in the seat worth to the team – buying concessions, etc?
It varies but on average for AAA baseball it’s $10 to $12 per ticket holder. That’s not including advertising but only parking and concession sales. For first time goers they’ll probably buy souvenirs pushing their value up by substantially more.
For the teams this makes incredible sense. We’re driving people that would otherwise have not attended. We’re also giving them market data that helps them drive their future season ticket sales and figure out more closely what their fans actually want and how they behave.
Our CFO, Franco Cirelli, formerly of the NBA, reaffirmed this approach to value creation by recounting efforts to improve the sports fan (i.e. consumer) experience.
What are the alternatives?
The top three are Stubhub, Craigslist, and eBay. Ticketmaster is trying to enter that market. They just acquired TicketsNow. But they focus on major league venues.
Is the system up and running now?
Yes. I’d be happy to give you a demo.
Is the website up?
Yes. But have you ever done something that you later found you weren’t good at? Well, writing the content for the website is like that for me. We’re remessaging it now. If you ever want truly honest feedback ask your brother. Mine wrote seven pages of feedback and it was only a seven page website.
How much does it cost to use?
It’s free to the consumer/fan and it costs nothing to setup for the team. We only take a share of the profit for customers that show up to the games. With minor league teams the fans in the stands are much more important than the major leagues, because their revenue comes primarily from the fans. The majors get ad money from TV viewers.
Do ever see this growing into a full-blown community with discussion boards, a store, etc?
We’re still learning. I heard from a customer the other day that when they go to the game they like to buy their concessions ahead of time. We could take orders over the web and have it delivered to them in the stands. The community side of the house already has a number of systems out there – Facebook, MySpace, and more, but do we want to play in that space?
Ever thought about other venues such as symphonies?
Yes. For example, do you know what the announced attendance at the University of Utah Womens Gymnastics is? On average 12,000. There’s many other venues we could pursue. Also, think about a golf course. Tee times could be organized and monetized this way.
How much have you raised so far in funding?
That’s not a public number right now.
You don’t use offshore software developers? Why?
I’ve gone off shore two or three times and had bad experiences. Besides, with the tight timeframes we are working on, I need immediate communication with the team. If we have it overseas it takes 12 hours or more to get a change done.
The other challenge is that should we ever go down the acquisition route, our buyer will likely have requirements around the quality of code. I was privy to an acquisition in the past where they went through the code line by line. And of course there is always the worry around intellectual property protections.
Best regards,
Hall T.
How did you come up with the idea behind Seatsub?
Like our CEO, Scott Tachiki, I was a season ticketholder a sports team. While having a beer with a management personnel from one of the teams I joked to him I was one of his best customers because I kept renewing my season tickets but I rarely used them. I was shocked when he replied that I was one of his worst season ticket holders. “Wait” I responded “I renew my season ticket plan at the first of every year, pay in cash well before the season starts, and don’t show up. How do you get better than that?” He said, that’s the problem – you never show up. Teams make money off the parking and the concessions which include things like merchandise sales and food and beverage.
So why didn’t I go to the games? The real problem is finding someone to go to the games I can’t make. Look at the pain you have to go through. You have to make phone calls and send emails to find someone to take over the tickets if you can’t go. Rarely does anyone ever get back to you right away because they have to check with their families before accepting and you can’t have a short phone call with your friends and family, even if you know in the first 30 seconds of the call that they don’t want your seats. After you’ve done that a few times, and gone through that process you just stop trying. In a season there are 72 games not counting the post-season playoffs that you have to fill.
So I set about trying to solve those challenges and remove the barriers that people face. There are social networks that help people get connected, but they don’t solve a real problem or create a tangible value. I wanted to create value for the consumer. And there are literally hundreds of ticketing companies, but no one is focusing on actually driving attendance.
So how do you add value to the consumer?
We save the consumer time and allow them to reconnect. If you’ve ever owned season tickets then you know what it’s like to look at a drawer full of unused tickets at the end of a year. We also found that in many cases up to 90% of season tickets are owned by companies. The tickets are bought with the intention of giving the tickets to clients, employees, and others. So at the end of the year, if the tickets aren’t used someone gets in trouble for not having found enough people.
How much is a fan in the seat worth to the team – buying concessions, etc?
It varies but on average for AAA baseball it’s $10 to $12 per ticket holder. That’s not including advertising but only parking and concession sales. For first time goers they’ll probably buy souvenirs pushing their value up by substantially more.
For the teams this makes incredible sense. We’re driving people that would otherwise have not attended. We’re also giving them market data that helps them drive their future season ticket sales and figure out more closely what their fans actually want and how they behave.
Our CFO, Franco Cirelli, formerly of the NBA, reaffirmed this approach to value creation by recounting efforts to improve the sports fan (i.e. consumer) experience.
What are the alternatives?
The top three are Stubhub, Craigslist, and eBay. Ticketmaster is trying to enter that market. They just acquired TicketsNow. But they focus on major league venues.
Is the system up and running now?
Yes. I’d be happy to give you a demo.
Is the website up?
Yes. But have you ever done something that you later found you weren’t good at? Well, writing the content for the website is like that for me. We’re remessaging it now. If you ever want truly honest feedback ask your brother. Mine wrote seven pages of feedback and it was only a seven page website.
How much does it cost to use?
It’s free to the consumer/fan and it costs nothing to setup for the team. We only take a share of the profit for customers that show up to the games. With minor league teams the fans in the stands are much more important than the major leagues, because their revenue comes primarily from the fans. The majors get ad money from TV viewers.
Do ever see this growing into a full-blown community with discussion boards, a store, etc?
We’re still learning. I heard from a customer the other day that when they go to the game they like to buy their concessions ahead of time. We could take orders over the web and have it delivered to them in the stands. The community side of the house already has a number of systems out there – Facebook, MySpace, and more, but do we want to play in that space?
Ever thought about other venues such as symphonies?
Yes. For example, do you know what the announced attendance at the University of Utah Womens Gymnastics is? On average 12,000. There’s many other venues we could pursue. Also, think about a golf course. Tee times could be organized and monetized this way.
How much have you raised so far in funding?
That’s not a public number right now.
You don’t use offshore software developers? Why?
I’ve gone off shore two or three times and had bad experiences. Besides, with the tight timeframes we are working on, I need immediate communication with the team. If we have it overseas it takes 12 hours or more to get a change done.
The other challenge is that should we ever go down the acquisition route, our buyer will likely have requirements around the quality of code. I was privy to an acquisition in the past where they went through the code line by line. And of course there is always the worry around intellectual property protections.
Best regards,
Hall T.
Monday, February 11, 2008
David Rose of New York Angels Talks about Starting Up, Membership and Angelsoft
I’m always interested in how other groups manage their angel networks. One of the premier groups in the USA is the New York Angels led by David Rose. Based on The Frank Peters Show podcast interviewing David Rose, the founder of the New York Angels. I learned the following things:
They have 75 members including both individual and corporate members. They have more applicants than places available so they have a waiting list. Corporate members or VCs constitute about 10% of their membership. They limit membership because there are only a certain number of people one can relate to. At a certain point, the group gets so large the group loses the ability to know each other.
They are a member managed group. Each member writes their own check for each deal. It’s not a fund. As a condition of membership, each member must pay a membership fee and also must invest $100K per year. Also, members must attend at least a majority of the meetings. Also, members must participate in screening and deal follow up sessions. They have 5 to 10 people churn each year.
They get 400 plans a year to review. They charge $150 per application primarily as a screening mechanism. They invest about $9M to $10M a year based on their own investments and those of follow on VC investments. They originally had a trade organization called New York New Media association which later morphed into the current New York Angels network in 2004. They are just now starting to see exits in their deals which normally take 5 to 7 years. Their first positive exit last year was Sign Story which sold to CBS for $71M.
David Rose was the driving force behind Angelsoft a software tool used to manage angel groups and their dealflow. He came up with the idea when he started the group and found there were no tools out there on the market to help manage the group. At that time some groups had developed their own internal custom software. Some used Yahoo groups to coordinate the effort while others just used email. David ran focus groups to identify the needs of angel groups and found a common thread among them. He used the initial beta version of the software they developed to support their own angel network and later offered it to other groups. The revenue model focuses on advertising and sponsorship. The software facilitates the syndication of deals by letting one group forward all the deal documents to another group for potential additional investment.
Angelsoft is currently used by over 250 angel groups which is about 30% of all angel groups worldwide. Because it’s the standard software tool used by angel groups they can aggregate information about the startup industry although they don’t have access to individual plans or information. They receive about 1000 plans per month in the system worldwide and they see 10 to 15 new angel groups join each month. Most angel investing is in the US with a growing interest in Europe.
Future plans for Angelsoft include adding background checks on submitted applications, escrowing services for the funding process, and sharing domain expertise from one group to the next. They also plan to add video conferencing and video feed capability later this year. It’s becoming a platform for social networking among angels.
Best regards,
Hall T.
They have 75 members including both individual and corporate members. They have more applicants than places available so they have a waiting list. Corporate members or VCs constitute about 10% of their membership. They limit membership because there are only a certain number of people one can relate to. At a certain point, the group gets so large the group loses the ability to know each other.
They are a member managed group. Each member writes their own check for each deal. It’s not a fund. As a condition of membership, each member must pay a membership fee and also must invest $100K per year. Also, members must attend at least a majority of the meetings. Also, members must participate in screening and deal follow up sessions. They have 5 to 10 people churn each year.
They get 400 plans a year to review. They charge $150 per application primarily as a screening mechanism. They invest about $9M to $10M a year based on their own investments and those of follow on VC investments. They originally had a trade organization called New York New Media association which later morphed into the current New York Angels network in 2004. They are just now starting to see exits in their deals which normally take 5 to 7 years. Their first positive exit last year was Sign Story which sold to CBS for $71M.
David Rose was the driving force behind Angelsoft a software tool used to manage angel groups and their dealflow. He came up with the idea when he started the group and found there were no tools out there on the market to help manage the group. At that time some groups had developed their own internal custom software. Some used Yahoo groups to coordinate the effort while others just used email. David ran focus groups to identify the needs of angel groups and found a common thread among them. He used the initial beta version of the software they developed to support their own angel network and later offered it to other groups. The revenue model focuses on advertising and sponsorship. The software facilitates the syndication of deals by letting one group forward all the deal documents to another group for potential additional investment.
Angelsoft is currently used by over 250 angel groups which is about 30% of all angel groups worldwide. Because it’s the standard software tool used by angel groups they can aggregate information about the startup industry although they don’t have access to individual plans or information. They receive about 1000 plans per month in the system worldwide and they see 10 to 15 new angel groups join each month. Most angel investing is in the US with a growing interest in Europe.
Future plans for Angelsoft include adding background checks on submitted applications, escrowing services for the funding process, and sharing domain expertise from one group to the next. They also plan to add video conferencing and video feed capability later this year. It’s becoming a platform for social networking among angels.
Best regards,
Hall T.
Wednesday, February 6, 2008
Jonathon McCoy of Perception Labs Talks about the Accelerator Program
I met with Jonathan McCoy who is part of the Entrepreneur Organization or EO as members call it. EO membership is available to entrepreneurs whose company has at least $1M in revenue. Numerous CTAN members are part of EO so I hear about the support that EO provides to its members.
So what is your background?
I studied electrical engineering at UT and then went on to work in Semiconductors for about 4 years. I worked at AMD and Cirrus Logic primarily. About five years ago I started some cash flow businesses. The first was a local courier / logistics business called Green Light Delivery that I recently sold. I also co-founded a company called Greenling which is an organic food delivery service to the home. The management of the company has grown the business considerably here and now in San Antonio. Then, I formed a partnership to purchase a small company, Longhorn Delivery that delivers restaurant meals to the home. You can have a meal delivered to your home in under an hour. Most recently, I started a company called Perception Labs. It is my primary focus today - the venture is working to commercialize a technology I have developed over the last four years or so.
Tell me more about the home delivery service market?
When the internet first became popular it was an interesting service to offer but nobody could figure out how to make money with the business model. With Longhorn Delivery we’ve taken a much slower approach, and as a result the business is sustainable and provides value to a lot of consumers. However, what might start to happen over the next several years as mobile applications become more ubiquitous is that ordering becomes a contextually-aware process - then the home delivery service becomes a seamless value-added service. Like many industries, embedding more and more software applications into our lives could be a game changer.
What’s the status of Perception Labs?
It’s still in the R&D phase – we’re working very hard to get the technology in a state that is ready for customers. The technology is very cool – a sort of unique method for performing domain specific search and simulation. I’ll keep you updated when we have a public demo.
So you’re a part of EO. Tell me about it?
I’ve been in EO for a couple of years now. It’s a great group that I’ve gotten a lot of value out of. The idea is to get people who have similar needs together to help each other - issues such as hiring/managing employees, growing sales, etc, come up often. I think the group has something like 15,000 members around the world, and about 80 in Austin. To get in EO you go through an application process at the local chapter level. The minimum requirement is that you have $1M in revenue for your company. What I like best is Forum, its kind of like having your own virtual board of directors. These are guys who have also become some of my best friends.
So what is EO’s new Accelerator program all about?
The EO Accelerator provides classroom education, peers, and mentoring support for up and coming companies. It’s a non-profit organization within EO. It’s been rolled out in 12 cities across the US and I’m volunteering to ‘Champion’ the local chapter. It’s for companies with $250K - $1M in sales and seeks to take entrepreneurs to the next level. It’s perfect for businesses that have a solid plan in place to reach $1M+ in sales within 18-24 months.
What does the entrepreneur get if they apply and then accepted?
The entrepreneur gets four quarterly meetings – each one a full 8-hour day. Like most things in EO you have to make a strong commitment to the program. There are four focus areas: people, sales/marketing, money, and strategy. During that eight hour session, there’s a professional facilitator, in our case a very successful entrepreneur named Gerry Morton, who teaches the entrepreneurs about setting goals for their business for the subsequent three months. It’s very tactical in nature. You’re setting goals for yourself so you can incrementally improve the business. The curriculum was pulled from successes within the EO network. They took the more successful business owners (there’s about 40 contributors) and drew out their experience. That’s the learning environment. Then there’s a local speaker that comes in for a few hours and talks about a related topic.
Where does the mentoring come in?
So, the other members of the Accelerator program provide peer support in groups of 3. EO members from the local chapter participate in the program for their own businesses and are available as mentors. We also invite mentors to the program from various communities within the city.
When does it start?
We’re launching on February 20. We have accepted just about all the members we need for the first round, but still looking for a few qualified candidates. So far we’ve had a couple information events to get the word out. We had a speaker come in from Microsoft last week and talk about how small business can profit from Microsoft as a vendor, how to position your business for a sale to Microsoft, and how businesses can leverage the newest technologies both to grow their own businesses and also to partner in providing new products and services.
How would you characterize the EO members?
It’s very diverse. It’s one of the most diverse groups I’ve been in. Maybe about 25-40% of the companies are tech oriented. In my forum we have 8 very different businesses represented. The philosophy of the group is to seek diversity in order to build off of one another’s experiences. We expect to see the same thing in the accelerator group. Nearly any kind of business is acceptable. We want people to graduate and move up. We don’t want people in the program for more than 18 or 24 months.
How much do you charge for the program?
Normally, the program like this would cost from $5K to $15K per. This program is $1K due to the sponsorship by Mercedes Financial. It’s heavily subsidized. It is really a no-brainer for businesses focused on growth because of the sheer amount of resources that are available. The program has you fill out worksheets on your strategy, sales/marketing etc. How many business owners in the hectic growth phase sit down and write up their strategy, then have the support to follow through? The program encourages good practice.
Best regards,
Hall T.
So what is your background?
I studied electrical engineering at UT and then went on to work in Semiconductors for about 4 years. I worked at AMD and Cirrus Logic primarily. About five years ago I started some cash flow businesses. The first was a local courier / logistics business called Green Light Delivery that I recently sold. I also co-founded a company called Greenling which is an organic food delivery service to the home. The management of the company has grown the business considerably here and now in San Antonio. Then, I formed a partnership to purchase a small company, Longhorn Delivery that delivers restaurant meals to the home. You can have a meal delivered to your home in under an hour. Most recently, I started a company called Perception Labs. It is my primary focus today - the venture is working to commercialize a technology I have developed over the last four years or so.
Tell me more about the home delivery service market?
When the internet first became popular it was an interesting service to offer but nobody could figure out how to make money with the business model. With Longhorn Delivery we’ve taken a much slower approach, and as a result the business is sustainable and provides value to a lot of consumers. However, what might start to happen over the next several years as mobile applications become more ubiquitous is that ordering becomes a contextually-aware process - then the home delivery service becomes a seamless value-added service. Like many industries, embedding more and more software applications into our lives could be a game changer.
What’s the status of Perception Labs?
It’s still in the R&D phase – we’re working very hard to get the technology in a state that is ready for customers. The technology is very cool – a sort of unique method for performing domain specific search and simulation. I’ll keep you updated when we have a public demo.
So you’re a part of EO. Tell me about it?
I’ve been in EO for a couple of years now. It’s a great group that I’ve gotten a lot of value out of. The idea is to get people who have similar needs together to help each other - issues such as hiring/managing employees, growing sales, etc, come up often. I think the group has something like 15,000 members around the world, and about 80 in Austin. To get in EO you go through an application process at the local chapter level. The minimum requirement is that you have $1M in revenue for your company. What I like best is Forum, its kind of like having your own virtual board of directors. These are guys who have also become some of my best friends.
So what is EO’s new Accelerator program all about?
The EO Accelerator provides classroom education, peers, and mentoring support for up and coming companies. It’s a non-profit organization within EO. It’s been rolled out in 12 cities across the US and I’m volunteering to ‘Champion’ the local chapter. It’s for companies with $250K - $1M in sales and seeks to take entrepreneurs to the next level. It’s perfect for businesses that have a solid plan in place to reach $1M+ in sales within 18-24 months.
What does the entrepreneur get if they apply and then accepted?
The entrepreneur gets four quarterly meetings – each one a full 8-hour day. Like most things in EO you have to make a strong commitment to the program. There are four focus areas: people, sales/marketing, money, and strategy. During that eight hour session, there’s a professional facilitator, in our case a very successful entrepreneur named Gerry Morton, who teaches the entrepreneurs about setting goals for their business for the subsequent three months. It’s very tactical in nature. You’re setting goals for yourself so you can incrementally improve the business. The curriculum was pulled from successes within the EO network. They took the more successful business owners (there’s about 40 contributors) and drew out their experience. That’s the learning environment. Then there’s a local speaker that comes in for a few hours and talks about a related topic.
Where does the mentoring come in?
So, the other members of the Accelerator program provide peer support in groups of 3. EO members from the local chapter participate in the program for their own businesses and are available as mentors. We also invite mentors to the program from various communities within the city.
When does it start?
We’re launching on February 20. We have accepted just about all the members we need for the first round, but still looking for a few qualified candidates. So far we’ve had a couple information events to get the word out. We had a speaker come in from Microsoft last week and talk about how small business can profit from Microsoft as a vendor, how to position your business for a sale to Microsoft, and how businesses can leverage the newest technologies both to grow their own businesses and also to partner in providing new products and services.
How would you characterize the EO members?
It’s very diverse. It’s one of the most diverse groups I’ve been in. Maybe about 25-40% of the companies are tech oriented. In my forum we have 8 very different businesses represented. The philosophy of the group is to seek diversity in order to build off of one another’s experiences. We expect to see the same thing in the accelerator group. Nearly any kind of business is acceptable. We want people to graduate and move up. We don’t want people in the program for more than 18 or 24 months.
How much do you charge for the program?
Normally, the program like this would cost from $5K to $15K per. This program is $1K due to the sponsorship by Mercedes Financial. It’s heavily subsidized. It is really a no-brainer for businesses focused on growth because of the sheer amount of resources that are available. The program has you fill out worksheets on your strategy, sales/marketing etc. How many business owners in the hectic growth phase sit down and write up their strategy, then have the support to follow through? The program encourages good practice.
Best regards,
Hall T.
Monday, February 4, 2008
Daniel Marcos of Creditos123.com Starts Venture Fund for Companies Serving Hispanics
I met with Daniel Marcos of Creditos123.com who provides financing to Hispanic customers. He now has a new project – applying venture funding to startup companies serving Mexican customers living in the US or in Mexico. He has experience having built an angel fund in 2000 and made eight investments. One of them has multiplied its sales by over 15 times in its 7 years of investment.
Daniel’s current fund is matched by the Mexican development bank at 35%. He has over $3M in the fund so far and it continues to grow. They are seeking a name for the group that will work in both the US and the Mexico market.
From the first one in the late 1990s to about 20 funds countrywide today, the number of venture funds in Mexico is growing. The other impact on the venture fund situation is the creation of the “AFORES” which is similar to a 401K program. There is now over $70B invested in the AFORES throughout Mexico. Soon, the managers of these funds will be allowed to invest some % of those funds into venture funds.
Angel funding in Mexico is not very large yet. There are two ways companies are started: large companies start small, stand alone businesses, or individual families start them. The Young Entrepreneurs Organization (YEO) has three chapters in Mexico. Most of the entrepreneurs in it are self-funded.
Best regards,
Hall T.
Daniel’s current fund is matched by the Mexican development bank at 35%. He has over $3M in the fund so far and it continues to grow. They are seeking a name for the group that will work in both the US and the Mexico market.
From the first one in the late 1990s to about 20 funds countrywide today, the number of venture funds in Mexico is growing. The other impact on the venture fund situation is the creation of the “AFORES” which is similar to a 401K program. There is now over $70B invested in the AFORES throughout Mexico. Soon, the managers of these funds will be allowed to invest some % of those funds into venture funds.
Angel funding in Mexico is not very large yet. There are two ways companies are started: large companies start small, stand alone businesses, or individual families start them. The Young Entrepreneurs Organization (YEO) has three chapters in Mexico. Most of the entrepreneurs in it are self-funded.
Best regards,
Hall T.
Wednesday, January 30, 2008
Joe Cunningham of Sante Ventures—Bringing VC funding to Life Science
Joe Cunningham of Sante Ventures talks about how they started their new fund and what he sees in the life science market today.
What is your background?
I’m a physician by background and I’m still on the board of trustees of the Texas Medical Association. I did serial entrepreneur work and then received an MBA from Baylor. After that I went on to work as the chief medical officer of Providence Health System which is part of the Ascension health system. Ascension is the largest non-profit medical system in the country with $14B in revenue. Austin-based Seton is one of the bigger hospitals in that system. The CEO of Ascension, Doug French, recognized the difficulty of bringing innovation into the big health system so he started a $125 million corporate venture fund and he asked me to help him run it. The fund was a financial success.
How did Sante Ventures start?
Along the way we ran into Austin Ventures in a deal we seeded together called Spinal Restoration here in Austin. Our partner Kevin Lalande was building a healthcare investment practice at Austin Ventures, and asked Doug and me to join as Venture Partners to help drive that effort. Over the next four years, we built a successful portfolio with AV and ultimately decided together with AV that Texas and the Central US could support a dedicated early-stage healthcare venture firm. We spun out of AV and raised our own fund. They were very collaborative and supportive in that effort – the two firms maintain close working relationships and, in fact, we still share office space with them.
What is the relationship with AV today?
They are a limited partner in the fund and a close co-investor.
How big is the fund in total?
$130 million. We also have some outside investors in the fund, many of them from Nashville with the healthcare system capital of the world. We set out to raise $100M and were oversubscribed but the fund documents cut us off at $130M.
Who works on the fund?
The three general partners, an associate, Omar Khalil who has a Masters in biomedical engineering and our CFO, Brad Wolfe.
What do you look for in an investment deal?
We do early stage seed through Series B investments in capital efficient medical technology, healthcare services and healthcare ID companies. We have a preference for companies located in Texas or the Central US although we will consider the either coast for select opportunities.
CTAN sees medical device deals. We recently looked at Class One Orthodontics and previously looked at ConMediSys. Did you see those deals?
We did. We see many interesting companies that for one reason or another don’t end up a fit for our portfolio. We will make only 15-20 investments out of this fund, so as you can imagine, we will by design be in only a subset of the interesting companies in our space.
Do you require FDA clearance on your deals?
Most of the time our deals are not FDA-cleared at the time we invest. In many cases, FDA approval is required by law prior to selling the product in the US, and the expense of the necessary clinical trials is a big driver of the company’s need for our investment dollars.
How do you vet the deals?
We have a deep network of clinical, regulatory and market advisors who we tap to help diligence deals.
Best regards,
Hall T.
What is your background?
I’m a physician by background and I’m still on the board of trustees of the Texas Medical Association. I did serial entrepreneur work and then received an MBA from Baylor. After that I went on to work as the chief medical officer of Providence Health System which is part of the Ascension health system. Ascension is the largest non-profit medical system in the country with $14B in revenue. Austin-based Seton is one of the bigger hospitals in that system. The CEO of Ascension, Doug French, recognized the difficulty of bringing innovation into the big health system so he started a $125 million corporate venture fund and he asked me to help him run it. The fund was a financial success.
How did Sante Ventures start?
Along the way we ran into Austin Ventures in a deal we seeded together called Spinal Restoration here in Austin. Our partner Kevin Lalande was building a healthcare investment practice at Austin Ventures, and asked Doug and me to join as Venture Partners to help drive that effort. Over the next four years, we built a successful portfolio with AV and ultimately decided together with AV that Texas and the Central US could support a dedicated early-stage healthcare venture firm. We spun out of AV and raised our own fund. They were very collaborative and supportive in that effort – the two firms maintain close working relationships and, in fact, we still share office space with them.
What is the relationship with AV today?
They are a limited partner in the fund and a close co-investor.
How big is the fund in total?
$130 million. We also have some outside investors in the fund, many of them from Nashville with the healthcare system capital of the world. We set out to raise $100M and were oversubscribed but the fund documents cut us off at $130M.
Who works on the fund?
The three general partners, an associate, Omar Khalil who has a Masters in biomedical engineering and our CFO, Brad Wolfe.
What do you look for in an investment deal?
We do early stage seed through Series B investments in capital efficient medical technology, healthcare services and healthcare ID companies. We have a preference for companies located in Texas or the Central US although we will consider the either coast for select opportunities.
CTAN sees medical device deals. We recently looked at Class One Orthodontics and previously looked at ConMediSys. Did you see those deals?
We did. We see many interesting companies that for one reason or another don’t end up a fit for our portfolio. We will make only 15-20 investments out of this fund, so as you can imagine, we will by design be in only a subset of the interesting companies in our space.
Do you require FDA clearance on your deals?
Most of the time our deals are not FDA-cleared at the time we invest. In many cases, FDA approval is required by law prior to selling the product in the US, and the expense of the necessary clinical trials is a big driver of the company’s need for our investment dollars.
How do you vet the deals?
We have a deep network of clinical, regulatory and market advisors who we tap to help diligence deals.
Best regards,
Hall T.
Monday, January 28, 2008
Paul Teich of AMD – Scenario Analysis for Predicting the Future
Paul Teich of AMD describes scenario analysis in developing roadmaps for product development. He also discusses the “Long Nose” concept and his first startup experience.
Tell me about your background?
I earned a CS degree at Texas A&M back when C was still a pretty cool programming language, and much later I earned the joint IC2/UTexas MS in Science and Technology Commercialization. I worked at AMD for pretty much all of the 1990s and then moved to Dell’s short lived New Product Concepts group. As that was disbanded I left to direct product management at a start up that you have never heard of. After that ride I went back to AMD. For the past 6 years I’ve been the business strategist for AMD’s Opteron processor brand.
What was the name of the startup?
It was called Fracta Networks, we were based here in Austin. You probably never heard of it.
You’re right I’ve never heard of it. What did it do?
It was a very early experiment in how people can track information they think is important, store it persistently on the web, and share that knowledge with other folks. The intent was to save snippets of web sites and documents so if the web site or document disappeared you still had that bit that you thought was important captured persistently.
Sounds like a backup or archival system. Is that right?
Actually, look at Google Notebook which is a very little known app. It does much of what the Fracta app did years ago for web capture. We did some things differently, of course, they seem to have a broader audience targeted. They’re Google, after all…
What was the business model?
Back in 2000 there wasn’t a viable advertizing model, so we were looking at subscription-based revenue. Our target was knowledge workers, so the customer, or at least the person who eventually paid our subscription fee, was a company. If we did it again today, we’d use an ad revenue model and skip the step of asking customers to ask their employers to reimburse them.
One of the issues systems like this face is privacy issues. As your system gathers information, at some point it learns significant things about customers. What can you ask them to let you monetize? What can you do and not do?
Facebook faces that same question today. How do you solve it?
The whole privacy thing is very interesting because if you ask your customers for meaningful demographic information, if they see the point in letting you have accurate information, you can start to figure out what groups of similar people do on the web. I believe that people at work trying to be productive will make different privacy tradeoffs with their professional persona than they will outside of work with their private persona. What’s it worth for say the Wall Street Journal to know what authors a specific technical community reads and which ones they do not read? We don’t know how much that is at the moment because no one can do it with any accuracy. Everyone says it’s worth money, but how much? There will eventually be interesting incentives in place to gather high-value personal information.
What happened to Fracta Networks?
It was funded in 1999-2000 primarily by Polaris and G51 just as the market was peaking. As the market headed down we started looking for partners or a buyer. We ended up selling Fracta to Chicago-based Divine Interventures as they changed their business model from VC to that of a product portfolio company. I worked for Divine until shortly before their reorganization in 2002.
Tell me about scenario planning. How does it work?
I do a lot of forward looking market research and forecasting, have been doing it for decades. I particularly like a tool called scenario planning. It’s a very handy tool for both envisioning and mitigating risk.
All of the big new technologies and products for the next five years are already in the market today. The challenge for predicting the next big thing is that they have not yet reached critical mass and are therefore, for practical purposes, invisible. I recently read a paper called the Long Nose of Innovation. It talks about the incubation of technology…immature products need refinement and nurturing. Most people see new products only after the incubation and refinement period, as they cross the chasm into larger, more visible customer bases.
I’ve found that a lot of futurists are on the “lunatic fringe.” They are very excitable, they have incredible detail about stuff I’ve never heard of, and in general they don’t listen very well. They know they are smarter than I am. Some of them have better manners than others and do a very good business consulting, but they come into a business arrangement with the expectation that you’re hiring them because they already know the answer.
If you look around, there are a lot of smart people who have bits of relevant information, knowledge and experience…and they are not only willing to help, they’re happy to help.
It’s the “Bazaar” model as opposed to the “Cathedral” model. Are you familiar with the metaphor?
No. What is that?
There’s a great paper called the “The Cathedral and the Bazaar.” Microsoft and Oracle are examples of companies building isolated, monumental, proprietary pieces of software similar to a ‘cathedral’ while the open source movement treats software more as a ‘bazaar’ where development is a collaborative project among many differently motivated people.
The key to forecasting in general and predicting discontinuities in particular is that individuals are guaranteed to be wrong about major aspects of their predictions.
A group of smart, informed people can collaborate very effectively to envision major features of the future. This is the basis for Prediction Markets, but in scenario planning we’re primarily trying to figure out what’s uncertain about the future, because what’s certain isn’t going to help you mitigate risk.
In scenario planning, we’re looking for events that are fundamentally uncertain for the organization and the overall industry. We have a method for ranking the uncertainties and the ones that pop up on top of the list are events that are inherently unpredictable in timing or in directional vector. In a scenario planning exercise we look for these uncertainties because they are areas of weakness in the industry and you can’t predict what’s going to happen. You then create a set of scenarios that are structurally different based on different resolution of the key uncertainties. They are not a little different, they are a lot different. And they are all plausible.
We can then use the scenarios for contingency planning and risk mitigation. Pick a product direction. The scenarios inform the product specification in the same way that wind tunnels inform aerodynamics. You have a set of specific futures you can fly your product through and ask how well it will do. In product planning the goal is as much to make sure the product doesn’t suck as it is to ensure that you hit a home run. A home run product is very hard to intentionally create. I’ll take a series of doubles (extending the gratuitous sports analogy) any day.
Most of the category-killer software applications in the market today are not the best at everything they do. From productivity suites to databases, there are niche products that compete quite effectively with the market leaders by being better at some relevant performance metric. The trick for most of us is to have a “good enough” product to gain a large audience.
Do you know David Smith of Technology Futures ?
I’ve taken his course. It’s very well grounded, I enjoyed it. He’s very quantitative in his approach. He has very sound mathematical models. It takes a lot of research and dedication to use his models as they should be used. His models can’t predict discontinuities, but no trend-based model can – some events have fundamentally unknowable probabilities of occurring. The trick is to use other methods, like scenario planning, to put bounds on discontinuities and their timing. Forecasting markets and technologies within scenarios makes good use of both techniques. It’s all about making rational assumptions.
So what are you planning to do with scenario analysis?
I’m co-authoring a book on the scenario planning technique I’ve jointly developed with the other authors. Our book will help small organizations – startups, workgroups, virtual teams – make use of scenario planning without spending a lot of money or dedicating huge internal resources. Along with the scenario planning I’ve lead at AMD, I’ve done pro bono scenario planning work for non-profits and I’d like to see the technique more widely adopted.
Best regards,
Hall T.
Tell me about your background?
I earned a CS degree at Texas A&M back when C was still a pretty cool programming language, and much later I earned the joint IC2/UTexas MS in Science and Technology Commercialization. I worked at AMD for pretty much all of the 1990s and then moved to Dell’s short lived New Product Concepts group. As that was disbanded I left to direct product management at a start up that you have never heard of. After that ride I went back to AMD. For the past 6 years I’ve been the business strategist for AMD’s Opteron processor brand.
What was the name of the startup?
It was called Fracta Networks, we were based here in Austin. You probably never heard of it.
You’re right I’ve never heard of it. What did it do?
It was a very early experiment in how people can track information they think is important, store it persistently on the web, and share that knowledge with other folks. The intent was to save snippets of web sites and documents so if the web site or document disappeared you still had that bit that you thought was important captured persistently.
Sounds like a backup or archival system. Is that right?
Actually, look at Google Notebook which is a very little known app. It does much of what the Fracta app did years ago for web capture. We did some things differently, of course, they seem to have a broader audience targeted. They’re Google, after all…
What was the business model?
Back in 2000 there wasn’t a viable advertizing model, so we were looking at subscription-based revenue. Our target was knowledge workers, so the customer, or at least the person who eventually paid our subscription fee, was a company. If we did it again today, we’d use an ad revenue model and skip the step of asking customers to ask their employers to reimburse them.
One of the issues systems like this face is privacy issues. As your system gathers information, at some point it learns significant things about customers. What can you ask them to let you monetize? What can you do and not do?
Facebook faces that same question today. How do you solve it?
The whole privacy thing is very interesting because if you ask your customers for meaningful demographic information, if they see the point in letting you have accurate information, you can start to figure out what groups of similar people do on the web. I believe that people at work trying to be productive will make different privacy tradeoffs with their professional persona than they will outside of work with their private persona. What’s it worth for say the Wall Street Journal to know what authors a specific technical community reads and which ones they do not read? We don’t know how much that is at the moment because no one can do it with any accuracy. Everyone says it’s worth money, but how much? There will eventually be interesting incentives in place to gather high-value personal information.
What happened to Fracta Networks?
It was funded in 1999-2000 primarily by Polaris and G51 just as the market was peaking. As the market headed down we started looking for partners or a buyer. We ended up selling Fracta to Chicago-based Divine Interventures as they changed their business model from VC to that of a product portfolio company. I worked for Divine until shortly before their reorganization in 2002.
Tell me about scenario planning. How does it work?
I do a lot of forward looking market research and forecasting, have been doing it for decades. I particularly like a tool called scenario planning. It’s a very handy tool for both envisioning and mitigating risk.
All of the big new technologies and products for the next five years are already in the market today. The challenge for predicting the next big thing is that they have not yet reached critical mass and are therefore, for practical purposes, invisible. I recently read a paper called the Long Nose of Innovation. It talks about the incubation of technology…immature products need refinement and nurturing. Most people see new products only after the incubation and refinement period, as they cross the chasm into larger, more visible customer bases.
I’ve found that a lot of futurists are on the “lunatic fringe.” They are very excitable, they have incredible detail about stuff I’ve never heard of, and in general they don’t listen very well. They know they are smarter than I am. Some of them have better manners than others and do a very good business consulting, but they come into a business arrangement with the expectation that you’re hiring them because they already know the answer.
If you look around, there are a lot of smart people who have bits of relevant information, knowledge and experience…and they are not only willing to help, they’re happy to help.
It’s the “Bazaar” model as opposed to the “Cathedral” model. Are you familiar with the metaphor?
No. What is that?
There’s a great paper called the “The Cathedral and the Bazaar.” Microsoft and Oracle are examples of companies building isolated, monumental, proprietary pieces of software similar to a ‘cathedral’ while the open source movement treats software more as a ‘bazaar’ where development is a collaborative project among many differently motivated people.
The key to forecasting in general and predicting discontinuities in particular is that individuals are guaranteed to be wrong about major aspects of their predictions.
A group of smart, informed people can collaborate very effectively to envision major features of the future. This is the basis for Prediction Markets, but in scenario planning we’re primarily trying to figure out what’s uncertain about the future, because what’s certain isn’t going to help you mitigate risk.
In scenario planning, we’re looking for events that are fundamentally uncertain for the organization and the overall industry. We have a method for ranking the uncertainties and the ones that pop up on top of the list are events that are inherently unpredictable in timing or in directional vector. In a scenario planning exercise we look for these uncertainties because they are areas of weakness in the industry and you can’t predict what’s going to happen. You then create a set of scenarios that are structurally different based on different resolution of the key uncertainties. They are not a little different, they are a lot different. And they are all plausible.
We can then use the scenarios for contingency planning and risk mitigation. Pick a product direction. The scenarios inform the product specification in the same way that wind tunnels inform aerodynamics. You have a set of specific futures you can fly your product through and ask how well it will do. In product planning the goal is as much to make sure the product doesn’t suck as it is to ensure that you hit a home run. A home run product is very hard to intentionally create. I’ll take a series of doubles (extending the gratuitous sports analogy) any day.
Most of the category-killer software applications in the market today are not the best at everything they do. From productivity suites to databases, there are niche products that compete quite effectively with the market leaders by being better at some relevant performance metric. The trick for most of us is to have a “good enough” product to gain a large audience.
Do you know David Smith of Technology Futures ?
I’ve taken his course. It’s very well grounded, I enjoyed it. He’s very quantitative in his approach. He has very sound mathematical models. It takes a lot of research and dedication to use his models as they should be used. His models can’t predict discontinuities, but no trend-based model can – some events have fundamentally unknowable probabilities of occurring. The trick is to use other methods, like scenario planning, to put bounds on discontinuities and their timing. Forecasting markets and technologies within scenarios makes good use of both techniques. It’s all about making rational assumptions.
So what are you planning to do with scenario analysis?
I’m co-authoring a book on the scenario planning technique I’ve jointly developed with the other authors. Our book will help small organizations – startups, workgroups, virtual teams – make use of scenario planning without spending a lot of money or dedicating huge internal resources. Along with the scenario planning I’ve lead at AMD, I’ve done pro bono scenario planning work for non-profits and I’d like to see the technique more widely adopted.
Best regards,
Hall T.
Wednesday, January 23, 2008
Ash Prabala of DVC – Providing ‘enabling technology’ to Life Sciences and BioTechnology OEMs
I’ve known Ash Prabala for about five years now. He started a company called DVC back in 1998 which previously performed consulting work in the area of scientific imaging for several years before identifying a key market in life science applications using digital cameras. I had the opportunity to catch up with Ash the other day.
What does DVC do?
We provide a combination of hardware and software to solve imaging problems in the life science area – primarily to key companies who OEM our product to enhance their solution. One example is a company which has the first (and only) FDA approved process of detecting and quantifying breast cancer through a routine, clinical blood test. The system utilizes DVC cameras and software to quantify Circulating Tumor Cells (CTCs) in a blood sample.
How did the market evolve?
Customers got tired of trying to use machine vision cameras for life science applications. Ten years ago, I saw customers take my cameras and apply them to new applications in life science. After a while the light bulb went off that there’s an under-served niche in the market – especially in fluorescent microscopy. My management team and I re-tooled our product strategy and we created OEM-friendly, feature-rich, modular cameras that were well-suited to Life Sciences OEM applications.
How is the growth?
We’re seeing steady and continuing growth. It started in 2005 after the 2002-2004 slowdown. During the down years we didn’t do what most other companies did – many tech companies chose to reduce head count, particularly in R&D. Instead we continued to invest in R&D. You can imagine how hard that is to do when sales are flat or trending down and you’re continuing to spend on R&D. But it paid off in 2005 because we had better products. We focused on the OEM portion of the market which grew faster than the end-user market.
How do you win against the competition?
We have better people than the competitors; in the Life Sciences niche, we have better products. We win most of the opportunities that we get a chance to bid on. Also, the product has to be high quality and we make that a priority. Our customers operate in the high-end of the market, and our quality processes have to be second-to-none.
How was DVC financed in the past?
We’ve done very well as a bootstrapped company. Our profitability and success is a validation of our strong business model. In my opinion if a business model is sustainable it should be able stand on its own and grow itself – at least up to a certain point. If it isn’t, all you’re going to do is take someone else’s money and throw it away at some point. That’s not the objective when you start a company. Our business model also imposes a strong fiscal discipline – and it is one that is embedded in the DNA of the company.Our conservative, disciplined approach helped us go through some tough times and ensured that we didn’t lose a single key person during the downturn. We still have them today.
How about for the future?
We are reaching the point where we are seeing large opportunities. We want these large orders but it’s difficult to fulfill them. Our average order size is increasing by a factor of ten. We have a technological need, but now need to convert that into a market lead. Having the team, the products and a proven, profitable business model will help us attract the right type of investment, to take the company to the next level.
Are you still in the same office?
One of the few privileges of founding a company is choosing the office location. I chose a building only a few minutes from my home near the old Motorola office in Oak Hill. We have outgrown our existing space, and will be seeking ‘flex space’ in the near future.
Best regards,
Hall T.
What does DVC do?
We provide a combination of hardware and software to solve imaging problems in the life science area – primarily to key companies who OEM our product to enhance their solution. One example is a company which has the first (and only) FDA approved process of detecting and quantifying breast cancer through a routine, clinical blood test. The system utilizes DVC cameras and software to quantify Circulating Tumor Cells (CTCs) in a blood sample.
How did the market evolve?
Customers got tired of trying to use machine vision cameras for life science applications. Ten years ago, I saw customers take my cameras and apply them to new applications in life science. After a while the light bulb went off that there’s an under-served niche in the market – especially in fluorescent microscopy. My management team and I re-tooled our product strategy and we created OEM-friendly, feature-rich, modular cameras that were well-suited to Life Sciences OEM applications.
How is the growth?
We’re seeing steady and continuing growth. It started in 2005 after the 2002-2004 slowdown. During the down years we didn’t do what most other companies did – many tech companies chose to reduce head count, particularly in R&D. Instead we continued to invest in R&D. You can imagine how hard that is to do when sales are flat or trending down and you’re continuing to spend on R&D. But it paid off in 2005 because we had better products. We focused on the OEM portion of the market which grew faster than the end-user market.
How do you win against the competition?
We have better people than the competitors; in the Life Sciences niche, we have better products. We win most of the opportunities that we get a chance to bid on. Also, the product has to be high quality and we make that a priority. Our customers operate in the high-end of the market, and our quality processes have to be second-to-none.
How was DVC financed in the past?
We’ve done very well as a bootstrapped company. Our profitability and success is a validation of our strong business model. In my opinion if a business model is sustainable it should be able stand on its own and grow itself – at least up to a certain point. If it isn’t, all you’re going to do is take someone else’s money and throw it away at some point. That’s not the objective when you start a company. Our business model also imposes a strong fiscal discipline – and it is one that is embedded in the DNA of the company.Our conservative, disciplined approach helped us go through some tough times and ensured that we didn’t lose a single key person during the downturn. We still have them today.
How about for the future?
We are reaching the point where we are seeing large opportunities. We want these large orders but it’s difficult to fulfill them. Our average order size is increasing by a factor of ten. We have a technological need, but now need to convert that into a market lead. Having the team, the products and a proven, profitable business model will help us attract the right type of investment, to take the company to the next level.
Are you still in the same office?
One of the few privileges of founding a company is choosing the office location. I chose a building only a few minutes from my home near the old Motorola office in Oak Hill. We have outgrown our existing space, and will be seeking ‘flex space’ in the near future.
Best regards,
Hall T.
Monday, January 21, 2008
Hank Weghorst of Troux Talks about His Next Project
I met with Hank Weghorst of Troux who talks about his next project-- a startup in the mobile space as well as the local startup environment. Hank is also working on an idea for starting an incubator to help seedstage companies get up and running.
What do you see in the local startup scene?
The model has changed dramatically today from when I started Troux five years ago. A company like mine needed $20M dollars. Now that same company needs $5M or even less. The whole software world has moved to a different model. It’s beginning to come to angel groups like yours.
What are you doing now?
I moved out of Troux a few months ago. I’m working on another startup idea. We’re going to focus on the mobile space. I’ve done several enterprise deals. All of them have $10M, $20M, $30M dollar deals a piece. The whole enterprise space is dead. The next step down from that is the Software as a Service model. The intent of it is to build an annuity stream. The success stories are few and far between, because if you run the financial model on it. It takes forever before you make money. If you have an enterprise company now trying to convert to an SAAS model it could take 3 to 5 years before you turn the corner and make the same amount of money as a perpetual license. When you take the perpetual license you get all the money up front. On a subscription model, it could take 3 to 5 years to get the same amount of cash. Now the good news, is that once you get to the 3 year mark then it’s gravy. It just takes a long time to get there and you have to have very patient investors and huge amounts of startup capital. This panacea of SAAS is talked about by everyone who hasn’t seen the bottom line. If you go one step down you get back to the old “eyeball” web deals. A lot of the deals that are successful now aren’t good, they’re just lucky. I don’t like to depend on luck. I want to depend on hard work. In an enterprise deal you were always looking at a 5 to 7 year horizon. The first 12 to 18 months I’m developing the product. In the next 12 to 18 months I’m rolling it out to my alpha/beta customers. Then in my 4th year, I’m in a growth cycle. If you only have a half million dollars you have to turn the whole thing on in 12 to 18 months. If you look at that model, you have to pick something where you believe the discontinuity is only about 12 to 18 months away.
I believe the mobile market disruption is about 12 to 18 months out. With such a short timeline, it’s all about execution. The smarter guy isn’t necessarily going to win because of the shortened timeline. An investor has to be willing to do whatever it takes in that short timeframe to make it successful. I believe the funding required will be $3M to $5M in total but will be consumed in a short period of time. It has to be a model of killer execution. The challenge is that in a 3 year timeframe, everyone can see the discontinuity coming up. The entrepreneur with a view on it no longer has an exclusive.
You mentioned the mobile market. What do you see in the mobile space now?
There’s a huge discontinuity in the 18 to 36 month window. I don’t know if you’ve been following it but we’re about to transition from cellphones to smart phones. Apple showed us what that will look like. The difference between a smartphone and a cellphone is the access to data. It’s not the communications. It’s in the web access capability. In a sense, the device becomes a disconnected computer. In less than five years, when you walk into your office your device will sense the monitor and keyboard and they will come alive. It’ll be your computer you’re carrying around. Then when you go to your car, your car will sense it. Sprint just announced that they are spending $5B in the next five years to rollout a WiMAX network nationwide. WiMAx is Wi-Fi everywhere.
What kind of product/service would you offer?
The thing I’m focusing on is the form factor and usability of the mobile device. When I’m on my phone, I want this thing to be smarter than my desktop computer. I want it to go and do things for me. “Here go do this for me.” If you go back to the advent of the web there was also the “semantic web” which was built for computers to communicate with computers. The shift from the desktop computer to the mobile device will use that concept in a real way.
The mobile phone in the future will have an “agent” mentality that will go do things for you. Any applications will reside on the web. If you take Google apps and move them to the mobile phone you can start to see what that will look like. Google is going to own this. Two months ago they released their Android software and opened up a contest to developers to show the best Android applications.
In a few years, you’ll go to Fry’s and you’ll find the Apple stuff on one side of the aisle and on the other side will be the open hardware—Motorola, Nokia, and so on but they’ll have a Google OS. I don’t know where Microsoft will be in all of this. I think they get belted by this. It’ll be Google vs. Apple.
What about Research in Motion?
With the advent of ubiquitous broadband networks, RIM’s advantage goes away. There are two distinct markets – mobile professionals and then there are the digital natives (kids from 13 to 25) who use it because it’s their digital lifestyle.
In a few years everyone will own a pocket PC and there will be no need for that big thing under their desk. There will be servers in the backroom running it.
The usage paradigm for mobile computing will change dramatically from a ‘desktop—I have time to sit and search’ to a ‘do’ mentality of the mobile space. I want to be the ‘do’ company. I want them to be configurable. I want to give people toolsets that can let people do what they want.
What’s a killer app?
It’s more of an approach than a killer application. Imagine an iPhone screen with a set of icons and you can configure those icons to do something for you. It could be anything from “have there been any new contacts that have come in for my territory in the last six hours?” All the way to “show me the latest score for my basketball team and who do they play next?” You can imagine configuring a matrix of thirty of these things to do. I want to extend that to something bigger. These agents that are collecting the information are storing it in a central area so you can access it from a desktop as well. It would be a mistake to build a mobile only application at this time.
The mobile phone and the desktop have to work in concert. The iPhone is one example of how well that works. What do you think?
That’s right. The computer and the phone always works as one although the biggest thing the iPhone missed is that you have to plug it in to synchronize it. The Blackberry does this already. I can’t believe they missed that one.
Tell me about the incubator idea you’re working on.
There are a couple of models out there for incubating startups. The one I like is called YCombinator. I just thought it was relatively unique in that it was team shotgun approach. Instead of hunting for one deal at a time, we hold a competition. They find the five or six best ideas and put them in a class and move them through a training process. That class gets a little bit of funding. We could hold once or twice a year a well publicized competition to find the people who want to join that class. We’ll surround them with the resources that they need to get going – not just funding but management, operational, financial, etc. The goal is to get them to the next level whether that be angel funding or something else. Typically the entrepreneur knows what they want to do but they need help.
Where I began to hang up is that I found myself becoming a VC – raising funding, etc. I could get the funding but then I’m competing against the guys I want to hand them off to.
I’m now looking at gathering a group of four with backgrounds in management, financial, operational, and HR along with four entrepreneurs. They may take an equity position. It’ll need some operating capital. I don’t know where that will come from just yet.
Best regards,
Hall T.
What do you see in the local startup scene?
The model has changed dramatically today from when I started Troux five years ago. A company like mine needed $20M dollars. Now that same company needs $5M or even less. The whole software world has moved to a different model. It’s beginning to come to angel groups like yours.
What are you doing now?
I moved out of Troux a few months ago. I’m working on another startup idea. We’re going to focus on the mobile space. I’ve done several enterprise deals. All of them have $10M, $20M, $30M dollar deals a piece. The whole enterprise space is dead. The next step down from that is the Software as a Service model. The intent of it is to build an annuity stream. The success stories are few and far between, because if you run the financial model on it. It takes forever before you make money. If you have an enterprise company now trying to convert to an SAAS model it could take 3 to 5 years before you turn the corner and make the same amount of money as a perpetual license. When you take the perpetual license you get all the money up front. On a subscription model, it could take 3 to 5 years to get the same amount of cash. Now the good news, is that once you get to the 3 year mark then it’s gravy. It just takes a long time to get there and you have to have very patient investors and huge amounts of startup capital. This panacea of SAAS is talked about by everyone who hasn’t seen the bottom line. If you go one step down you get back to the old “eyeball” web deals. A lot of the deals that are successful now aren’t good, they’re just lucky. I don’t like to depend on luck. I want to depend on hard work. In an enterprise deal you were always looking at a 5 to 7 year horizon. The first 12 to 18 months I’m developing the product. In the next 12 to 18 months I’m rolling it out to my alpha/beta customers. Then in my 4th year, I’m in a growth cycle. If you only have a half million dollars you have to turn the whole thing on in 12 to 18 months. If you look at that model, you have to pick something where you believe the discontinuity is only about 12 to 18 months away.
I believe the mobile market disruption is about 12 to 18 months out. With such a short timeline, it’s all about execution. The smarter guy isn’t necessarily going to win because of the shortened timeline. An investor has to be willing to do whatever it takes in that short timeframe to make it successful. I believe the funding required will be $3M to $5M in total but will be consumed in a short period of time. It has to be a model of killer execution. The challenge is that in a 3 year timeframe, everyone can see the discontinuity coming up. The entrepreneur with a view on it no longer has an exclusive.
You mentioned the mobile market. What do you see in the mobile space now?
There’s a huge discontinuity in the 18 to 36 month window. I don’t know if you’ve been following it but we’re about to transition from cellphones to smart phones. Apple showed us what that will look like. The difference between a smartphone and a cellphone is the access to data. It’s not the communications. It’s in the web access capability. In a sense, the device becomes a disconnected computer. In less than five years, when you walk into your office your device will sense the monitor and keyboard and they will come alive. It’ll be your computer you’re carrying around. Then when you go to your car, your car will sense it. Sprint just announced that they are spending $5B in the next five years to rollout a WiMAX network nationwide. WiMAx is Wi-Fi everywhere.
What kind of product/service would you offer?
The thing I’m focusing on is the form factor and usability of the mobile device. When I’m on my phone, I want this thing to be smarter than my desktop computer. I want it to go and do things for me. “Here go do this for me.” If you go back to the advent of the web there was also the “semantic web” which was built for computers to communicate with computers. The shift from the desktop computer to the mobile device will use that concept in a real way.
The mobile phone in the future will have an “agent” mentality that will go do things for you. Any applications will reside on the web. If you take Google apps and move them to the mobile phone you can start to see what that will look like. Google is going to own this. Two months ago they released their Android software and opened up a contest to developers to show the best Android applications.
In a few years, you’ll go to Fry’s and you’ll find the Apple stuff on one side of the aisle and on the other side will be the open hardware—Motorola, Nokia, and so on but they’ll have a Google OS. I don’t know where Microsoft will be in all of this. I think they get belted by this. It’ll be Google vs. Apple.
What about Research in Motion?
With the advent of ubiquitous broadband networks, RIM’s advantage goes away. There are two distinct markets – mobile professionals and then there are the digital natives (kids from 13 to 25) who use it because it’s their digital lifestyle.
In a few years everyone will own a pocket PC and there will be no need for that big thing under their desk. There will be servers in the backroom running it.
The usage paradigm for mobile computing will change dramatically from a ‘desktop—I have time to sit and search’ to a ‘do’ mentality of the mobile space. I want to be the ‘do’ company. I want them to be configurable. I want to give people toolsets that can let people do what they want.
What’s a killer app?
It’s more of an approach than a killer application. Imagine an iPhone screen with a set of icons and you can configure those icons to do something for you. It could be anything from “have there been any new contacts that have come in for my territory in the last six hours?” All the way to “show me the latest score for my basketball team and who do they play next?” You can imagine configuring a matrix of thirty of these things to do. I want to extend that to something bigger. These agents that are collecting the information are storing it in a central area so you can access it from a desktop as well. It would be a mistake to build a mobile only application at this time.
The mobile phone and the desktop have to work in concert. The iPhone is one example of how well that works. What do you think?
That’s right. The computer and the phone always works as one although the biggest thing the iPhone missed is that you have to plug it in to synchronize it. The Blackberry does this already. I can’t believe they missed that one.
Tell me about the incubator idea you’re working on.
There are a couple of models out there for incubating startups. The one I like is called YCombinator. I just thought it was relatively unique in that it was team shotgun approach. Instead of hunting for one deal at a time, we hold a competition. They find the five or six best ideas and put them in a class and move them through a training process. That class gets a little bit of funding. We could hold once or twice a year a well publicized competition to find the people who want to join that class. We’ll surround them with the resources that they need to get going – not just funding but management, operational, financial, etc. The goal is to get them to the next level whether that be angel funding or something else. Typically the entrepreneur knows what they want to do but they need help.
Where I began to hang up is that I found myself becoming a VC – raising funding, etc. I could get the funding but then I’m competing against the guys I want to hand them off to.
I’m now looking at gathering a group of four with backgrounds in management, financial, operational, and HR along with four entrepreneurs. They may take an equity position. It’ll need some operating capital. I don’t know where that will come from just yet.
Best regards,
Hall T.
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