Angel Investment Program by the Federal Government -- HR 3567 Bill Proposed

You know you’re getting big when the federal government wants to step in and help you. Here’s a case in point.

The HR 3567 Bill is an amendment to the Small Business Investment Act of 1958. It is currently making its way through Congress and would provide federal funding to angel organizations in addition to creating an office in the SBA to carry out the program. The program would include building a database of angel investors and setting up a matching funds program up to $2M per group.

The Angel Capital Association researched the bill and surveyed the membership as policy advocation for angel investing is now becoming a higher priority based on membership feedback. The survey showed that members found two positives in the bill:

1. Having the office focus on connecting resources of financing (angels) with users (entrepreneurs) may lead to market efficiencies;

2. The office will provide a point of entry at the federal level for angel investors and angel groups to discuss and address other issues related to angel investing.

The survey also revealed two cons to the bill:

1. The bill could lead to a reduction in angel investments because many angels would not want to report their investment activity to the government office;

2. Some question the need for angel legislation when the number has increased from 67 percent since 1999 and angel investments annually total more than $26 billion.

Currently, the ACA does not take a position at this time. Relevant text from the proposed bill is below:

Title III - Angel Investment Program
Section 301 -
Establishes within the Investment Division of the SBA the Office of Angel Investment, headed by a Director, to provide support for the development of angel investment opportunities for small businesses.

Requires the Director to establish and carry out a program, to be known as the Angel Investment Program, to provide financing to approved angel groups. Limits to $2 million the financing to an angel group. Provides a matching funds requirement. Establishes an Angel Investment Fund. Authorizes appropriations.

Requires the Director to establish and maintain a searchable database, to be known as the Federal Angel Network, to assist small businesses in identifying angel investors. Authorizes appropriations.

Requires: (1) the Director to establish and carry out a program to make grants for the development of new or existing angel groups and to increase awareness and education about angel investing; and (2) each grant recipient to report to the Administrator describing the use of grant funds. Authorizes appropriations.

Best regards,
Hall T.

Best Practices for Entrepreneurs Seeking Funding

I work with entrepreneurs every day who are going through the fund raising process. Over time, I’ve found some entrepreneurs employing practices that make the process go smoothly. For those who seek funding here are some best practices to consider in your fund raising efforts:

Develop a relationship with investors early on

I often come across entrepreneurs who say that don’t need funding right now so they don’t need to talk with investors. I sometimes ask when they will need funding and am surprised that the answer is usually six to twelve months later. I advise the entrepreneur to start developing relationships now. If you wait six months and then start looking you’re behind. In meeting with an investor the entrepreneur can state that he’s not ready for investment but then lay out the plans for developing the business. By building a relationship now and keeping the investor informed of your progress, the entrepreneur will be in a better position when it comes time to raise the funding.

Have ready the executive summary, slide deck, and business plan with financials

It helps to have the core three documents – executive summary (one-page only), slide deck, and business plan already developed and ready to go. As the entrepreneur meets prospective investors he can use the appropriate docs for each meeting.

Publish a periodical email newsletter for interested investors

In the fund raising process, I see some entrepreneurs sending out email updates to highlight the progress of the company. Some come as often as weekly to show progress in sales, product plans, and other milestones. This shows the company’s ability to execute.

Find a lead angel to develop a terms sheet and start off the funding round

By finding a lead angel and creating a terms sheet, the entrepreneur removes the biggest barrier to fund raising – the negotiation process. There are numerous angel investors who find the initial negotiation and due diligence process too time consuming. By eliminating this hurdle, the entrepreneur opens up the deal to a larger number of investors.

Make the deal terms “investor friendly”

Of course every deal must be negotiated. The harder the terms for the investor to accept the longer the time it will take to negotiate. By making the terms “investor friendly” through reasonable pre-money valuations, preferences, and other terms, the faster the process goes.

Push all due diligence docs to a password-protected web-site so interested angels can perform due diligence more easily

The due diligence phase can be sped up by having all the key docs already available. I’ve seen some entrepreneurs put everything on a protected web-site and then give out the password to interested investors. This knocks down the hurdle of trying to send 600 MB worth of documents through the email system.

Continue the quarterly email newsletter after funding so investors stay with you

It’s important to keep investors up to date even after the funds are raised since investors can help in other ways. Some investors bring a rolodex of contacts while others bring experience and coaching. By keeping them informed of your progress and challenges, they may be able to help. This practice is also useful for when it comes time for follow-on fund raising.

Best regards,
Hall T.

Rob Donnelly of Guardian Ventures talks about VC investing in the 2000-Generation

Rob Donnelly of Guardian Ventures talks about VC investing in the 2000-generation, birth of the Houston Angel Network, and why Austin might be the best place to start a life science industry cluster in the state of Texas.

What is your background?

I have a Biomed undergrad from A&M and an MBA from SMU.

How did you get into the venture capital?

I worked in investment banking after graduate school and did some startup work at a software start-up on the West Coast. It was great intro into the entrepreneurial world. After that I moved to Houston in the late 1990s. At that time, Houston tech community was going through some growing pains and felt they were behind the West Coast.

Paul Hobby, Bob McNair and others had family investment businesses and were doing one-off deals but wanted to accelerate technology deal flow. There were a number of us who formed a group that was the predecessor of the Houston Angel Network. The Houston Technology Center (HTC) was working at that time to help the tech entrepreneurial community.

We spun that effort into a small fund called Genesis Park. Our model focused on early stage tech and later shifted to private equity after 2000. We were fortunate to be close to our LP’s and were able to shift to private equity (including distressed/turnaround) as it was a better asset class at the time.

What type of deals did you look for?

We did a number of deals – software, semiconductor, life science, and communications. Between Genesis Park and Guardian, I’ve participated in three life science deals: two have been successful.

So how did the Houston Angel Network start?

I work closely with several individuals who were apart of the Band of Angels in the Bay area. They had a high caliber of angel investor: experienced, tech savvy and super-accredited. And we had a hard time replicating the Band profile in Houston given its energy and real estate concentration. HAN and HTC together lowered the requirements for membership and opened the meetings up to service providers. It went from a small group of highly active investors to a large group of service providers and casually interested investors. Several generations later, the Houston Angel Network has emerged stronger, more focused and more successful.

So how did it work at Genesis Park?

Our most successful model was taking active roles in the businesses we fund and backfill ourselves with long-term management as soon as possible. The majority of the Principals are still running deals or off on new tangents. Blair Garrou stayed in the venture world and formed DFJ Mercury.

What kind of return did the fund generate?

Once the last remaining portfolio companies liquidate, Genesis Park will have done well given its vintage. What saved us is we put the brakes on drawing capital from our LPs and shifting into private equity, including some turnaround opportunities in the communications sector.

What are you doing now?

We stopped formal operations of the fund in 2004-5. Now I work on individual deals. Sometimes I’ll find something interesting and get involved. I find my old colleagues in Houston are interested in venture investing again. Their net worth has doubled or tripled due to the price of oil. There’s a totally different energy vibe today in Houston due to the increased liquidity. The big difference between this run up in the oil cycle and previous run ups is that a lot of the families with oil interests have opted to sell to publicly traded partnerships. Families are trading their assets for liquidity.

What is next?

I think of all the cities in the state of Texas, Austin has the best shot at being the life science start-up city.

Why not Houston?

You can’t import entrepreneurial talent into Houston the way you can with Austin. Houston has little native life science managerial talent. They have great research and clinical institutions but few individuals who can launch a real business. Those people are on the west coast and the northeast and most won’t move to Houston. They will, however, move to Austin. The challenge for Texas is that the location of the IP in the state is not in the same place as the managerial talent. Taken as a whole, Texas can become quite competitive in life sciences, but each city must focus on what it does best – for Austin, it is launching and building technology companies.

What are you doing now?

I’m still working on deals and I would like to put down roots here in Austin. If you can bring the right investors to the table it can make a big difference.

Best regards,
Hall T.

SideCar Funds in Angel Groups– Creating Diversification and Participation

It’s interesting to note the rise of the fund (sometimes called a SideCar) among angel groups to provide diversification and participation into angel investing by passive investors. In many cases the fund is applied to deals the angel investors pursue. This means the return on the fund will mirror the return the angels are seeing.

During the recent Angel Capital Association Summit in San Diego a number of groups discussed their sidecar fund and how it worked. The first came from Ian Sobieski of the Band of Angels in the Bay Area. It’s a $50M fund raised primarily from outside investors. The fund invests $300K in deals the Band of Angels invests in which allows outsiders to enjoy the same returns as the Band of Angels members enjoy (which was reported at 53% IRR). The fund has a staff of three people who are paid from a 2.5% management fee and a 20% carry fee.

The second example comes from Luis Villalobos of the Tech Coast Angels which has a $3M fund that invests $350K in each deal that the Tech Coast Angel members invest in. The fund has no carry or management fee and so relies on the members to manage the fund. Both funds are ten year long funds.

Best regards,
Hall T.

Tony Wright of HQ Investments talks about the Long-term Care Industry

Tony Wright of HQ Investments talks about the long-term care industry, their efforts with a wine business, and their current investment criteria.

What is HQ Investments?

We started in the healthcare business back in the 60s. HQ comes from the name HealthQuest. We’re based in South Bend, Indiana with an office in Austin, Texas Over the years we built various healthcare businesses focused on long-term care, including nursing homes, assisted living facilities, retirement housing communities, rehab therapy, institutional pharmacy, home infusion therapy, nursing home software and medical training. In many of these businesses, we were providing services that were reimbursed by the government. In the 90s we made the decision to get out of those businesses where we were actually providing goods and services directly to patients.

Why did you get out of that business?

A number of reasons, but one of the largest ones was future reimbursement pressure. In the early 90s the government reimbursement portion of the long term care industry was moving to a system similar to the DRG-based system used in the hospital industry. DRG stands for Diagnostic Related Groups. Prior to that time, Medicare reimbursement for long-term care was cost-based. Now everything has a code assigned to it and that dictates how much you get paid, regardless of what it costs you to provide those goods or services. Another reason was related to the difficulties of satisfying all of the constituencies involved. First, there are the residents that you provide care for. They have one set of expectations but they’re not paying the bills. Then you have their families who are very involved in what you’re doing but they have another set of expectations and they’re not paying the bills either. Then you have the government who has yet another set of expectations and they are paying the bills. This creates a difficult environment to operate in. After nearly 30 years of successfully dealing with these challenges, we were ready to move on to new areas of opportunity.

What are you moving into?

We started making venture investments in 2002. Since then we’ve invested in companies in various industries - online furniture retailing, online wine retailing, software, healthcare services, and real estate.

How did that work out for you?

We’ve had some great successes and some complete flame-outs. We’ve done well in software, healthcare services, and real estate but the furniture and wine ventures didn’t pan out very well.

What about the wine business – how has that worked out?

The original business plan for the wine business (Winesource.com) was to provide a means for small wineries to get national distribution. The three-tier distribution system squeezes out the small winery. We wanted to make it possible for consumers to get access to small wineries without having to go to their tasting room. That was the original idea. It was well-received by wineries.

What came of it?

We weren’t able to make any money with it. We sold the company. We didn’t do our homework. It’s a crowded field.

What do you look for in deals?

We’re usually not early stage investors, although we have made some exceptions in the past. Our preference is to do something with companies that have a proven product/service and we can see a path to profitability. I’m naturally drawn to healthcare deals. We’re part of an angel group in Indianapolis called HALO Capital Group which stands for Hoosier Angels Looking for Opportunities. It’s similar to CTAN, and is focused on promoting development in Indiana. HALO’s website is here.

What kind of deals are you seeing?

HALO sees deals from Indiana University, Purdue and Notre Dame. We’re doing a deal on stem cells and another one involved in providing technical training to industrial workers who operate complex machinery and equipment. We recently did one on software for Chambers of Commerce.

What’s your investment philosophy?

The management team is important. We’ve found that no matter how good the product or idea is, if the management team isn’t right the company will probably fail.

Best regards,
Hall T.

Terry Lipman Talks about Fostering the Film Industry in Austin

Terry Lipman Talks about Fostering the Film Industry in Austin, the challenge with Villa Muse-like projects, and other efforts to promote the Austin film industry

What is your background in the film industry?

I started in film in Australia in the 1980s when the Aussie Government introduced tax incentives to attract local investors to support locally made films. To obtain the incentives, however, certain “strings were attached.” Even though I was not a filmmaker, I was able to handle the strings. These included the provision of certain business services to protect the government and investors – accounting, legal, insurance bonding distribution etc. My initiative was very successful and went far to help develop an independent Australian film industry growing from a fledgling state to become a leading member of the world filmmaking community. I assisted in providing the business services in the making of over 200 movies including the legendary “Crocodile Dundee.” Gradually the US studios saw opportunities in making their films in Australia using the highly skilled local crews and facilities that were developed and moved in. They now have a number of major studio facilities there and in New Zealand.

When I came to Austin about ten years ago I immediately saw a similar situation as Australia. Austin had a great filmmaking community, perfect climate and other benefits and was only 1500 miles from Hollywood. More importantly it had a very active group of aggressive business entrepreneurs and investors enjoying enormous rewards from developing a successful technology industry. (There was so much technology needed in the making of films and music that Hollywood did not yet have.) The challenge I saw was how to bring the filmmaking and the business and investment community together so that, rather than Austin just relying on being a back lot for Hollywood, films could be made here with local ownership and control. I spent a year or so working with some local leaders – Pike Powers, Jerry Converse, The Texas Film Commission and film director Dwight Adair with support from local filmmakers to create a strategy with the State for funding help. As a result the State passed a loan guarantee program for Texas banks that financed films made in Texas using local crews, services and facilities. George Bush signed it. We celebrated. Everyone was happy. But unfortunately after 18 months work, the bank – Chase Bank – refused to accept the State’s guarantee as it had not put any money into a bank account! So the initiative died. It was a disaster.

What was that program called?

The Texas Film Industry Development Loan Guarantee Program. Though it was sunsetted a couple of years ago I have been invited to resubmit it if at any time it could show that it would create jobs for Texas. Now might be a good time with the enormous loss of filmmaking business to other States.

Is it completely dead?

No. Not completely dead. It just needs resuscitation in a new form. I started revisiting the situation about a year ago when so much Texas film business was being lost to other States and I read that if we built a film studio in Austin “they will return.” It’s a nice thought but it doesn’t work that way. It’s true that many Hollywood producers love making films here in Austin and would love to return but the way it works is that the major film studios go where it’s the cheapest. Louisiana and New Mexico states have provided such tremendous tax incentives that they have attracted the lion’s share of the interstate business from Hollywood. New York is doing something similar this year. Texas did pass a bill last year but, unfortunately its small 5% incentive didn’t help. It was just a token and many of Texas’ 6000 members of the filmmaking community are now moving to Louisiana. From my experience in Australia, I believe that building a successful industry is not about building sound stages and back lots first. That’s putting the cart before the horse. Sure it’s good to have a studio facility available – and we do have several right now - but only where there is a guarantee of ongoing usage to confidently cover its costs. And the costs of running a studio that operates 24/7 day and night can be very expensive. In my opinion building a local industry starts by owning and controlling the making of films. First we make a lot of good quality locally funded, reasonably budgeted films so there’s a return on investment. Then, as the confidence is built up by the investment community an industry is slowly and strategically developed. Then as the needs develop the call for the studios is created with a guarantee of business.

What will get it going?

By having local investors fund films made in Austin along the lines that Austin Ventures did guiding local investors to enter the software business. I am proposing a low cost “VC style” business corporation that would contract with Austin’s highly regarded filmmaking community and local service providers that is staffed by experts in all aspects of film business. It would seek out, acquire and raise funds for commercially viable films and serve in a risk management capacity to minimize the investors’ risk and maximize their opportunity for profits. In addition it would protect its investors with the highest levels of insurance, completion bonding, legal, accounting, marketing and other business services and serve as the Executive Producer on all projects funded. I see the corporation strategically positioned at the forefront of the economic development of a well-coordinated entertainment industry capitalizing on the growing digital capability based here in Austin, as Austin Ventures did for the software industry. And, with Austin being voted by Movie Maker Magazine this year as the number one place in the US to make movies, I believe now is the time to do that.

How far are you with packaging this up as a deal?

I am in the early stages but I do have the support of a highly regarded producer in Los Angeles with extensive experience to bring to Austin a package of five high quality and commercially viable very low budget films to be made here in which local investors will have the opportunity of substantial ownership for a relatively low investment. I have also secured support from an experienced film investor with substantial investments in Central Texas and who will put up some of the funds on a co-funding basis for this slate of films and others and who will take on a consulting role for any investors who might be interested in having a look at investing in film and who can see and support an economic development opportunity that we have right here in Austin via the “VC style” film industry catalyst organization.

A few years ago we had the Burnt Orange Productions unit? What ever happened to them?

It just didn’t work. I was involved in the early days. They were all great people with worthy motives but the experiment of creating a commercial film production company around a film school where young students could have practical experience working with leading directors was a great idea but it just didn’t work for a variety of reasons. Even with Carolyn Pfeiffer, a first class and most experienced person in the business, that wasn’t enough. I may be wrong but to me the organization did not appear to be operated on a commercial basis. It was more of a bureaucratic organization that concerned many in the local film community who saw their jobs at risk. Also unlike what I am proposing for Austin, the investors in the operation were not experienced in film and were more interested in supporting UT’s initiative rather than really investing in films.

What do you think about projects like Villa Muse that recently presented to the City Council for creating a studio in Austin?

I could be proved wrong but I don’t believe it will work - not at this early stage in Austin’s development in film. At least not the elaborate and expensive facility I have read about. It seems to be one of those ‘build it and they will come’ projects. In Australia the studios were not built until after there was a demand from the film industry for them not before. I don’t see any demand here at all. I see Villa Muse more as an interesting real estate deal proposed before its time rather than filling a local need. I heard they were seeking some $50M. Goodness knows how they could possibly generate a return on that sort of investment that would get anywhere near covering their costs let alone paying investors a dividend - not for years. Also I fail to see how it would attract the sort of business it is being built for. First Hollywood have numerous sound stages and back lots in their home town and will only go elsewhere where they can save money and they go to great lengths to save money. As an example almost no films have been made at Las Colinas Studio in Dallas over the 25 or so years since it was built for the same reason. It is currently promoted as a tourist attraction! They did a few lower budget television shows there initially like Texas Ranger but since then it has become a great big white elephant. I really believe to create a film industry with sophisticated studios to service it, you first need to create a demand by making commercially viable films and controlling where they are made. I really know that the way to change the paradigm from merely being at the mercy of Hollywood is by proactively seeking out and funding the best projects from around the world to be made here in Austin using some leverage to get the best deals from all the local crews, facilities and service providers plus international distributors. That, in my humble opinion, is the way we become a major industry force in the future.


Best regards,
Hall T.

Board Planning Exercise—Finding Your Company’s Competency

At the recent Angel Capital Association Summit in San Diego, I had the opportunity to hear Dave Berkus of the Tech Coast Angels talk about the work of the Board of Directors in a startup. Aside from governance most startups need help in setting strategy. Dave Berkus outlined an exercise he uses with startups to help them find their core competency.

It goes something like this-- make a chart with the following column headings:

Candidate Company
What they want
What you want
Ranking 10-1

Now go through and for each candidate company that may one day want to purchase the startup, list out what they would want from your startup. Likewise, write down what the startup would want from the candidate company. After you list out five or ten of these, go back through and rank them based on the value a proposed buyout would bring.

This exercise brings into focus what the startups’ core competency is and helps the entrepreneur set a strategy to develop that competency. As a secondary benefit the exercise highlights who may want to buyout the startup and why. Along the way the startup can start building a relationship with the candidate company.

In the early days of a startup strategy is equally important as governance. The planning strategy outlined above can help set the agenda for the board in working with the startup.


Best regards,
Hall T.

Negotiating the Terms Sheet – Principles Unite, Numbers Divide

During the ACA Summit, Robert Robinson of the Hawaii Angels offered the following advice.

There are three elements to understand in any negotiation:

Commitment – what have the parties agreed to?

Verification – how will we know that everyone fulfill their commitment?

Enforcement – what happens if a party does not fulfill his commitment?

Areas to negotiate include:

--Expectations
--Process
--Terms Sheet
--Communications
--Portfolio governance
--Follow-on financing
--Exit

During the presentation he brought up a key point of negotiation when he stated,
“Principles unite, numbers divide.” As soon as someone starts using numbers conflicts start to arise. At some point in the negotiation numbers must be used, but building a common base first goes a long ways in helping navigating through the possible numbers later.

The negotiation process itself is important. In this blog post a first-time CEO gives his experience in negotiating with a VC but also applies to angels as well.

Knowing the terms and what they mean is critical to the negotiation process. I’ve sat across the negotiation table with entrepreneurs who from time to time lean over to their attorney and ask, “What does that term mean?”

To that end, we’ve taken steps to provide more training to entrepreneurs in the form of special events like the Central Texas Entrepreneur Funding Symposium and Mock Terms Sheet practices sponsored by Andrews Kurth. For a tutorial review of Terms Sheet terms, check out this site.

Best regards,
Hall T.

The CEO Roundtable of Web 2.0 Companies Talk about the Current State of Angel and VC Funding

A recent Roundtable of Web 2.0 companies including highlights the participating companies including ApartmentRatings.com, Babblesoft, Edioma, iTaggit, KeyIngredient, Mindbites, Moximity, MusicGorilla, NaturallyCurly, OtherInbox, VolunteerSpot, and Wowio posted this summary which captured best practices for CEOs. The group offered their views on the funding situation with what angels and VCs fund these days:

“Angels: A working product, a scalable model, revenue, and a willingness to exit. It also really helps to have a serial entrepreneur as a founder. Your raise should be between $250k and $1M.

Some smaller funds like G51 have been active B2C funders, as have a few out-of-town VC’s like True Ventures, Benchmark Capital, and DAG Ventures. Here’s my take on the profile of successful VC raises:

VC’s: A working product, a scalable model, a compelling, innovative, and defensible take on an emerging market, and the potential for a billion dollar exit in 5-7 years. Your raise should be $1M or more, although there was some talk that $1-$3M is no man’s land right now. If the founders are first time entrepreneurs, it also doesn’t hurt to have some ivy on their resumes.”

I think they are right about the angel investor’s view of the fundable startup especially the point about a working product. I would add that the management team needs someone with experience and a permanent CEO is a must.

A clear go-to-market strategy is also key. Sometimes I see entrepreneurs try to paint a picture of a market full of opportunities but instead leave the investor wondering which of the twenty segments highlighted will actually be pursued.

Best regards,
Hall T.

Mike Maples speaks at Acton Angel Network Event on the State of Angel Investing

Mike Maples speaks at Acton Angel Network Event on the State of Angel Investing, what he sees as warning flags in a startup, and what he looks for in deal.

I had the opportunity to hear Mike Maples Sr. speak on the state of angel investing at the Acton Angel Network event last Thursday. The event highlighted Matt Lyons of Andrews Kurth who led a Mock Terms Sheet practice. For those who have not heard about it, the program involved a case study and a terms sheet. Participants are divided into angel investors and entrepreneurs and invited to “negotiate” through the terms sheet.

The event was great fun and educational too. In fact, at the end of the day, I gave a few closing remarks and invited everyone to move to the room next door for drinks and food. Typically, this generates a rush of people but instead the participants continued their negotiations for another 15 minutes before closing it off.

Mike Maples keynote started off with a review of the bubble days in which hype ruled. Mike pointed out that in many cases the hype turned into reality such as:
1. B-B e-commerce reaching $1.3 trillion by 2003 – actual $2.4 Trillion
2. Consumer e-commerce reaching $108 billion by 2003 - $95 billion
3. Productivity gains from e-commerce would pump $250 billion into economy by 2005 - $450 billion
4. Industry’s would change – Music, Travel, Movies, Yellow Pages, Retail

But the bad news is that business cycles do exist and that the bubble days created a lot of bad habits among entrepreneurs and investors. The VCs are currently in disarray. The bottom half of the VC community went out with the bubble burst and aren’t coming back. Twenty of the top VC funds in the 1990s went away and aren’t coming back either. Entrepreneurs receiving large investments tended to overspend on unnecessary things.

The old investment cycle of the 1990s of Angel investment leading to VC funding leading to Mezzanine funding is giving way to a new model of angel investment first and VC funding only for expansion after success.

The three warning flags Mike looks for in a deal are

1. The entrepreneur claiming there’s no competition,
2. The entrepreneur asking the investor to sign a confidentiality agreement up front.
3. High management salaries

Mike advised the entrepreneurs in the room to bootstrap as long as you can. He encouraged the audience to pick a focus and execute well including:

1. Build the right product
2. Build the product
3. Manage spending
4. Hire the best

Mike closed out with what he looks for in a deal

1. ‘Entrepreneurs that want to Learn
2. Idea, product, service you can explain to your spouse
3. Invest with people you like to work with
4. 3-5 yr –
a. 15 X return
b. 25% year annuity
5. Sharp, narrow focus
a. In big area or
b. Protected Niche
6. Hard technical problem, not a feature

Best regards,
Hall T.