Jonathan Gilliam of OneAccord Talks about his Startup Experiences

How did you get to Austin?

I attended UT-Austin and was one of the lucky few who got to stay after graduation. All my college buddies in Dallas and Houston are envious. But there are sacrifices – execs in Austin know to do well here usually means you’ll have to travel.

What is your background?

I am a business development guy, sales and deal-making are in my DNA. During the 90’s like many Austinites I morphed into the tech business and have hung around it most of my career. It’s a lot of fun.

What was your first startup?

I was a co-founder of Hush Communications. We provided encrypted email service that was end-to-end, meaning only the sender and recipient could read it. At the time, Bill Gates was defending his email in court and people were starting to realize the Internet was not as private as they had thought. We promoted “privacy” as a right and were a bit ahead of our time, it took a while for people to really care about their security online. The company is still doing well, more focused on businesses now.

Facebook changes all that, of course. I think people have just given up on privacy and are more concerned now with controlling their personal information rather than trying to hide it.

Later I spent 6 years at Deloitte in their data forensics group leading national business development for their fraud detection product, and then to another company in town doing large-scale data mining for the government.

So I sort of went from “fighting the man” to “being the man”, career-wise at least! I still believe privacy is something to be cherished, especially having seen it from the other side.

How did you get your startup funding?

We closed our last round of funding two weeks before the tech crash of 2000, and promptly moved the business to Ireland where the encryption laws were more friendly.

Interestingly, our last round was through an “online investment bank” called OffRoad Capital (get it?). We were one of the last deals they did before the crash, our “road show” was streamed online – imagine the video technology back then– and our deal actually went to a unique auction phase giving us something like a 25% higher valuation than we expected.

Wonder when someone’s going to bring that back! It was great for startups.

What are your current interests?

With OneAccord I’m focused on helping companies ramp their revenue and build out their sales and marketing strategies. I recently joined an awesome online marketing agency called Idea Interactive and last year founded an association for complex sales professionals called the Society for Business Development Professionals. So it’s been busy!

I hear you’re a blogger. What do you blog on?

My blog until now has been a grab bag of my thoughts on a number of start-uppy business topics, but more and more I’m focusing on information for companies wanting to “blow out” their top line.

What are the top three trends in the business development space?

It is an incredible time of transition for going to market. The days of calling someone you don’t know up and getting them to spend a lot of money with you are simply dead. Try calling an CIO and selling them something today; voice mail and email filters mean never having to talk to a salesperson again.

All companies need to take a hard look at leveraging new “Sales 2.0” strategies to have a chance of succeeding. This is actually a wonderful opportunity for those willing to be creative, invest and step up to the plate. More than ever it’s about relationships and trust-building and leveraging networks.

Another trend is the rising need to be information savvy. It’s less and less what you know but who you know and how to quickly find out what you don’t know. It’s just as important to have a search window at our fingertips as having an encyclopedia in our heads. This changes not only customer activity but business activity in general.

I recently blogged about another opportunity in the chaos of the financial crisis. As competitors do the drill of reigning in spending and scaling down, smart companies are stepping in and acquiring other companies on the cheap, gaining market share and taking advantage of more favorable terms. This crisis is one of those rare game-changing opportunities, if we can overcome the fear and hype.

Best regards,
Hall T.

Eric Stumberg of Tengo Internet Talks about Tengo Internet and Municipal Wi-Fi Implementations

What does TengoInternet do?

We provide high speed internet management services for outdoor parks and campsites.
It’s mostly amenity internet with added business applications, so we provide members all the deployment and management and support networks.

Do you cover the Texas Parks & Wildlife?

We are operated a 3 year pilot with them. The pilot proved that their users wanted it; but the state parks decided that they wanted to actually manage that project internally.

Do they pay for it?

We’re ran a guest-supported pilot for three years. We use satellite to handle the remote locations. Normally when you are remote like that, you need to share the back haul costs with your regular applications. The back haul is a big component.

Sounds similar to municipal Wi-Fi. What ever happened to that?

The business model is challenged. No one wants to pay for it, except for municipal services. It’s consistent with a lot of the municipal Wi-Fi deployments – there is no quality of service or revenue guarantees - EarthLink tried to use an advertising and subscriber model in a couple of areas. They failed. If you have an anchor tenant it works. If you don’t, it won’t work.

What are you working on these days?

The extending the reach of WiFi into our customer’s networks, expanding our media platform for advertising directly to our subscribers, integrating social networking tools into tech support – such as Twitter, and others..

Where do you see Tengo Internet in 5 years?
Bigger and deeper in an expanded space. We will become the dominant player in outdoor hospitality network management services.


Best regards,
Hall T.

Jamie Wallace of Childproof Straw Talks about Her Startup

How did come up with the idea for a childproof straw?

I have three toddlers! They all love yogurt and due to lack of time, I started stabbing a straw straight through the top of the yogurt container! It worked great but I got sick of the spills all over the house from the straw falling out . Same problem with juice boxes, milk cartons, drinking cups… The concept hit me out of nowhere and I grabbed some “tools” around the house and built a straw with offshoots. The addition goes through the top (or lid) and the offshoots prevent removal!

Have you done any patent searches on it?

We’ve checked and there’s no prior art. We have a provisional application filed.

How are you pursuing the market?

We started a survey to get feedback from the market. It’s went to 29 states and 5 countries in just four days. It’s overwhelmingly positive. My goal is to get it to all fifty states. This helps validate the market.

What’s the next step?

We plan to license the technology to the food/drink companies such as Coca-Cola, Pepsi, Kraft, General Mills, major straw manufacturers and more. We want “The Childproof Straw” or “Secure Straw” to be on every super market shelf, served with every child drink, and an addition to Juice or Milk cartons, pouches, boxes…

How is that going?

It takes time to work your way through the system at these large companies. Also, we have found that typically the manufacturing is ending up in China.

You may want to start with smaller, local companies to build up a base.
I agree, we are going to start focusing more of our energy that direction going forward.

What are some of the interesting feedbacks you’ve received from the survey so far?

People have been overwhelmingly excited about the idea. The product seems like a no-brainer to parents. We literally have hundreds of comments on why they like it. Here are some of my favorites!

“I could see this straw being handy for the elderly and for use in hospitals. I would not limit your marketing solely on small children.” Cedar park, TX

“Why not just replace the stupid straws on the market now with the smarter straw described here!” Pacifica,CA

“This is the kind of thing that would make a restaurant or certain brand of drink stand out above competitors. This is something moms would recommend by word of mouth as quickly as possible! "...and they even have these amazing straws...so kid friendly...!" Austin, TX

“Solves a very common child related dilemma in a seemingly easy and inexpensive way.” Vienna, VA

“My son has speech problems and is supposed to use straws instead of sippy's (for the muscles around his mouth), but I am so tired of all the spills. Thanks!” Monroe, OH


Best regards
Hall T.

Michael Agustin and Tommy Tran of Gendai Games Talk about their new product GameSalad

How did you come up with the idea for GameSalad?

The idea behind GameSalad is to give people the ability to make their own games. It’s very easy to use. It’s a drag and drop interface. We have a social community and it’s easy to embed the game into other programs such as Facebook or your own blog.

Is it up and running now?

Parts of it. We are currently in closed alpha but all the tools are there to make your own games.

What kind of games can people make?

Right now, we focus on 2D games. We have developed our own engine and plug-in. We chose to go with our own plug-in rather than Flash so we can also support the iPhone. With our engine, people can make their games once and play them in a Web browser or iPhone.

How do you charge for it?

We will sell premium games through micro-payements, similar to how the App Store and the xBox360 charges $0.25 to a $1 to play a full game. For free games, we plan to make additional money with advertising. We will offer a free creation tools for beginning game designers and a pro version that lets people make games for the iPhone as well.

When will you start charging?

Sometime at the end of Q2, 2009. We also plan to make our games from the tool and sell them ready to run, over the iPhone App Store. By making our games we plan to make additional revenue and we’ll learn how to improve the tool itself.

How do find the local gaming community?

Austin has a pretty big industry, and developers here are quite helpful.

What platform does it run on?

The game engine runs as a plugin in Web browsers on all platforms. The tool will be initially Mac-based because there are statistically more designers on the Macintosh. We also like the tools on the Mac such as Xcode and Cocoa, which allow us to build rapidly and provide a polished interface.

Can we hear your Fastpitch?

Gendai Games is a game creation for the rest of us. The games market is over $2.25B worldwide with over 200M users there are more players online than all the video game consoles combined. For the long tail of game developers, it is difficult to create and publish their own works. Gendai Games is an open platform for user-created games that are playable on mobile platforms and the web. Non-programmers including designers and graphics artists make up the majority of game developers. Our tool lets them embed their game on the web and mobile phone in the same way that YouTube can be embedded. The company will use micro transactions to charge for game playing. The product is in alpha and is under evaluation by game companies like Disney, Sony, and Electronic Arts.


Best regards,
Hall T.

David Hooper of Minimus Spine Talks about his new Startup Using Ozone for Spinal Disc Herniations

David Hooper of Minimus Spine Talks about His New Startup

What is your background?

I went to Case Western Reserve University and then the University of Iowa for a Ph.D. in Biomedical Engineering. My dissertation was on spinal mechanics and I was fortunate enough to have Dr. Vijay Goel as my advisor and Dr. Jim Weinstein on my review committee. I spent three years in England setting up a biomechanics lab and evaluating patients after knee reconstruction. From there I came to Austin and took a position at Spinal Concepts in 1999. That was a fantastic entrepreneurial company and we did really well. When I got there, there were about 30 people and under $10M in sales. We built the company to about $80M in sales and sold to Abbott Labs in 2003. I left Abbott in 2006 and started this later in the year. Several of the physicians and executives I worked with at Spinal Concepts have invested money in Minimus and helped get the idea off the ground.

What was your primary job?

I was Abbott Spine’s VP of Emerging Technologies. In that capacity I was responsible for our Class 3 product development (non-fusion devices) and involved in identifying technology for potential acquisition or investment. I was the company’s liaison with FDA and responsible for designing clinical trials and preparing regulatory submissions. I worked with physician investigators around the country and had a team of engineers, research monitors and data managers to execute clinical trials and regulatory specialists to participate on design teams and prepare FDA submissions.

Why is there so much activity in the spinal area?

A great deal of money has been invested in spine because these patients need devices that improve their quality of life. The market is moving towards minimally invasive surgery and non-fusion but the outcomes still aren’t as good as with hips or knees. Opportunity breeds innovation.

Many of the products are relatively inexpensive to design and build and can be sold with good margins. Over the last few years, some of the regulatory hurdles have been eased- specifically with devices known as fusion cages. Since 1996- at least four companies completed clinical trials on cages and they made a great deal of money. Many other companies tried to do clinical trials but struggled with enrolling them- so no approvals. FDA down classified cages a couple years ago from Class 3 to Class 2, meaning that clinical studies are no longer required. Since then, there is a host of companies fighting for their piece of the pie and competition is fierce.

Artificial discs have been hot because the market started turning away from using cages as stand alone devices and the idea of maintain motion is appealing. Just like cages, the first disc companies getting through FDA trials were handsomely rewarded but later entrants have struggled with enrollment. These disc devices haven’t yet met expectations because it’s debatable whether or not they actually improve patient care, they introduce new risks- and they are expensive. Products like that are going to struggle in today’s health care environment.

One recent problem in spine is that many of the new technologies look very similar to one another. There was clearly a herd mentality surrounding artificial discs. Spine still has great potential but the products that will be successful must be differentiated, have clinical data showing they really do improve patient care- and ideally- save the health care system money. Minimus hits on all these fronts and that’s what compelled me to start the company.


What exactly is your proposed technique at Minimus Spine?

We’re working on a procedure for injecting ozone gas into a herniated spinal disc. There’s a stack of peer-reviewed literature about an inch thick that describes this technique. It’s being done every day in Europe, Asia and South America. The gas oxidizes the herniation and allows it to shrink in size, relieves pressure on the nerve and provides the patient relief from pain. Contrast that to steroids. Steroids address inflammation of the nerve but do not address the herniation. That’s why patients often have multiple injections and many go on to surgery. I believe Minimus can effectively treat patients with just one injection and reduce the number of patients that progress to surgery.

Why isn’t this available in the U.S?

The main reason that this isn’t available in the U.S. is because there is no regulatory approval. It takes a significant investment to go through the FDA and the technology has needed a better business model to justify that investment. We have the model figured out and once we go through the FDA process we would be the only injection treatment available- except for steroids which don’t’ work that well and don’t have FDA approval for spinal indications.

Our device is quite different from those being used overseas. We’ve been able to make improvements that should position us well with the FDA. Some of our angel investors are clinicians in Europe and the Middle East who are already using ozone. They feel that our patent-pending designs will revolutionize the existing market- particularly once we have FDA approval.



How long does the effect of your procedure last?

One of our surgeon advisors has been tracking a group of almost 100 patients he treated in 2002. In that group, only 15% of the patients went on surgery within 5 years, which is about half of those who receive steroids. Less than 2% were given a second injection, which is much better than steroids where the average is 2.5 injections per patient. If Minimus can cut the number of injections and the number of surgeries then we’re in great position because it’s better for patients and saves money.

Do you need a new code for reimbursement code for this procedure?

No, there’s an existing code we can use. There was a product released in the 1980s called chymopapain that was used in a manner similar to what we want to do with ozone. Chymopapain is an enzyme derived from the papaya plant. The product was hugely popular but there were a small number of well-publicized adverse events that caused the product to crash. Basically, the enzyme isn’t specific to the disc material. If it leaked out of the disc or was mistakenly injected into nerves, the enzyme could dissolve the nerve and leave the patient paralyzed. There were also some people who had an allergic reaction to the protein and died. Some clinicians still use chymopapain outside the U.S. but its not available here. Not that many doctors want to take the litigation risk. None of these problems have been reported with ozone.


Is there a patent on this technique?

They started injecting ozone into herniated discs in Italy over 15 years ago. It’s in the public domain. We have filed four patents on our product and believe that these patents will make it difficult for others to create a profitable product that can meet FDA standards.

The other aspect of intellectual property is the clinical data and regulatory approval. Some people have a misconception that once one company does a study and gets FDA approval, any future competitor can design a similar product and FDA will approve it without them having to do their own study. That’s just not true. Again, fusion cages are a prime example. It was over ten years between the first product to get regulatory approval and the eventual down classification. History has proven that the value of these approvals is great because it is always much more difficult to complete a study once there is already a product on the market. If you were a patient and Minimus had approval today, would you opt to take the FDA approved product or enroll in a study of another ozone product? Most patients will take the FDA approved product because there’s no need to take a risk on an unproven product. Likewise, most doctors will chose to use the FDA approved product because its not worth their time and energy to do an FDA clinical study. That generally holds true unless the new product is believed to be significantly better.

I’ve always said, patents are great but they are worthless if your product isn’t on the market. The spine industry changes so quickly, I believe there is just as much value in FDA approval and being early to market.

Henrik Johansson of Boundless Networks Talks about the Early Days

Boundless Network was recently named the second fastest growing company in Austin by Austin Business Journal and named the No 6 among “Best Places to Work” by the industry magazine The Counselor. I talked to Henrik Johansson, one of the founders and the COO of Boundless Network.

What does Boundless Network do?

We’re a technology-enabled services company that provide promotional products solutions to corporate customers.

What are you working on these days at Boundless Networks?

The first couple of years we were focused on growing almost exclusively through recruiting of industry salespeople and then helping those salespeople deliver value to their customers. We spent a lot of time and effort on developing a fully scalable back-office system that could handle our rapid expansion. Now we’ve evolved our technology platform to the point where it really delivers unique value to our customers, and that is increasingly starting to drive our growth .

What do you use on the backend?

We selected the Lombardi workflow product TeamWorks and have used it to streamline our supply chain and orders process. It is the foundation for the engine that is managing all the custom order needs and coordinating the activities in our supply chain. We also have invested heavily in Salesforce.com as our CRM and marketing engine and customized it to our industry. I have been impressed with Salesforce.com so far as they have really opened up their back end to external applications which have made it useful for so much more than just CRM.

Who funded you guys?

Initially we raised about a $1M from angel investors in town which converted into our Series A of $3 million from Austin Ventures and Silverton Partners. Later we raised $4M in Series B from those same firms. They have both been great partners to us. In an industry largely void of outside capital, having strong financial partners is a competitive advantage.

What did you do before Boundless Networks?

I co-founded my first startup Creditland in the Bay area in the late nineties. It was a lending marketplace and we partnered with many of the biggest banks in the US and provided them online credit approval capability. We used a heavy duty decision engine on the back end. After that I was recruited to another online financial services company in Austin called EverydayWealth. We built an online financial planning application, and grew quickly by signing up members through a network referral model.

You’re originally from Sweden. So how did you come to Austin?

I started as a management consultant with Andersen Consulting (now Accenture) in Stockholm, and got happily stuck here after a project in Dallas. I met my wife-to-be there and we moved to San Francisco where we stayed for about 6 years, before we decided to come back to Texas about 7 years ago, and then Austin was the only option. We love it here.

Best regards,
Hall T.

Scott Shane’s new Book "Fool’s Gold" Dispels Many Myths around Angel Investing

I found the book Fool’s Gold insightful as it confirmed many of my assumptions about angel investing such as:

1. Most angel investing is done alone by individuals who are supporting a family or a friend and in such cases treats their investment more as a donation.
2. The majority of these investments don’t come with due diligence, terms, or other basic investment supports.
3. Most never see a return.
4. Most cannot help the company they invest in because they don’t know enough about the industry or the company.

As a director of any angel group I encourage people to join for education and deal flow. An angel can spend all day finding the deals but then must spend all night investigating those deals. I had the chance to speak with Scott Shane the author of Fool’s Gold.

In your chapter on why people do angel investing you list several factors such as to make money, to help the community, and more. Which factor do you think will be the driving force of angel investing in the coming years?

I think that it is to help the community. With a slow IPO market, a lot of acquirers slowing down their operations, and general economic malaise, I don't think the next couple of years will be the golden age for angel investments. I think the people who will do this and be happy with it in the next few years are the ones doing it to give back or to stay involved with startups.


I understand angel investing in total is just a little larger than VC investing. Within angel investing, family and friends money outweighs angel group funding by a factor of 13 to 1. What can angel groups do to support the "family/friends" money effort short of having them join the angel group?

I don't know that there is much angels can do to support the friends and family money. I think the best thing to do is to stop thinking in terms of this financing lifecycle model where the entrepreneur puts in money, gets money from F&F and then angels and then VCs. Very few of the businesses that get F&F money are appropriate for angels. So rather than supporting the F&F money effort, I think the issue is to figure out which F&F money is the end of the financing money and which is in companies that seek further rounds. You want to separate out those
for whom the F&F is a stage rather than an end.


You mention that only 5.9% of companies started each reach "gazelle" growth rates of 20% or more per year? Aside from industry is there any data that indicates which companies will grow that fast?

There is. Founder experience, IP protection, business strategy are a few. But none of this is for angels in specific. The study that needs to be done and that I have wanted to do for years because it would be so helpful is to look at all the deals that go into angels. The deals would be tracked and we could see what leads to higher performance. This approach is specific to angel deals and therefore
of great relevance to angels. Moreover, it can tell you if angels are picking winners or losers.


You write about the importance of "staging" funding for angel investments. What more can you tell us about that?

Angels generally think in terms of putting in money in one block and that's it. Staging, putting money in over time with milestones is a better way to monitor companies. So angels should think about how much time it will take to achieve a company's goal - say get the product on the market. Then they should create milestones to get there and give out money on achievement of the milestones. This is essentially the VC way and seems to be done by sophisticated angels,
but not all.


You indicate that angels receive 1.7x on their investment but that the data is hard to judge without time frames. If you separate out the family and friends money which is more a donation than an investment - what multiple would you expect to see?

I don't have the data to look at actual returns by typical angels. The book gives numbers on actual returns for angel group members, expected returns by typical angels, and actual returns by all informal investors. In general, I would say that we can infer that the typical angel neither has the return expectations nor the returns talked about by sophisticated angels in groups.


You indicate that financially successful angels look at the industry of a company to determine its potential value. You show a list of valuations for six-year old companies by industry and they range in valuations. Does this correlate to the maturity cycle of the industry? What other factors drive it?

That's a book in itself. Industry maturity, the nature of production, IP protection, firm size, and a host of other things drive the numbers. The purpose of the chart was to say industry matters and angels need to pay attention to that. They should investigate why industries are attractive or not.


You conclude that state tax policies aren't that helpful and the most practical support the government can provide is to foster the growth in the number of angel groups? Why?

Angel groups allow you to get people involved in investing in start-ups who have lower net worth. That enhances the pool of angel capital and gets the novices working with and learning from the experts. While everyone likes a subsidy, the state tax policies don't seem to actually move many non-investors into the investor categories because state tax rates aren't that high. So taxes aren't as effective. If the federal government created an angel tax credit that might be
different.


How would you encourage the investors to join an angel group?

I would suggest groups go out and look for accredited investors and try to bring them into the group. I would also encourage government programs to get these groups started. There is a bunch of effort that needs to happen in the beginning for which subsidies help and get paid off later.


How do you see the current economic climate impacting angel investing?

It's hurting. Angels invest their own money. They have to limit that to a portion of their net worth. If their net worth drops by one third, the amount of money for angel activity, on average, goes down a third. The only silver lining in this is that people might be allocating a greater portion of their wealth to angel investments. If they are going to lose a lot in relatively low risk low return activities like public equities, they might as well risk losing money for a big winner in a start up.


You list Austin as a good place for angel investing since the number of firms receiving external equity per million population actually puts Austin above San Jose? What should a city like Austin consider doing to improve its position here?

Focus efforts on building and maintaining angel groups. The system is working in Austin. So it is a matter of maintaining the top position. That means keeping the angel groups going. That's the thing under your control. You can't make new entrepreneurs emerge or new technologies be born. But you can make sure that the system stays there for financing them once they are born.


Best regards,
Hall T.

Gail Austin of Summerfield Talks about Her Startup

Gail Austin of Summerfield talks about her startup

How did you get into retail?

I have a degree from the University of North Texas in Interior Design and then I worked at places such as Sanger Harris. It was long ago and now they turned into two or three other entities. Now they are Macy’s.

What’s the idea behind your startup? What’s unique about this one?

So often one goes out to shop and doesn’t find what they’re looking for. I have an idea on how to create a better retail experience at a cost advantage over the competition.

How would you create a better experience?

Summerfield embodies the spirit of luxury, while showing the discriminating consumer an alternative to high costs: special offerings, special services.
Superior customer service: I have JD Powers awards for outstanding customer service.
Also, I am uniquely aware, because of my background, of low and high budgets and particularly good at mixing the two.


What would you focus on first?

Home interiors. I plan to hit the market between the Heather Scotts and the John Williams level. Specifically, I want to hit market trends in home offices and outdoor accessories.

One of the challenges with retail is scalability. How will this scale to be big? How you are going to get to be 5x in 5 year unless you are opening more stores ?

After the initial model takes off, we will open a second location in another Austin top zip code area for high disposable income—not currently served by this type of business. This business will expand with internet sales and marketing, similar to Furniture Land which is based in North Carolina. Their model is a retail outlet and huge internet sales.

How is your business model superior to others?

Same day deliveries, our door to yours.
Interior Design (1 hr.) will be complimentary with delivery of merchandise for add-on sales.
Better displays and suggestions because of my design talent.
Expansion into internet sales and marketing.
Marketing creatively, including realtor emails.
Owner is creative thinker.

How do you plan to expand the operation?

Internet Sales and Marketing, 2nd location, Interior Design Classes, mass emails to select groups.

So have you done a fast pitch competition before?

This is my first try.

Well let’s hear it.

I am Gail Austin. The problem I’m solving is that in the southwest Austin area there is not enough service furnishing homes and gifts locally. People have to drive 30-45 minutes to find what they are looking for. And people in that area have a significant amount of disposable income so as investors we should care that we can meet their needs, give them outstanding customer service and show their profit. So market size down there is wanting to be enhanced and expanded. And I am looking for $125,000 in addition to what I put in the business and we will have a lease, two employees and approximately $50,000 in merchandise on the floor at wholesale prices and the investor can expect a return on his income of about 10%.

The consumers will be amazed at what is at their fingertips: a luxury look at a value price.

Best regards,
Hall T.

Travis VanderZanden of QikCom Talks about His Startup Bringing Twitter-like Capability to the Business World

Travis VanderZanden of QikCom Talks about His Startup Bringing Twitter-like Capability to the Business World

So what is your background?

I worked with Qualcomm for five years in San Diego. I decided it was time to start my own company and thought Austin would be a great place to start it.

How did you come up with the idea for QikCom?

I had been following Twitter for a long time. It’s a great way to communicate. I think it makes more sense in the business setting. Right now, consumers use it for things like what they having for lunch. I think it fits better for business. It complements email.

What is your business model?

It’ll be subscription based at the company level. It will be free for employees to sign up to get grassroots adoption. We then plan to charge a subscription for additional Enterprise 2.0 applications in our TabStore. I want to stay away from the advertising model. Twitter is still trying to figure it out. I think they will eventually.

How is your micro-messaging service better than Twitter?

I think that micro-messaging for business needs to be more secure. You have to have a company email address to join. We can lock down the IP address to reside in a certain range. We also have SSL on top of that. It depends on what you’re using it for. We’re hoping they will pay for that.

How many are signed up so far?

We have over 500 companies signed up so far. We’ve identified the early adopters in each of those companies and now we’re trying to spread deeper into the organizations.

How did you find the 500 companies?

All word of mouth. We haven’t started marketing yet.

Where is the development done?

We did everything here in Austin. Nothing was done overseas. We’ll be ramping up quickly to finish our TabStore app platform.

How do you foresee the business user making use of your service?
QikCom is perfect for staying connected with other employees within your company. Micro-messaging is short, quick messages that provide a great alternative to email. We also see the TabStore providing a lot of additional use to organizations moving toward Enterprise 2.0.

Who is your competitor?

Yammer is our largest competitor, they launched a few weeks before us and won the TechCrunch50 award.

How are you better than them?

We’re different from our competition because we’re going far beyond just rebranding Twitter. We’re building a business application marketplace called “TabStore” for on top of our core micro-messaging utility. We currently offer three apps/tabs in the TabStore, ToDo List Management, Frequent Travel Management, and Competition Monitoring.

Travis can be reached at travis@qikcom.com.

Best regards,
Hall T.

Alan Knitowski of Curo Capital Talks about His Startup Experience

Alan Knitowski of Curo Capital Talks about His Startup Experience and the Move to Austin from Southern California

What is your background?

I was a Captain in the US Army Corps of Engineers until August 1996, when I was recruited to Silicon Valley to work at Northern Telecom (now Nortel Networks). I spent 5 great years in the Bay Area from 1996 to 2001, and without a doubt it was an amazing time to be in San Jose to experience both the first big wave of the Internet and the entrepreneurial experiences associated with the VC world on Sand Hill Road. During my time there I not only worked at Nortel, but I also founded, ran and sold my first company, Vovida Networks, to Cisco Systems in November 2000, and also founded my second company, Telverse Communications, which was ultimately bought by Level 3 Communications in July 2003. In 2001, I relocated my family to Newport Coast in Southern California and spent the last 7 years working on several companies there before moving here to Austin in July.

Why did you move to Austin?

I came to Austin for a lot of reasons, some personal and some professional. I have family in Texas and have always had a great time with my friends in Austin, some of which transferred here from the Bay Area. Additionally, I thought that it would be a fantastic environment to raise my four kids, all of which are under 10 and none of which had ever experienced growing up anywhere but coastal Orange County. On the business side, I was thrilled to realize that Texas has no state income taxes and that there would be no state capital gains on any future company sales of start-ups as had been the case back in California. Additionally, I came here to be more centrally located for my business activities on both coasts and to assist some of my current companies with their growth and expansion activities in the Midwest.

What are some of the big differences in the costs of living in California versus Texas?

In California, pretty much everything is more expensive than here in Austin: gas, food, state taxes, labor, office space, etc. And, while Austin may have 2.5% - 3% property tax on your home here versus 1% - 1.2% in Newport Beach there, it’s all relative as 2.5% - 3% of the home values here are still much less expensive that 1% - 1.2% of the home values there. There are certain things such as electricity and water that seem to be more expensive than Newport Beach, but in general things tend to be lower and you seem to get more bang for your proverbial buck.

What kind of work do you do now?

I still work building start-ups and young companies as I did before, but I now also spend more time managing small investment funds and assets both for myself and other accredited investors. Over the past decade I have created, built or advised about 16 companies with my partner Luan Dang, who is still based in Newport Beach. We were blessed to have had four of them sold after the Internet bubble popped, including the two mentioned above, vCIS, which was an anti-virus and security software company purchased by Internet Security Systems and subsequently by IBM, and Bitfone, which was bought by Hewlett-Packard. Two other companies are “Managers” for two additional companies that are “Funds” for accredited investors, including my business partner and I, predominantly focused on private company deals in one and publicly traded securities in the other. We tend to look for deals that we can get involved in managerially and that we can bring some operating leverage and some of our networks across the country to help companies grow quickly and efficiently. For the most part we have only made one passive investment, as we have had our best results where we have been directly involved on a daily basis. One of my current companies is called Caneum, which does business process and information technology outsourcing. Recently it was awarded both the Deloitte & Touche Orange County Fast 50 growth award and the #3 national ranking on the 2008 CRN Fast Growth 100 National List. Outside of Caneum, my partner and I have been extensively involved with Vootage, an online video site anchored with high school athletics and communities, Edgewater Networks, a communications networking equipment company venture backed by Palomar Ventures and El Dorado Ventures and Windspring, focused on data miniaturization technology and software for in-car navigation systems and personal navigation devices. I also have a personal LLC that my wife and I use for other business and investment activities, as is similarly the case with my business partner.

How do you find the funding environment here?

For the most part it is quite a bit different from California on the institutional side, as I sense from talking with many local CEOs that there’s not much VC funding going on locally at the early stages of new ventures. For instance, it appears that Austin Ventures has moved their investment focus a bit further upstream, so many local CEOs still seem to be flying back to California to explore the more traditional venture financing. On the Angel side, however, Austin and Newport Beach aren’t that terribly different as there appear to be quite a few people involved in investing as high net worth individuals or on behalf of family offices or small private equity funds. There are not as many companies in Austin as in the Bay Area in terms of Dell or Google like successes, so there is probably a little bit more investing on the west coast in absolute dollars and a little bit more redeployment of successful liquidity event monies in to new companies and ideas. However, I am hopeful that this will change over time and I am excited to now be here in Austin to be a part of that process. With all of that said, it pretty obvious due to the market and economic conditions that there’s no silver bullet or panacea available for raising funding for just about any young company, whether here locally or out in California. I find the current climate more challenging than at any point since I’ve been doing start-ups because people are confronted with whether to invest in new private companies or simply go out in the open market and buy mature, profitable companies with great dividends for as little as 1 times earnings or less than 1 times cash on hand. Between that, and the lack of meaningful corporate M&A of young companies and a closed IPO window, I think that we’re all looking forward to getting back to somewhere between the irrational exuberance that we had before and the irrational stupidity that we appear to have currently.

What is your advice to other investors?

While I think that it’s important to be cautious, I think that people need to remember that the goal is to invest early in great companies that can develop and mature over the mid and long term to provide for meaningful returns and exits. Some of the greatest companies of the past 10 years came out of the post Internet bubble era and I would expect the same now that the credit and housing bubbles have popped this time around. Additionally, I would suggest that people should try not to be surprised by just about anything that can happen right now for start-ups in this environment. I had one startup not too long ago where the (now former!) CFO was convinced by Wells Fargo to put some of the company’s investment and working capital dollars in to State of Pennsylvania Student Loan Structured Investment Vehicle auction-rate securities via Merrill Lynch so that they could get an extra 70 or 80 basis points in interest on their money. The CFO thought that the suggestion was sound and quite safe because the underlying securities were AAA rated and implicitly backed by both Merrill Lynch and Wells Fargo. Needless to say, the credit markets froze for these securities and suddenly the start-up found itself without access to its capital to run and grow its business. Strange contractual items appear to be coming up all over the place these days, so please be cautious with your management teams and your investors’ investment dollars.

Best regards,
Hall T.