Are You ready to get Married?

Investing in early stage companies is not unlike getting married -- it follows the same steps.  In many cases the time some investors spend in a deal is longer than some people spend staying married.  The average length of a marriage today is 8 years. I know many investors who are in deals for ten years or more.

Here’s a comparison between getting married and investing in a startup.

Marriage                        Investing in a Startup

Longing                          Seeing others make a profit

Introduction                  The entrepreneur pitch

Dating                             Getting to know the team

Engagement                  Due Diligence

Marriage Ceremony     Signing the terms sheet

Honeymoon                   Excitement of joining a new co.

Post-honeymoon          Day to day work on the business

I draw this comparison because I see many investors rushing through the “dating” process only to find they picked the wrong one.

As an investor you’ll spend quite a bit of time with the startup over the coming years so you want to check compatibility with the management team.  The key areas to look for alignment are:  hiring people, managing budget, and building culture.  Products and strategy will change to fit the market and the current business conditions. 

If you’re investing in a startup you’re about to get married.  Make sure you’ve done the necessary due diligence on the people.

Best regards,

Hall T. 

The Searchfund—Another Investment Innovation

Entrepreneurs typically come up with their own ideas and invest time in building a basic business at which point they seek funding to grow it.  There’s a method called the Searchfund in which an entrepreneur raises funding to find a business which can then be funded for acquisition and growth.  The concept comes from Stanford. you can see more at this link about the basics.  

The search fund concept originated in 1984 and has become increasingly well known among business schools and private investors. A search fund is an investment vehicle to allow an aspiring entrepreneur the opportunity to search for, acquire, manage, and grow a company.  They raise an initial seed amount of funding to support the search effort which typically takes two to three years.  Once they have identified the acquisition target, they raise a round of funding to acquire and grow the company. The follow on funding can be in the form of debt, seller equity rollover, earnouts, traditional senior and subordinated loans, and equity financing from new investors.

One can find opportunities from retired CEOs or trade association presidents, brokers, or other personal contacts.  Skills needed for a  Searchfund program are the same as for an entrepreneur --  a wider view of the world, attention to detail, perseverance, ability to build relationships, and strategic thinking.

Benefits of running a Searchfund include expanding one’s view to a wide range of industries in a short amount of time. One can find a target company to acquire and then lead that company to success with the potential for a high financial gain.  About one in five Searchfund ends without finding a target acquisition

The returns match those of venture funds and angel deals.  The Search Funds 2011 study shows the asset class at 34.4 percent IRR and 11.1x multiple of investment.  Results from the Stanford experiment with search funds provided the following results:

“As of December 2011, 26 principals or partnerships were either looking for a company to buy or raising funds for acquisition; 50 had acquired companies that were still in operation; 3 had deviated from the search fund model; and 71 were classified as “terminal.” Of the 71 terminal search funds, 23 acquired and exited a business, 17 acquired then shut down a company, and 31 concluded without an acquisition.”

I know several investors interested in pursuing a Searchfund. If you are interested in being a part of Searchfund, please contact me.

Best regards,

Hall T.

Greg Leman Talks about the Baylor Research and Innovation Collaborative

Greg Leman Talks about the Baylor Research and Innovation Collaborative

Where are you from originally?

I am a Midwest guy.  Grew up in NE Indiana

What university did you go to?

Studied Chemical Engineering at Purdue University, and after working a few years at Dow Chemical, went to grad school at University of Illinois, Urbana campus where I earned a masters and PhD in Chem E as well.

What brought you to Austin?

The opportunity to leverage what I learned over 25 years in research, product development and business leadership to create a new program in Technology Entrepreneurship at Baylor University brought me to central Texas.   I quickly became connected to IC2 Fellows at Baylor  and others who introduced me to the Austin community of tech business innovation.

What is your group’s mission?

Enable accelerated commercialization of things that matter.  In our view this is possible only when we focus on both the innovation and the innovator – sustainable positive impact through tech ventures demands development of leadership as well as technologies.

What need does it fulfill?

As Baylor emerges as a much more research-focused institution, the local need is for easy-to-utilize commercialization pathways that help these research insights to make a manifest difference in society.  More broadly, we are responding to the need for new companies and the SME segment of the commercial world to drive economic growth and create jobs.

What exactly does it bring to startups?

Since we are an accelerator, our key deliverable is commercialization process coaching.  The processes we have developed have proven to be successful in taking ventures to their next key milestone at a 75% rate.  For startups the next major milestone is usually funding the next phase.  In our system most of these startups achieve that funding by a reformulating their plans, which happens as they gain deeper insight into the opportunity set (often significantly altering their prioritized path forward to reach cash positive state more quickly) and also by doing a much better job communicating a compelling value proposition.  Further, we find that teams that have been through our highly iterative process gain such a comprehensive understanding of how all the pieces of their plan depend on each other that when reality happens and they need to reformulate on the fly, they can do so quickly and knowledgably.  We teach them how to skillfully pivot.

What type of startup would benefit from your group?

Pre-funded startups will benefit greatly because we accelerate their path to clear, executable strategy that delivers on proven customer needs.  These teams often have a macro-level understanding of how their technology could solve an important problem, but are very weak on the details of that need, how various customers will find solutions to it and thus what business model will enable a profitable solution delivery system. 

Startups with a successful launch behind them with revenues from their initial target customers in place will benefit by using our process to investigate, prioritize and execute on growth in adjacent opportunities.  By aligning operational, financial, product development and strategic implications for each choice or series of targets, these startups typically discover better rollout options than they had in mind, and gain insight into the talent acquisition challenges they will have over time, allowing them to solve problems proactively.

What was the most challenging aspect of starting up the initiative?

We ourselves are in effect a startup – The BRIC just opened its doors in January of this year, and Baylor has never before had a tech biz accelerator in place.  On the other hand, we are drawing on the experience of a senior coaching team and an acceleration process that team has developed over the past 7 years.  This process created a highly experiential learning environment that mixed venture-teams with student-analysts, so we in fact have a well-proven product.  Still, branding and market awareness have been two of our biggest challenges.

What advice do you have for entrepreneurs?

Commit deeply to your purpose  - your intent to “make meaning,” as Guy Kawasaki described it.  Then, you will be better at focusing on the things that keep you on your path, rather than on just any chance to turn a buck and survive another day.  Conversely, be much more flexible in the details of how you will create that meaning, and work much harder than you think you have to, so that you can truly understand what customers, investors, and other stakeholders can teach you about the process.

What Austin-based resource have you found to be the most helpful and why?

The network.  Every time I have needed to add to our team or gain insight into a particular issue, it seems I end up tapping folks who either are or have been part of the Austin venture scene.

Links:

www.baylor.edu/launch

www.baylor.edu/bric

Steve Pearson Talks about Business Intelligence for Early Stage Companies

Steve Pearson Talks about Business Intelligence for Early Stage Companies

Where are you from originally?

I was born in Denver and moved to Boise, Idaho, in 7^th grade. After high school, I moved to Texas to join my family’s home state and get a job. That’s a long way to say that I call Texas my home!

What university did you go to?

The University of Texas at San Antonio.

What is the idea behind your startup?

To provide business intelligence in the early phase of a need or idea development, when that information is most valuable.

For example, if you want to explore where a market is moving many years down the road, wouldn’t you want to know that another company already holds a patent similar to your technology?

Or, would you want to know about an adjacent technology that could disrupt your market and make it much smaller in the near future?

What need does it fulfill?

Many of the small to medium-sized businesses we help are used to keeping idea generation and development in-house. Only when the idea is fairly mature will due diligence be performed to verify future market sizes, patentability, technical feasibility and so on.

We believe this approach wastes time and money. A small amount of early phase due diligence is much more cost and time effective than lots of money invested in medium-to-late stage development.

What exactly does it do?

Our consultants are well versed in technology, markets and intellectual property. We bring in the appropriate expertise for each client’s needs to supply competitive intelligence and work together to develop innovation and strategy most likely to succeed.

Who is it for?

Our typical client is a vice president or director at a small to medium-sized technology, energy, transportation or consumer products company. Any company or institution can be a great fit, but only if they have a culture open to outside input.

What was the most challenging aspect of starting up?

Our challenges are similar to many other start-ups: too little time and forging new channels to bring in appropriate clients. Our business is so novel that it can take 20 minutes to educate a prospective client about what we do and how we can meet their needs.

What is the next step for you and your business?

Persuading satisfied clients to endorse our work publically. It is no surprise that many clients see a competitive advantage to keeping themselves and their companies anonymous.

What advice do you have for entrepreneurs?

Make your plans, obtain your financing and network to establish relevant contacts as quickly as possible. Get as far down the road as possible before leaving your current position.

What resource have you found to be the most helpful and why?

Input from friends, colleagues and my network. Honest input from a friend beats 10 lost clients on any day.

TiE Dallas Talks about TiECon SW 2013

TiE Dallas Talks about TiECon SW 2013 

Where are you from originally?

The Indus Entrepreneurs (TiE), was founded in 1992 in Silicon Valley by a group of successful entrepreneurs, corporate executives, and senior professionals with roots in the Indus (Indian subcontinent) region.

TiE is the world's largest not for profit organization for entrepreneurs. It is spread across 61 chapters in 17 countries. The strength of TiE is its global network of 13,000 members worldwide including over 2500 charter members.

What is your group’s mission?

TiE’s mission is to foster entrepreneurship globally through mentoring, networking, and education. Dedicated to the virtuous cycle of wealth creation and giving back to the community, TiE’s focus is on generating and nurturing our next generation of entrepreneurs.

What brought you to North Texas?

TiE Dallas has been serving as a networking, mentoring and educational resource to the DFW Entrepreneurial community for over 10 years by organizing valuable events for its members and non-members alike. 

This year, for the first time, the Dallas, Austin and Houston chapters of TiE are collaborating on a conference, and bringing TiECon SW 2013 to the North Texas region. This conference is a fantastic opportunity for entrepreneurs, investors and corporations to connect, learn and create new opportunities and relationships

What need does it fulfill?

The conference brings entrepreneurs, investors, service providers, university and corporate representatives, all under one roof. By providing one venue to bring together the key players in the entrepreneurial ecosystem, TiECon SW 2013 serves as a platform to raise funds, to find mentors and advisors, for business development, to create partnerships, to learn from experts and from each other, and most importantly to network and build connections.

What exactly does it bring to startups?

In addition to a lineup of dynamic speakers, we have three diverse panels on highly relevant topics for today’s environment. Our panels cover Funding Choices for Startups, Big Data Trends and Cross Border Trade and Innovation. This year, for the first time, we also have a Mentoring Roundtable, where over a working lunch, entrepreneurs have the opportunity to seek advice on specific business issues from experienced startup executives and entrepreneurs. And of course, the most exciting event of the day is the Elevator Pitch Competition, when finalists, shortlisted from an extremely competitive pool of applicants, will get the opportunity to pitch their business idea to a panel of judges composed of angel investors and VCs. This is the opportunity for startups to get in front of investors and take the first step to secure funding for their business.

What type of startup would benefit from your group?

TiE does not have an industry or stage focus, we welcome any and all entrepreneurs.  From technology to hospitality we have a wide variety of members that can not only learn from each other but also provide advice to the next generation of entrepreneurs.

What advice do you have for entrepreneurs?

Take advantage of these networking and mentoring opportunities. Learn more about TiE and TiECon SW 2013 at http://tieconsw.org

As a member of the Texas Entrepreneur Network, you receive a 15 percent registration discount. To register, click here, select register today, enter your email address, select non member. After you complete the registration page, enter discount code Partner in the promo code field at the bottom of the page to receive your 15 percent discount. 

Greg Jacobson talks about KaiNexus

Gregory Jacobson, MD, CEO, KaiNexus

1. What is the idea behind your company?

The idea behind KaiNexus is that organizations who want to create and sustain a culture of continuous improvement need a way to harness the collective brain power of their staff, and to track the progress and impact of the resulting improvement initiatives.

KaiNexus provides this solution with a web-based communication platform that enables everyone in any organization to collaborate on innovation and opportunities for improvement that drive immediate, measurable impact to bottom line performance. The platform architecture is such that it is easily implemented via a SaaS business model.

2. How did you come up with the idea?

I am a doctor who, during my residency, found that improvement ideas from front line staff in the Health Care industry were consistently being lost or ignored because there was no systemic solution to manage these ideas to fulfillment and impact. A lot of these ideas didn’t need a complicated process and heavy-footprint project management solution; in many cases, these ideas could be more effectively addressed locally in changes that the staff themselves made. The complex, large-scale project management solutions available at the time impeded the progress of improvement. I identified this gap in available technology, and realized that an easier, more user-friendly platform for managing improvement work needed to be developed.

3. How long have you been in operations?

My co-founder Matt Paliulis and I worked on the architectural ideas and built a pre-production early adopter version on nights and weekends from 2005-2010, eventually licensing the resulting technology content from Vanderbilt University. Friends and family invested and a Beta Version that went live in January of 2011, and the first paying customer was secured in the Fall of 2011. This was followed by the KaiNexus 1.5 release with additional project management and event management functionality in summer of 2012, which is the current version today.

4. Did you seek investment when you started the company?

Yes. It was a very difficult process that took four months of hard work. Approximately $600K was raised from friends and family. 5. Did you bootstrap the company? Yes. Matt and I both worked at other jobs until March of 2010. I still works two weekends a month to keep up my medical skills and generate further development ideas for new product features. We were also able to bring in an influential thought leader early in the company, for sweat equity. Early customers have had massive impact on the product design features. The vision of KaiNexus is still the same, and fundamentally the way the software works is the same, but the nuances of how it works as well as all of the major features have been enhanced and refined based on customer feedback. The KaiNexus team has learned a lot in the last two years. Sales and delivery methodologies have been aligned to customer buying profiles, and customer traction is dramatically accelerating with an average of two new customers being added each month.  6. What was the most challenging aspect of starting your business? Neither Matt nor myself have any real experience in marketing and selling, so learning these skills was the most challenging barrier to growth to overcome. An experienced software sales executive joined the advisory board in 2012, which helped greatly. There was also significant “learning on the job” experience as each new sales prospect was converted into a customer. Another experienced software entrepreneur has joined the team, and greatly contributes to the sales, marketing and business development abilities of the team. 7. What is the next step for your business? Our next step is to raise a $1M Series A investment to be channeled toward developing greater sales and marketing capacities. In particular, we will be focusing on automation of the marketing process so as to drive sales prospects successfully through the funnel, and to put in place the necessary sales talent to close deals from this growing pipeline. A new platform version will also be developed and released in late 2014. KaiNexus 2.0 will contain additional modules that can create upsell opportunities with current customers as we also expand the user count in these customers. This additional module portfolio in the product will also create additional selling opportunities in other vertical markets beyond healthcare, such as Transportation, Logistics, Financial sector, etc. 8. What advice do you have for other entrepreneurs? Being truly passionate about solving the problem your company is trying to solve is vitally necessary to withstand the many obstacles that you will encounter. Make sure that you really believe in, and care about, the work that you do.  Be patient; raising the necessary funds requires time, effort, and dogged persistence.  Be willing to talk to your customers; figure out what their problems are and how you can solve those problems is critical. Be willing to adapt your product to better solve those problems.  Arrange your family finances in a way that allows you to bootstrap as long as possible. 9. What Texas-based resources have you found to be the most helpful and why? Austin and Houston in particular have very active Angel networks. It has been good to have an experienced entrepreneur as part of the team who has raised money in these markets for software companies in the past and has a solid network of contacts. It is also great that the Angel groups TEN and Incubators like ATI and Capital Factory also augment CTAN.

Chris Haskell talks about making a career change to a startup

What is your group’s mission?

For every employee in Austin to be able to advocate for their career, resulting in a dramatic increase in productivity and employee engagement. 

What need does it fulfill?

A 2012 study of over 1,000 companies showed over 65% of the current workforce is dissatisfied with their job. A lot of this dissatisfaction comes from people not taking the time to plan a career that is a good fit for them. There is a better way to approach career planning.

What exactly does it bring to startups?

Someone about to enter the startup space can be blindsided by the reality of what they are entering into. We help with the most important step, the planning and preparation stage.

What type of startup would benefit from your group?

Because we are focused on the individual and their ability to understand where they fit in the world of work, we can benefit any organization.

What was the most challenging aspect of starting up the initiative?

Narrowing our target market and refining our ‘go-to-market message’

What advice do you have for entrepreneurs?

Don’t undervalue the importance of engaging with a personal board of directors, or advisory board. The success or failure of your business may be up to you, but it doesn’t mean people won’t help you out if they have been through a similar experience.

What Austin-based resource have you found to be the most helpful and why?

Honestly it has been the spirit of camaraderie from other local business owners. It is good for Austin when businesses succeed, and local entrepreneurs really take that to heart. I have loved the ‘let’s go get it done’ mentality of a lot of the early stage community I have interacted with.

Where are you from originally?

Anchorage, Alaska. But I got to Texas as fast as I could! 

What university did you go to?

I have a BBA in Finance from University of North Texas and a M.Ed. in Counseling Education from University of Texas in Austin

What brought you to Austin?

I visited a few times when I was an undergrad and liked this city so much I moved here without a job two weeks after I graduated in 2005. I got a job in three quick, and I don’t plan on ever leaving! 

Corey Egan and Swapnil Bora Talk about iLumi

Corey Egan and Swapnil Bora Talk about iLumi

Where are you from originally?

Corey is from Dallas, Texas and Swapnil is from Nasik, India

What university did you go to?

We met while graduating at the top of our MBA class at the University of Texas at Dallas

What is the idea behind your startup?

We believe that through innovative technology and design, even the simplest things in life can become extraordinary, and we’ve started with light.

What need does it fulfill?

LED lighting, lighting control, and specialty lighting are all rapidly growing lighting markets, however despite their benefits their inherently complex, expensive, and limited.  ilumi packs all the benefits of these types of systems into a series of sleek and sexy LED lights you control right from your mobile device.

What exactly does it do?

By simply screwing in any combination of ilumi lamps (bulbs) and downloading the ilumi app, you get complete control over your lighting.  Conveniently turn ilumi on/off, adjust the brightness and color, or even program your lighting to do amazing things.

Who is it for?

ilumi is about getting the most out of your space and is perfect for the home or commercial locations like restaurants, bars, or hotels.  It’s a lot less expensive than installed lighting control systems and actually pays for itself in energy savings!

What was the most challenging aspect of starting up?

There have been many technical and business challenges to starting a technology company.  One of the most challenging aspects overall is moving all efforts forward at a similar pace.  All elements of the technology, the market, and the required capital to get where you need to go.

What is the next step for you and your business?

We’ve now launched a Kickstarter campaign to further build the ‘ilumi nation’ community and generate some additional funds to propel us through manufacturing and into customers’ hands by the end of the year.

What advice do you have for entrepreneurs?

Go for it with all you’ve got! An idea at rest will stay at rest… an idea in motion can change the world.

What resource have you found to be the most helpful and why?

As a first time entrepreneur we’ve taken it upon ourselves to reach out to the entrepreneurial and tech communities near and far.  From our crowdfunding supporters, to organizations like the CleanTech Open, to other Entrepreneurs themselves, there is a fervor about these communities that is inviting, challenging, and extremely motivating.  

Abid Malik with the TEN Group talks about moving to Austin and helping IT Startups

Where are you from originally? California

What university did you go to? Sacramento State University, CA

What brought you to Austin? Business expansion/ base  in a hi-tech city

What is the idea behind your startup? Help start ups build successful companies

What need does it fulfill? It helps companies with their strategic planning

What exactly does your product do? It offers an automated process of filling gaps in a business before and after the funding

Who is it for? Start ups in IT & Health Care

What was the most challenging aspect of starting up a business? Finding uniqueness  or niche in a competitive market

What is the next step for you and your startup? Find start ups that need funding, team, and consulting

What advice do you have for entrepreneurs? Have strategic planning before you start any business

What Austin-based resource have you found to be the most helpful and why?Austin has a vibrant and supportive start up ecosystem and I've found the Texas Entrepreneur Networks to be a valuable resource for finding the right place to seek help.

Charlette Stallworth talks about Temples Scott & White Tech Transfer

Charlette Stallworth talks about Temples Scott & White Tech Transfer

Where are you from originally?  

I am from Atlanta, Georgia, but I have been in Texas for 10 years.  I lead the Office of Research Business Development at Scott & White Healthcare (S&W) in Temple, TX.

What university did you go to?  

I received my MBA from Baylor University.

What is your group’s mission?  

To identify and realize research business opportunities via collaborations with physicians, scientists, staff, pharmaceutical and device companies, academic institutions, government entities, and investors - which ultimately improve patient care.

What need does it fulfill?  

We help to bring S&W physician inventions – therapeutics, devices, apps, and diagnostics – from the bench to the bedside. 

What exactly does it bring to startups?  

Technology transfer and commercialization; innovative clinical technologies; pre-clinical R&D; manufacture of protein and immunotoxin therapeutics for phase I clinical trials; flexible clean rooms for custom projects; feasibility studies; and clinical trials  

What type of company would benefit from your group?  

Start-ups, bio-tech companies, academic institutions, pharmaceutical companies, and device companies

What was the most challenging aspect of starting up the initiative?  

Communicating our services to the market has been the most challenging aspect.  I really appreciate this opportunity to talk about what we do.

What advice do you have for entrepreneurs?  

Focus on your objective while being responsive to intermediate results.

What local resource have you found to be the most helpful and why?  Our network of partners from Dallas to Austin to Houston has been the most helpful resource, because it allows us to find unique ways to move projects forward.