Showman-- A Digital Signage Platform

Wordpress.com for digital signs.

The platform makes it easy to setup and create interactive and engaging displays without the need for huge development or IT staff.  Their goal is to make the whole process of finding your location through a facility or plant easy and painless and was designed with non-tech users in mind.

Dennis Smolek and Tucker McCormack of Showman are both from the Texas Hill country, Austin and Fredericksburg respectively. Dennis has a degree  in Visual Communication from UT Arlington while Tucker studied History at SMU then went on to receive a M.A. in Statecraft and National Security from the Institute of World Politics and an MBA from Schreiner University.

Showman is the digital signage platform used to maintain and control digital and interactive displays, creative and support services, and specialized hardware packages. It is primarily a cloud based management system for digital screens. Think Wordpress.com for digital signs. Showman is for everyone owning a business or space wanting to better engage visitors or customers through great visuals to show off their message.

The platform makes it easy to setup and create interactive and engaging displays without the need for huge development or IT staff.  Their goal is to make the whole process of finding your location through a facility or plant easy and painless and was designed with non-tech users in mind. They also offer hardware packages, creative and development services, and ongoing IT support.

Digital and interactive signage is an exploding market. Retail, restaurants, stadiums, public spaces, and more are starting to capitalize on modern technology to engage and attract visitors and customers. The products in this market though are fractured into just offering hardware, only being a management platform, or just service companies. Then the systems are highly technical and difficult for non-tech users. Interactive systems have even larger growth opportunity but require complex and expensive development teams.

The most challenge aspect of starting up has been bootstrapping a concept that provides reoccurring revenue for the long term. “We have to stay lean and it is challenging to grow with limited people. Everyone wears A LOT of hats, and being flexible, adaptable, and capable of many roles is a must,” said Tucker.

The next step for the business is expansion of the platform and services into other industries and markets. Roam’s CRE Directory focus is too small of a market, and the Showman platform opens the door for the entirety of interactive and digital signage. Moving in this direction opens the door to a rapidly growing market (~14% CAGR) with an estimated $39 Billion value by 2020.

Dennis advises other entrepreneurs to plan before taking the plunge and be realistic about everything. Talk to other folks in the industry you are trying to get into and get REAL numbers.  He also said, “Double or triple how much you think something is going to cost or how much you need to save. Riding razors is not fun and everything takes longer than you think. Consider taking on funding early. Forget equity issues and ownership. 100% of 0 is still 0 and it will take capital to make it happen. Just remember that your investors are partners and money comes with a relationship. Make sure it will be a good one.”

The resource he found most helpful was the book “The Founders Dilemma” which gives many straight forward ideas and examples for setting things up without the common “reality distortion” of most startup stuff.  Strategyzer is another group that really gives good, visual planning for how to create valuable ideas and start to plan on how to capitalize on them.

Also, the program Xero and an accountant are important. Tucker said, “Get one, fast. Don’t waste time.”

His final message “Get a good lawyer you can actually talk to. Legal Zoom is easy but you need humans.”

To learn more about Showman visit the TEN Funding Portal at this link. 

Texas Venture Growth Forum -- 4 -- Participating Companies

Since most of the potential investors work on the west coast or east coast, a Texas entrepreneur must travel extensively to meet them.   Two week travels up and down the coasts is a common part of most entrepreneurs spring and fall calendar.  The Texas Venture Growth Forum brings the investors to Texas for two days of 1:1 sessions saving time and travel for all involved.  Here are some quotes from the event participants:

Erik Huddleston, Trendkite, “The Texas Venture Growth Forum gave me the opportunity to meet new investors.”

Panos of Seismos, “I was able to meet many investors without having to travel extensively.”

Alan Knitowski, Phunware, “It was great seeing West Coast investors in Austin.”

Valuations in startups on the West Coast and East Coast have hit all time highs.  Pre-revenue companies with a product barely working are receiving high valuations by investors seeking the next big hit.  Texas trails the coasts in valuations and so investors come to find deals at more reasonable prices.

To learn more about the Texas Growth Capital Forum visit this link. 

Venture Capital Profile on Rembrandt Venture Partners by Scott Irwin

Scott Irwin of Rembrandt Venture Partners recently participated in the Texas Venture Growth Forum held in Austin.   Scott has ties to Texas as he grew up in Dallas where he attended St. Mark’s.   He later worked for El Dorado Ventures which invested in several Texas companies including Convio, Ripcode, Store Speed, Triactive, Efficient networks, and Mirage Networks.  

Today he works for Rembrandt Venture Partners which has $325M under management.  They invest $10M to $15M per company over time and look for recurring revenue and SaaS business models in the B2B and enterprise space.  They believe in the high velocity model of growth.

Rembrandt typically takes a minority shareholder position in a syndicate with other investors.  They take a board seat and usually come in on the B or C round. They don’t focus on pre-revenue or Series A companies.

Rembrandt has three partners so they have a lean team with a quick decision making process.  The firm was founded ten years ago by Scott’s partner Gerald Casilli, who was a former operator.  Before that he was a founder of Trinity Ventures in the 80s.

“We’re not looking for growth stage companies who have figured it all out,” said Scott.   “We look for emerging growth.  We’ve been operators and want to be actively involved in the company. We’re comfortable with enterprise businesses.   We’ve sat in their place and know what it’s like to run a company. We can get heavily involved in recruiting and team building.“   They each have fifteen years or more of experience.

Rembrandt invests across the country. When the market is really hot, Scott indicates they invest more in the Bay Area.  When the market cools they look more broadly.   During the frothy times, the growth rates tend to be higher in the Bay Area than anywhere else.  The frothy market can magnify the growth rates and perceived value.

On the other, when the Bay Area crashes, they fall even harder.  In the rest of the country, companies are built with a long term view and in Texas they have excellent engineering and good operational processes so they stand out in a normal environment.  This tends to draw Bay Area investors interest even more. 

To learn more about the Texas Growth Capital Forum visit this link. 

Texas Venture Growth Forum Event Results -- 3

A startups fundraising strategy should have a national focus from day one.  While there is ample support for startups in Texas, the funding must be sourced from across the country.

While Texas has many Series A funds which range from $50M to $100M in size and write checks in the $2M to $5M range, there are no Series B funds.  A Series B fund is typically $300M or more from which the fund writes $5M to $15M checks to startups.  Entrepreneurs seeking Series B funding must look across the US to find Venture Capital funding.

Series B investors across the country are looking for quality deals.  Some use syndicate partners to find the deals.  Since there are no local Series B funds in Texas, outside investors have a more difficult time finding the best Texas deals.  In the 1990s, there were over 30 venture capital (VC) funds in Austin alone.  Dallas had its fair share of venture capital as well.  The Dot Com crash crushed the VC community and what came back in its place in Texas were angel groups.  Some VCs repositioned themselves as microVCs with $50M funds and invested alongside angel groups. Texas gave scant attention to the VC community for several years.  Now, fifteen years later, startups have outgrown the angel groups and need Series B funding.

In addition to financial Venture Capital there is a growing number of Corporate Venture Capital (previously called Strategics)  funds.  In the past, pharmaceuticals shifted from internal R&D to buying successful startups to fill their pipeline of technologies and products.  Today, just about every segment of the corporate world has created a venture capital arm to invest in promising startups with the intent to monitor the industry and/or acquire the company.

The Texas Venture Growth Forum brought both financial VCs and Corporate VCs to Austin for a two day conference highlighting 1:1 sessions between the VCs and Texas startups. Some of the financial VCs such as Rembrandt, Three Rivers, and Delta-V were well represented at the event.  Corporate VCs including Shell, Dell, and Microsoft also sent representatives to meet with prospective startups. Venture firms with portfolio companies already in Texas such as Revolution, SSM Partners, and Greycroft participated as well.

Venture Capital Profile on Delta-v Capital with Dan Williams

Dan Williams grew up in the Dallas area, attended Plano East High School and went to MIT and came back to Texas where now lives in Dallas and works as Vice-President of Delta-v.

Delta-v was founded in 2009 and is investing out of their 3^rd fund.Delta-v is unique compared to most typical growth equity firms.    Their strategy is to provide secondary liquidity to existing shareholders in late stage growth companies.  That could be providing partial liquidity to existing management teams, cashing out employees who left the company, or providing liquidity to other investors including angels and other venture funds.  .  Often times, people will take 10-20% off the table to pay taxes or buy a house.  As their funds have grown, they’ve expanded into primary growth capital and work on both primary and secondary investments.

They look for companies that have removed business model risk.  They typically seek $10-$20M in revenue and above. To date, they have invested in over 20 deals. Most of their investments have revenue above $20M.   They look for those who are getting towards cash flow breakeven and are growing at least 20% per year. Delta-v invest as little as $2M and up to $20M.

Delta-v invests broadly across technology sectors.  The current Delta-v portfolio includes investments in enterprise SaaS, security, consumer anddigital media, SaaS, healthcare IT and more.    

They don’t have strict requirements around taking a board seat or a target ownership percentage.  They can be the less active investor. When needed or desired, they do sit on boards and have leadership that has come from the startup industry and have a great deal o f experience.  Dan was previously with Cisco’s  Corporate Development team focused on Cloud and Analytics  and understands what strategic acquirers look for.  Delta-v understands what it takes to run a company as well as the technology behind it.  They have contacts and connections and can also help with hiring.

They were the first investors in Drilling Info. That’s the only deal they’ve done in Texas so far but want to do more.  The Dallas community is growing well.  They’re impressed with the number of companies coming up and are looking to find more opportunities outside of the coasts. 

Dan said it’s helpful to meet a company who has given you advance information.   He likes to track their progression over time.  It is still interesting to meet companies below $10M in revenue to track them over time.

Texas Venture Growth Forum Event Results -- 2

Startup funding today emphasizes the seed-stage startup seeking their first round of funding. Later stage companies find fewer funds in Texas which some call the “Series B crunch”.  While there are numerous VC funds for Series A, there are none in Texas for Series B.  Efforts are underway to build those funds, but it will take several years to put new funds in place. 

According to PitchBook, Texas-based companies raised an average of 40% of their Series B through E funding from Texas funds over the past ten years. When compared to California-based companies who raised closer to 70% of their funds instate, we have identified a funding gap in the Lone Star State.  

A key driver of funding in the past can be attributed to Austin Ventures (AV), who were responsible for over three billion dollars in funding for over 280 Texas companies, creating an estimated 50,000 Texas jobs since its founding over 30 years ago.  AV recently closed their doors as the founders sought to take their efforts in different directions.

The mission of the Texas Venture Growth Forum is to develop the funding and operational infrastructure to support Texas tech companies seeking the capital so as to keep their corporate roots planted firmly within the region.

The path forward is to attract capital to Texas companies through events that pair investors with startups in 1:1 sessions and provides an attractive setting for meeting and building relationships with Texas companies. 

See more about the Texas Growth Capital Forum coming up here.

AnatoMotion show teeth in action using real-time video technology

Shane Matt runs AnatoMotion which fills a gap in dental technology by providing dental motion analysis for fixing dental bite problems.   He needed a way to electronically store and share digital bite registrations with an anatomically correct motion of the patient. Smart wearables provided the conduit for an easy to use, affordable and scalable solution.

AnatoMotion's e-Bite system consists of wireless sensors on the teeth and software to analyze jaw function. Dental lab technicians, who make restorations and appliances rarely ever see a patient. Now they can see how a patient moves their teeth, allowing them to make more functional prosthetics. They can also correlate digital 3D files of the teeth to sleep studies to capture the correct bite for sleep apnea appliances.

Once FDA approved, AnatoMotion will be used by dentists on patients having cosmetic makeovers, TMJ (temporomandibular joint) problems, sleep apnea and a number of other issues. NXP, formerly Freescale Semiconductor has supported the effort through technical research and other resources in their Discovery Lab.

As an entrepreneur, Shane indicates it takes time to refine and distill the "why" and "how" when going from visionary to entrepreneurship. The most difficult challenge he encountered has been in presenting the product concept to venture capitalists. He’s now using Crowdfunding as it gives a broader reach to individuals that are interested in early stage seed investment.

Shane is now completing hardware development. In January, he will build the user interface software and begin the FDA regulatory process.

See more about Anatomotion here. 

Venture Capital Profile on Greycroft Partners by Will Szczerbiak

Will Szczerbiak, a senior associate at Greycroft partners recently participated in the Texas Venture Growth Forum, in October, 2015.  First, a little background.  Will came out of Georgetown in 2007, and spent three years as in investment banker and joined Volition Capital in Boston sourcing and executing deals and everything related to getting a deal done.

He went to business school at Columbia, and interned at Greycroft Partners.  Greycroft focuses on Internet and mobile-enabled businesses in a wide range of industries.   He later joined full-time and works with both Greycroft’s core early stage and growth funds. The growth fund is a $300M pool of capital which partners with eVentures and focuses on later stage opportunities.  Their core fund focuses on Series A deals.

Greycroft takes a flexible approach to investing and does not maintain a minimum check size or ownership threshold.  They also don’t require a board seat and can lead or follow via syndication. The growth fund looks for more mature companies, usually with $10MM+ in ARR and established teams.

Greycroft looks for strong syndicate partners that can continue to support the company.  They don’t want to be the only investor able to support a company if they need to do a bridge round or some other financing at a suboptimal time. 

Greycroft aligns themselves with the entrepreneur.  Their fund is purposefully small relative to other firms, meaning that exits in the $100M to $500M range can be very impactful.  Bigger funds oftentimes take the entire round and may push the entrepreneurs to pass on lucrative outcomes because they need a considerably larger exits to return their funds.  At Greycroft they want the entrepreneur to exit when it’s right for them. They’ve worked with just about every venture firm you can name and are very collaborative as they believe their approach generates better outcomes for all involved.

For the core fund, they generally look for commercial traction.  Product-market fit, compelling unit economics, and a strong team are important.  Growth is also critical, as many portfolio companies are growing >10% month over month.   They also look for companies that have gotten to that point without having to raise large sums of capital.  An ideal range is less than $2M. 

In terms of sector, Greycroft looks for anything internet or mobile enabled B2B or B2C.  They have an array of mobile gaming, pure play content, and B2B SAAS companies in the portfolio. Some in sales enablement, security, fintech, etc.  Among other areas, they are interested in digital healthcare, cybersecurity, and have made investments recently in both spaces.  

They are agnostic in terms of geography.   In Austin, they’re invested in Buzzpoints, and the B2B courier service Dropoff.

On the operational side, they have innovation days with various groups in NY and also have an office in LA in which they recently setup a demo day with Macy’s to showcase their branded ecommerce companies.  They had twenty of the top executives of Macy’s attend the event and they’ve done similar events for Alibaba, Time Inc, and others.

Every year they put on a summit in which they invite key executives from potential acquirers, customers, and partners of portfolio companies. It drives a lot of business for their portfolios.

From the Texas Venture Growth Forum, Will noted two companies – Trendkite who has built an incredibly impressive roster of clients and Seismos which has an impressive team. 

Will likes to be on the investor relations list. With Trendkite, he is staying in touch till they need another round. He proposed a quarterly check-in to see how the business is tracking and their time table to another round of funding.   The next time he makes it to New York or he comes to Austin he’ll setup a meeting.  He likes some documentation to track the company’s progress but keeping in touch personally makes a big difference.  

See more about the Texas Growth Capital Forum coming up here.

Why we need to Rethink Investor Recognition

I deal with startups from across the country but mostly from the tech centers, Austin, San Francisco, New York, and increasingly Chicago, and Atlanta.  I can tell almost immediately if the startup is coming from the Bay Area because they are head and shoulders above all others in how they treat the investor.

They thank the investor for the time they are spending.  They show respect for the investors background (and most often have actually looked it up and found some talking points to start off the conversation).  They show gratitude for the "insight and helpful advice" the investor is giving them.  As an investor, I know this is somewhat fawning and it can be overdone, but the fact that they are taking time to research before the meeting, and showing a modicum of respect for the investors time and advice sets a better tone for the discussion.

Outside of the Bay Area, most entrepreneurs come to pitch their deal and get a response--nothing more.  They treat the investor and the entrepreneur as equals and while most say thank you for taking time at the beginning of the meeting, that's about it.  There's no tone set for the discussions -- this will be another conversation with just another investor -- no big deal.

On your next pitch, research the investor you are going to meet and take an extra step to thank him for his advice and show how it means something to you.  You're not just raising funding, you're building a relationship.

The Rise of Analytics in Fundraising

Analytics is fast turning into a must have.  It comes under various names-- Big Data, Predictive Analytics, and more.  Big data refers to the acquisition and management of large data sets.  Predictive analytics refers to the brand of data mining concerned with the prediction of future probabilities and trends. The goal is to find the one or two variables that can predict an outcome.   Some are familiar with the law of large numbers which says if you perform the same experiment on a large data set, the expected outcome will converge as more experiments are done.

In the investment world, analytics are used to determine where and how much to invest.  The goal is to yield the highest possible return.  The variables cover the type of investment, the duration, and the amount to invest in each type.   The same concept now applies to many other areas.

There are now databases of backers for rewards campaigns.  Here's one example by Krowdster.

For those raising funding, Funding Analytics takes in a large number of potential investors and then determines what factors are the key variables.  Since investors change their perspectives, so what they look for in an investment will change as well.

At its most basic level, funding analytics shows you which investors are most likely to invest in your startup or growth company.