Why did software companies snag a bigger chunk of the venture pie than at any time since the year 2000 in the latest Pricewaterhouse Coopers, NVCA quarterly report? Because it’s now much cheaper to start a software company, says Forte Ventures Tom Hawkins.
“You get a capital efficiency with software that leverages cloud economics such as Amazon’s Web Services, and that lowers the cost of developing innovative software solutions. It’s a much better way to develop a company and that’s why there’s a big spike there,” says Hawkins.
Will be at Southeast Venture Conference in Atlanta
Hawkins, who launched Forte Ventures in Atlanta in 2012, is among hundreds of private equity investors and venture capital firm representatives on panels and evaluating the 50 presenting start-ups at the upcoming Southeast Venture Conference in Atlanta, May 6 and 7.
Hawkins has 24 years of venture capital, entrepreneurial and operational experience. Prior to Forté Ventures, Tom co-founded the Venture Capital line of business at Arcapita Bank in 2005 and raised a $200 million growth stage venture capital fund in 2006. Tom managed investment activity in the IT, communications, energy and industrial technology sectors.
Prior to Arcapita, Tom was an Investment Partner with the Corporate Fund of Siemens Venture Capital, the $850 million venture capital arm of Siemens AG (NYSE: SI), where he managed investment activity in IT, communications and industrial automation & control.
A red-hot investment space
He says one of the current red-hot investment spaces is marketing automation and its sub categories such as digital marketing asset management and sales enablement. “We’ve done a number of investments in that space,” he notes.
“Our strategy is to offer our network of constituents in the venture capital ecosystem a compelling reason to work with Forté Ventures,” Hawkins says.
“We do this by leveraging our strong relationships and differentiating ourselves with a “privileged access” theme.
LPs get previleged access
The company website further explains, “Our limited partners seek privileged access to venture grade financial returns through a portfolio of risk-mitigated investment opportunities on a national basis that are validated by corporate strategic partners.
We strive to provide our limited partners with a smarter approach to gaining portfolio exposure to the Venture Capital asset class and help them avoid the adverse selection problem associated with local and/or regional investment strategies.”
The company also has an office in Silicon Valley. “It’s important to keep your thumb on the pulse of the dealflow there,” Hawkins says.
Hawkins thinks we’re “largely out of the economic downturn. People made a lot of money in the stock market the last two years. I think in 2014 we’ll have good stability and reasonable growth, but it has to slow down a little bit.”
Still, he adds, it’s not like the Internet boom at the start of the century. “That was all in one sector,” he explains. “We’re in a much more diversified economic base and all the indicators, retail, housing, are looking good.”
From a venture standpoint, Hawkins says, “Venture money is certainly flowing. Valuations are going up. It’s a good time to be an entrepreneur.”
Several years ago, watching his weight, like the rest of us, Keval Meta, founder and CEO of Inrfood.com, was drinking a diet soda. “That’s not really very healthy for you,” a friend told him.
“What do you mean?” he asked. “Zero calories and carbs, what could be wrong?”
“Read the ingredients,” his friend said. He did. The results disturbed him, because there was a wide range of controversial information about the ingredients in that cola, from the sweetener Aspartame to food coloring.
Although he completed medical school, Meta never practiced. The entrepreneurial bug caught him instead and at 33, he’s already launched and sold two companies. Inrfood, is his third, which he founded in 2011 in Durham. He took a hiatus after medical school to work with clinics in Africa, and to work in research when he returned to the states.
Technology the only answer
But he grew increasingly interested in how technology was the only answer to solving the nation’s serious healthcare problems. “I saw that problem getting bigger and technology is the only answer.”
So he founded Inrfood.com. Originally headquartered at the American Tobacco Campus in Durham, the company has since gone virtual and has offices in Austin, TX, and Boston, MA.
Still, Meta calls it “A community company,” because of its ties to scientists, nutritionists and others at Duke University, The University of North Carolina at Chapel Hill, and other regional connections. “We’re heavily embedded with Duke, NC State, UNCC, local farmers.”
Inrfood currently offers smartphone apps that tell users what’s in what they eat, and that’s important because “You are what you eat,” Meta says.
“We believe that when you think of the word nutrition, it’s about more than food,” he adds.
Foods today more chemistry than biology
A lot of foods today, he says, “Are more chemistry than biology. You almost need a Ph.D to pronounce the names of the additives. Many of those are banned in multiple countries around the world, event though they’re approved in the U.S, labeled as “Generally Regarded as Safe,” when they may be carcinogens.
When it comes to weight – the factor that spurred the creation of the company – he says, “You need to look at more than calories. You need to look at the ingredients and what they mean to you.”
Right now, he says, the company is geared toward helping people with a variety of chronic conditions create a healthy diet. Based on a users height, weight, sex, and other factors, it can tell you what you need…and what you don’t, based on Institute of Medicine guidelines.
It can yield some surprises. For instance, the average 35-year-old male should get about 1500 milligrams of sodium daily, but instead, most get about 3500. “That’s one reason for the problems we have with high blood pressure and heart disease,” he notes.
The app learns what a user consumes over time and will advise on what may be lacking in a diet and how to get needed nutrients. “Everyone is different,” he says. “A peanut can affect one person profoundly, but not affect a million other people.”
Uses Huge database
The company’s database already has ingredients of 450,000 bar-coded products, 50,000 products from top national restaurants, and hundreds of products without bar-codes such as the basic ingredients of tuna casserole and chocolate chip cookies.
The two-employee company, which also uses freelancers and part-timers, bootstrapped up to now – meaning self-funded – will probably look for funding from investors in the spring to initiate projects beyond the scope of its current operations. “We see opportunities more capital intensive than our current projects,” says Meta.
Meta previously founded two other healthcare focused companies – one that provided first aid (GoToAid) and disaster recovery information and alerts and another that provided information on pet first aid (Petsaver), each of which sold to two of the largest healthcare organizations for people and for pets.
Goal? Empowering you
“Our goal, overall,” Meta says, “Is that we want you to be empowered. We don’t tell you not to eat anything. Consumers have the power to decide what to buy and vote with their dollars. We’re trying to help people buy healthier products. That’s our core mission. To let people know what’s in their food and be wiser about what they’re consuming.”
Located in Durham’s American Underground facility for startups until April, the company also completed a stint with the Boston, Mass, Challenge, which selects about 120 startups from 2,000 applications for an incubator session. It won an innovation award from Blue Cross Blue Shield in October, and was among the top 25 healthcare innovations at CES in Los Vegas. It also won an award from the Perkins Institute for the Blind.
In June, it won a $50,000 grant from NC IDEA. It also won the startup pitch contest at the recent Internet Summit in Raleigh, an annual event bringing 2,000 attendees and speakers from top brands including Google, Bing, Twitter, Adobe, and many others to the Research Triangle in November.
The company actually had a demo table at the Internet Summit two years ago and Meta says before coming, he bought some McDonald’s French Fries to show their ingredients. “We’ve had those fries ever since and they didn’t turn black or green or anything. It’s plastisized food.”
Presenting at the Southeast Venture Conference in May
The company will also be pitching its wares to investors at the upcoming TechMedia 2014 event, the Southeast Venture Conference coming up May 6-7, 2014 at the Ritz Carlton, Atlanta.
SEVC plays host to the most dynamic high-growth companies in the Southeast alongside billions of dollars represented in investment capital from around the country – May 6-7, 2014 at the Ritz Carlton, Atlanta.
The conference features and highlights the region’s all-star tech companies ranging from startups to late stage from a range of industries. In order to receive an invitation, the over 50 featured presenting companies have demonstrated proven success metrics – ranging from strong proven revenue and market traction for later stage companies to initial investor and organization miles for mid-range companies to proven management or other 3rd party validation (winners from other regional investment forums, etc) for earlier stage companies.
On May 6-7th at the Ritz-Carlton Atlanta the Eighth Annual Southeast Venture Conference will present national and regional venture capitalists with over 50 of the most dynamic high-growth investment opportunities in the Southeast and Mid-Atlantic Regions.The first round of presenting companies offer a dynamic picture of the Southeast’s vibrant start-up scene from DC to Miami, Florida.
In addition to market-relevant panel topics and extensive executive and investor networking, this year those who attend will also hear keynotes from Marcus Lemonis from CNBC’s The Profit, Lending Tree founder & CEO Doug Lebda and Cvent founder & CEO Reggie Aggarwal.
Several executive panels will provide additional insight for both venture capitalists and founders on topics ranging from Limited Partner viewpoints, M&A, fundraising strategies, entrepreneurial roundtables and venture investment trends among many others.
A list of venture firms committed to attending so far follows the presenting companies.
The first round of announced presenting companies include:
How can brands and stores get more people to sign up for loyalty programs? One say, Atlanta start-up GetOne Rewards, thinks, is to make the process faster and easier.
The company, which has raised about $3 million through two rounds, sells a cloud-based digital rewards program. It’s system lets customers type their phone number into a store terminal or smartphone, then tracks their purchases, assigning points that can be redeemed for rewards.
Justin Michela, CTO and co-founder of GetOne Rewards tells us the company already has about 500 to 600 clients in Atlanta and Charlotte as well as other locations up and down the East Coast from Florida to North New York. It also has locations in Colorado and California.
Quick and easy from the beginning
“From the beginning, we went with a phone entry model,” says Michela. “You type in your number in the store in under ten seconds.” While the system “Has all the bells and whistles,” Michela adds, “We built it from the ground up not to require those things.”
Those things, which the customer can do if he or she wishes once signed up, include claiming rewards, filling out information, creating a marketing connection, and providing email to get extra points.
Loyalty programs are a big deal. A friend of ours is a travel writer and she scores some excellent perks, from the loyalty rewards programs she signs on to. The 2013 COLLOQUY Loyalty Census shows more than 25 percent growth in such programs over the last two years.
With digital technology, a company such as GetOne Rewards can help merchants capitalize on the real-time and geo-targeting capabilities of rewards programs.
Like their competitors, GetOne Rewards has visit based programs and customers get a point for each visit. But, as an alternative Michela says GetOne’s competitors don’t offer, they get one point for every $4 (or other amount) they spend.
A big selling point
That, Michela explains, lets a merchant give more rewards to the customer who comes in a couple times a day vs. someone who visits once a month. “That’s a big selling point with us,” Michela says.
But the company’s main differentiator, he says, “Is that we create a painless process for store owners.” They don’t need to understand the technology they’re using to get full value from it.
“You have to admire a lot of these store owners,” Michela says. “They’re the embodiment of the American Dream. I know this guy who quite a six-figure job to open a pizza shop. He says, ‘I don’t know how to do marketing. I just want to make pizza.’ We try to work with them to create a really good marketing program for them that makes sense.”
Michela explains, “Once it’s plugged in, it’s automated. It classifies customer automatically, knows when it’s their birthday so you can send them a gift coupon, knows when Jim hasn’t been there in a while, so you can send him an offer to entice him to come back.”
Later in the moth, TechMedia presents Digital Summit Atlanta, where you can hear tech icon and creator of the Apple computer, Steve Wozniak, as well as thought-leaders from brands including Yahoo, Google, Bing, Razorfish, The Huffington Post and many others.
“You spin through a number of presentations and never have a chance to get bored,” he says of the three-minute rounds. “They leave you wanting just a bit more.” For a startup, that’s a good way to initiate contact with an investor: leave them wanting more.
Set for September 17-18 at the Raleigh Convention Center, the annual event draws some of its new energy from the vibrant and growing early startup hubs in the Triangle’s three cities.
Bustling startup hubs in the RTP
“Today, especially in downtown Durham, but also all over Raleigh and Chapel Hill we’re seeing tremendous activity from early-stage startups,” says Elliott. That fact has shaped this year’s focus, as well, he adds.
“What both the startups and investors need is to take companies to the next level and we tried to theme the conference in that direction this year,” says Elliott. “You’re up and running, how do you kick it into growth,” he adds.
To bolster that theme, the event features “A number of CEOs who began life at very early stage companies and were able to find the right switches to hit and push them into high growth mode.”
Those include Mike Cote, chairman and CEO of Atlanta-based SecureWorks, which was acquired by Dell in 2011; David Morken, co-founder and CEO of Triangle-based Bandwidth; and Mark Norman, president of Zipcar.
Elliot, however, points out that the entrepreneurs and investors will also hear from top corporate development people from Red Hat, Google and other firms, to “Get a clear picture of the characteristics they’re looking for in partners or acquisitions and how you can set your company up to grow inside a company like theirs.”
The NC Research Triangle entrepreneurial ecosystem has been growing by leaps and bounds lately. On the heels of opening a new startup hub in downtown Durham, The American Underground, a network of startup hubs, will open a new location this fall at 213 Fayetteville Street in downtown Raleigh. Startups help spark the innovation that creates new markets and new jobs; the American Underground helps startups connect with the resources they need to succeed.
@Raleigh will feature up to 25+ companies as well as Bandwidth Labs, the incubator arm of Bandwidth, the world-leading Raleigh-based innovator that recently shook up the smartphone market with the introduction of Republic Wireless.
@Raleigh will also feature a ‘regional coworking desk,’ allowing startups in the Underground to work in any Underground location. This means a startup based in Raleigh can easily take meetings in the two Durham-based Undergrounds, plop down in the Durham coworking space, and not miss a beat — and visa versa.
Nor will startups miss out on social time, a not-to-be-dismissed lubricant of success. @Raleigh is situated directly above popular watering hole, Foundation. Networking and learning events, as seen in Durham and other national hot spots, will be a staple of the new hub.
Density Key to Success
Density, experts say, is key to a successful entrepreneurial economy. A critical mass of startups, funders etc. allows for productive interaction and increases the odds of success.
The new @Raleigh site will strengthen a Triangle-wide ecosystem that the original Underground — located at Durham’s American Tobacco Campus — helped to kick-off in 2010. There are now 100+ startups in Durham, more than half of them working in the collaborative, inter-connected spaces at American Underground hubs at the campus and at its just-opened downtown Durham site.
“The Triangle as a whole is now alive to the idea that we can be an international hub of the kind of innovation that leads to new companies and jobs,” says Underground Chief Strategist Adam Klein. “We have the universities, we have the talented, dedicated visionaries. @Raleigh represents an opportunity for us to better link our regional assets and make it possible for startups to work across the Triangle easily and seamlessly. We look forward to collaborating with others who share this vision for regional success.”
Adds Bandwidth CEO David Morken: “Bandwidth’s incredible growth over the last several years is due to hard work and relentless innovation, items we expect will be hallmarks of the American Underground@Raleigh. Locating Bandwidth Labs in the Underground allows us both to help build our community and to continually expose some of our brightest minds to new and challenging ideas.”
Raleigh Mayor Nancy McFarlane, said, “I am thrilled to welcome The American Underground@Raleigh to our bustling downtown and vibrant entrepreneurial eco-system. The Underground’s regional approach combined with the international scope of Bandwidth Labs makes the project a perfect fit for North Carolina’s capital city. The more connectivity we achieve between entrepreneurs, investors, universities and major corporations, the more our startup eco-system will grow and thrive.”
Jean Pauwels, owner of the building since 2006, has previously partnered with Foundation and a theater group. He carefully vetted his next project. “A big part of my decision to work with the American Underground is my desire to collaborate with people who think outside the box. The Underground team truly wants to put together something special. It will be a great addition to downtown Raleigh.
Paul Singh, venture partner in the international 500 Startups has observed, “I’ve rarely seen an entrepreneurial ecosystem as thoughtfully developed or successfully executed as the American Underground.”
Mark Zuckerberg and two of his Facebook co-founders, Dustin Moskovitz and Chris Hughes, occupy the top three spots in Wealth-X’s list of ultra wealthy technopreneurs aged 30 and under with a combined net worth of US$22.4 billion.
Zuckerberg’s net worth increased by US$3.7 billion to US$17.3 billion after shares of the world’s No. 1 social network soared on 24 July on mobile advertising revenue that ignited a 20 percent share rally. Co-founder Moskovitz, Zuckerberg’s former roommate and now CEO at Asana, an online shared task list, saw his fortune rise nearly US$1 billion to US$4.2 billion. Hughes, a Facebook spokesman until 2007 and now publisher and editor-in-chief of New Republic, the 98-year-old magazine he bought in 2012 for an undisclosed amount, is in third spot with a net worth of US$950 million, according to Wealth-X, the world’s leading ultra high net worth intelligence provider.
Below are the top 5 ultra wealthy technopreneurs:
Co-founder, chairman and CEO
CEO and Co-founder
Chief Technology Officer
* In 2010, Hughes launched the charity-driven social network Jumo, which subsequently merged with social action publishing firm Good in 2011. Hughes has an advisory role in the company as he focuses on New Republic.
The men in the list have accumulated a massive US$25 billion between them, according to Wealth-X data, through growing their companies, mostly within the last decade. Wealth-X data also shows that eight out of the 10 men are based in California, reaffirming the status of the US West Coast as a hub for technological innovation.
The Great Recession made a deep impression on Generation Y (those age 24-35) and Baby Boomer entrepreneurs (those age 48-70), according to the American Express OPEN Ages Survey.
The study, which revisits an analysis first conducted in 2007, reexamines post-recession opinions and finds that the younger generation’s first economic downturn has made them more risk averse (just 56% say they like taking risks, down from 72% in 2007), while Boomer entrepreneurs’ appetite for risk remained unchanged (54% vs. 53% in 2007).
Factors ranging from the reality of living at home to being saddled with more student loans, has translated into fewer Generation Y’s launching new businesses straight out of school (16% vs. 28% in 2007), perhaps choosing to get other work experience instead. As a result, they are also less likely to be interested in serial entrepreneurship (44% vs. 59% in 2007).
Some benefits from economic turbulence
Surprisingly, enduring economic turbulence has uncovered some benefits. Eight-in-ten entrepreneurs from both generations (81% Gen Y and 80% Baby Boomers) attribute managing their businesses through the recession as the reason they became better entrepreneurs.
In the process, they have become more creative in their marketing (50% Gen Y; 40% of Baby Boomers) and improved their financial management (83%; 77% of Baby Boomers). Over the last three years, Gen Y-owned small businesses found opportunity despite the recession, having experienced 24% revenue growth, compared to revenue growth of just 10% experienced by Baby Boomers.
“Resilience is a trait shared by both generations of entrepreneurs,” said Susan Sobbott, president American Express OPEN. “Younger business owners channeled their passion through innovative thinking and thrived in the face of adversity while older entrepreneurs relied on experience to weather the storm and find a better life balance.”
In contrast to the younger generation, Baby Boomers have been impacted by several economic downturns and have become more prepared to weather marketplace volatility and the recent climate has made them more optimistic. Less than half say growth is the top priority for their businesses (47% vs. 66% of Gen Y). This time around, Boomers are more at ease, achieving better work-life balance: working an hour less per day (9 hours per day vs. 10 in 2007), cutting back on caffeine (2 beverages per day, down from 3 in 2007) and making fun a priority in their businesses (73% up from 66% in 2007).
Passion Plays Important Role in Success of Gen Y
The generations diverge on a host of issues, but none is more seminal than what motivated them to start their businesses. The primary reason Gen Y became entrepreneurs was to do something they are passionate about (26%). For Baby Boomers, it was a tie between being their own boss and making money (each 28%). With passion as their motivation, Gen Y entrepreneurs are focusing on activities that will grow their businesses. Gen Y small business owners who were motivated by passion to start their businesses are more likely to:
Have experienced higher revenue growth over the last three years (37%) than Gen Y overall (24%) or Baby Boomers overall (10%)
Have a social media presence for their business (89%) than Gen Y overall (79%) or Baby Boomers over all (59%)
Offer customers rewards or discounts for their repeat business (65%) compared to Gen Y overall (56%) or Baby Boomers overall (32%)
Have a business mentor (52%) compared to Gen Y overall (41%) or Baby Boomers overall (23%)
Despite Difficult Times, Entrepreneurship Still Rewarding for Gen Y and Boomers
While the recession may have been a bigger challenge for Gen Y, both generations are less optimistic about the U.S. economy over the next year than they were in 2007. However, Gen Y actually has a slightly rosier outlook (53%, down from 64%) than Baby Boomers (50%, down from 62%). And more entrepreneurs from both generations say they are “somewhat happy” with their lives rising 16 percentage points for both Gen Y and Boomers. Both groups agree that their satisfaction is fueled most by their relationships with their family and friends (74% for Baby Boomers and 72% for Gen Y.). However when asked what else fuels their enthusiasm, Gen Y say doing what they are passionate about is the next most influential factor (56%) while Baby Boomers claim their independence is responsible for their happiness (64%).
Generations at Odds on Value of Social Media Relationships
Social media has created a technology divide between the generations. Generation Y entrepreneurs are much more likely to use technology to market their business (81%) compared to Baby Boomers (61%). Since 2007 the impact of technology on running a business has meant more entrepreneurs have:
Established a company presence on a social networking site (51% of Gen Y, up from 19%; 30% of Boomers, up from 11%)
Established a relationship to sell products online (33% of Gen Y, up from 19%; 23% of Boomers, up from 17%)
Started a blog discussing their business (23% of Gen Y, up from 8%; 6% of Boomers, up from 1%)
While both generations use social media for their businesses (79% of Gen Y and 63% of Baby Boomers), their preferred tools and the value they find in using these media channels vary greatly:
Gen Y entrepreneurs place a higher value on social media than the Baby Boomers.
Half of Gen Y (50%) believes business relationships made through social media are as valuable as traditional business relationships.
For Baby Boomers, it’s only slightly more than one-third (34%).
Four-in-ten (41%) Baby Boomers believe business relationships made through social media are less valuable than “real/actual” business relationships.
Additional findings from the OPEN Ages Survey, including fact sheets by gender, are available upon request.
Do startup company incubators really work? The rapid growth of New York City’s innovation economy has been fueled by three Polytechnic Institute of New York University (NYU-Poly)-operated incubators that generated $251 million in economic activity since 2009, created more than 900 jobs and contributed $31.4 million in local, state and federal tax revenue, according to a report released today marking the fourth anniversary of NYU-Poly’s public-private incubator initiative.
By 2015, they are projected to nearly triple their economic output to $719 million, 2,500 jobs and $92 million in tax revenue.
All of this is good should offer cannon fodder to those starting or developing new incubator or accelerator programs nationally. We see successful startups emerging from those we’ve covered in the Southeast and Mid-Atlantic regions as well as those on the West Coast and Southwest.
Many smaller cities, such as Durham, NC, are revitalizing their local downtown economies with startup hubs.
The economic impact study was conducted by Dr. Jill Kickul, director of the NYU Stern School of Business Program in Social Entrepreneurship. It surveyed all 102 startups that have been in the incubators, or “innovation centers.”
Last month, NYU-Poly and NYCEDC announced plans to develop and operate the Clean Technology Entrepreneur Center (NYC CTEC) in partnership with Forest City Ratner Companies to support innovators focused on solving urban challenges of sustainability, energy, and resilience.
“Since 1854, Poly has served to incubate knowledge in Brooklyn, but we established formal incubators only a few years ago. Within these few short years, NYU-Poly’s incubators have transformed innovation and technology into real economic development throughout the city,” said Dr. Katepalli Sreenivasan, president of NYU-Poly. “This unique partnership between a strong engineering and technology institution of higher learning, government and the private sector has proven to be a powerful cultural and educational driver, as well. We look forward to strengthening these ties further.”
“This study demonstrates the unique contribution and economic impact that NYU-Poly incubators have had in providing the resources and environment to support the next generation of successful entrepreneurs with high-quality mentorships and access to funders and strategic partnerships,” said study author Kickul.
The study also found:
35 companies have graduated to larger spaces in New York
5 have been acquired by larger entities for more than $50 million
Salaries paid by graduating companies average $72,000
84% of respondents rated the NYU-Poly incubator experience as important or very important for their success, citing unique access to talent, networking opportunity, and the price and quality of the spaces.
“NYCEDC and NYU-Poly have partnered to create a nurturing environment for start-up businesses around the City, including partnering to open the Varick Street Incubator, the first in the growing number of City-sponsored incubators, as well as the DUMBO Incubator and NYC CTEC in Brooklyn,” said NYCEDC Executive Director Kyle Kimball. “Since first launching the program in 2009, these projects have positively impacted New York City, and we look forward to seeing them further contribute to the City’s rapidly transforming and growing innovation economy.”
“NYSERDA’s public/private partnership with NYU-Poly and its cleantech incubator, NYC ACRE, have been extraordinarily successful. Since NYSERDA began funding NYC ACRE in 2009, the 20 current and former tenant companies have created a total of 116 new jobs and raised a total of $32.3 million in investment,” said Francis J. Murray Jr., NYSERDA president and CEO, updating NYC ACRE’s significant growth since the survey was conducted.
“It’s organizations like NYU-Poly that are helping the state meet Governor Cuomo’s goals of growing our cleantech economy through innovation while at the same time reducing our energy use.”
The economic impact study was conducted between October 2012 and January 2013. The study team surveyed all 102 startups that have been in the incubators, met with 24 current tenants and 11 graduated companies, analyzed available data and applied standard economic formulae to determine the economic activity generated by the NYU-Poly incubators. The full report and more information about NYU-Poly’s innovation centers are available at http://www.poly.edu/business/incubators.
Durham adds another spoke to its growing reputation as a startup and technology hub today, officially opening a new American Underground location off Main Street called Underground Main.
Located at 201 West Main Street in Durham, the new space is an extension of the award-winning American Tobacco Historic District, home to the original Underground hub. The 22,000-square foot new space opens with 40 startups and has room for 50.
It offers a meeting rooms – one in a former bank vault – something a little different from the usual ping pong table, a 50-foot-slide.
For years we heard tech employees of major firms based in Research Triangle Park – only 10 or 15 minutes from either American Underground – lacked places to grab lunch, drop off your dry cleaning, or meet and chat with colleagues. While IBM and other large tech firms retain their somewhat less populated but still large campuses in the RTP, the startup ecosystem is blossoming in downtown Durham.
Original site designed by Disney
The original American Underground site on the American Tobacco Campus, designed by Disney, complete with a waterfall, running water canal, restaurants, shops and office space, offers much the opposite, a place where entrepreneurs, organizations such as the Council for Entrepreneurial Development and even venture capital firms can easily interact with others. Downtown Durham offers similar, if less fancy amenities.
The Underground model has earned national attention.
Recent visitors include John Biggs (TechCrunch), Joe Klein (TIME), Alexis Madrigal (Atlantic Monthly) and the President’s Council for Jobs and Competitiveness, including G.E’s Jeff Immelt and Facebook’s Sheryl Sandberg.
Paul Singh, a venture partner with the national 500 Startups, visited recently, noting, “I’ve rarely seen an entrepreneurial ecosystem as thoughtfully developed or successfully executed as Durham’s American Underground.”
“At the Underground, we want to help launch businesses with truly innovative ways to serve real world needs and see them grow into full-fledged successes that produce good jobs,” says American Underground Chief Strategist Adam Klein.
“It’s no secret that the startup world is sometimes charged with being an ‘echo chamber’ that relies too heavily on hype. There’s not a lot of ‘hype’ here in Durham. Instead, we’re focusing on the pieces that make for real world success: good ideas, access to capital and mentors, and, ultimately, positive deal flow.”
Keen to capitalize on a regional entrepreneurial legacy that includes SAS and Red Hat, Underground leaders have recruited regional partners, including the Research Triangle Park Foundation.
NC IDEA — a catalyst for young, high-growth, North Carolina tech companies — will sponsor relevant content for entrepreneurs via events, networking and other programming. Both RTP Foundation and NC IDEA are ‘founder’ partners as are Duke University, The Greater Durham Chamber of Commerce and Self Help Credit Union.
In addition to Duke, university partners include NC Central (which has an office @Main) and NC State (which has one @American Tobacco) as well as the University of North Carolina at Chapel Hill.
Opening party (Thursday, July 18) To highlight the region’s many attractions, including Durham’s burgeoning reputation as a foodie mecca, @Main’s opening party features eats and drinks from a variety of local producers. Railhouse Brewery, for example, is providing pours of its acclaimed craft beers. Republic Wireless is raffling one of its groundbreaking $19 per month mobile phone packages.
@Main’s roster includes: Archive Social, Duke University, Cloudfactory, NCCU,PopUp, Durham Cares, Sovereign’s Capital, Virtue Event Planning/ Tivi Jones Media/ Art of Cool, Zone Five Software, eyeNET Security, Knurture, PRSONAS, InfoHounds, ShiftZen,
Hazard Studios, Text2Give, 519 Games, Robotfactorial, Changemaker Capital, StoreHouse, Trust, LifeKit, Side, Z Shift and Third Track, Open’s Horse, Splitmo, CrowdSearch, Latitude, Growth Partners, Mighty Thumbs, Haiti Hub, Investors Mosaic, CleanHatch.
Entrepreneurs hear oceans of advice about maintaining passion, about vision, and about elevator speeches. But in years of covering the startup scene, we’ve seen one factor that makes all the difference in whether or not they succeed: customers.
Y-Combinator’s Paul Graham says in a blog post every entrepreneur should read, that one of the most common pieces of advice they give their startups is to “do things that don’t scale.”
He goes on to say that the most important thing startup founders need to do immediately is acquire users manually. He uses Y-Combinator funded Stripe as one example. “At YC we use the term “Collison installation” for the technique they invented.” The Collison brothers, who founded Stripe didn’t just send a link to a beta version of their product. They would sit down and load it onto a user’s laptop when they agreed to try it.
Graham points out that many founders avoid manually signing up users because “the numbers are so small.” But he advises startups to keep track of a weekly growth rate. If you have 100 users and get 10 more, that’s a 10 percent weekly growth rate, and while 110 users may not sound like much, if you continue growing at 10 percent a week for a year, you’d have 14,000 users and in two years, 2 million.
Getting users isn’t the only thing a startup needs to do, Graham suggests in his wide-ranging piece that includes many specific examples. Once you have customers, you have to be almost pathological in making them happy, Graham says, explaining that’s what the late Steve Jobs meant when he said he wanted Apple products to be “insanely great.”
In the tech field, startup founders are often engineers with no experience in customer service and frequently have to learn the importance of making every customer extremely happy. But, Graham writes, “I have never once seen a startup lured down a blind alley by trying too hard to make their initial users happy.”
Over-engaging with users, Graham says, is not just a way for getting a startup rolling, it’s necessary to acquire the feedback needed to improve the product.
He also suggests that many startups would do better by narrowing their initial product focus to a niche market the way Facebook did when it started on college campuses. In the Research Triangle, we saw Automated Insights (formerly Statsheet) a startup that developed an algorithm that let its software write statistics derived sports stories discovered there wasn’t much of a market for that in reporting actual sports events, but sold a version to Yahoo for reporting fantasy football contests.
While we’re on this tact, we should mention that at TechMedia’s digital conferences and the Southeast Venture Conference, we have repeatedly heard venture capitalists, accelerator founders and angel investors point out that the best way to fund a company isn’t necessarily outside financing. “Getting customers to fund you is still the best way,” said one.
Entrepreneurs at the helm of high growth companies face a lot of challenges, not least how to be an effective business leader. Many have superb technology skills, great ideas and passion but never ran a business before. Their very strengths can derail their leadership.
So say Robert E. Kaplan and Robert B. Kaiser in their book, “Fear Your Strengths,” which says establishing a good leadership mindset is essential not just to entrepreneurs, but to leaders at all levels – even those at the very top of established companies.
Kaplan, president of Greensboro, NC-based Kaplan DeVries Inc., a consulting firm specializing in intensive assessment of executives, tells the TechJournal leaders of all stripes should avoid the following:
1. Don’t make big strategic decisions unilaterally. “Know when not to trust your judgement completely,” he adds. “Before you make a big strategic move, an acquisition, launching a new product or service, check your judgement with people you respect and trust.”
Those might include the CEO of another company in the high tech sector – one reason tech hubs, accelerators and incubators can be so useful as early home bases for tech startups. But in any event, Kaplan says, “Make sure you have friendships, however you form them, with peers you can go to for advice.
2. Don’t hire only like-types. Even if someone is a really bright go-getter like you, don’t hire them if they’re not qualified to do the job. Also, Kaplan notes, sometimes the “strategic type” of leader does not always see the value of operational persons who have to implement the plan. If you’re not good at management and you look down on those who are, you may not hire or support them. “That’s a good way to get yourself in trouble,” Kaplan says.
3. Don’t do other people’s jobs. Don’t micromanage. Former President Jimmy Carter was a nuclear engineer and a Naval officer, but pundits looking at his failed presidency pointed out that he tried to micro-manage everything, right down to who played on the White House tennis courts. That didn’t turn out so well for him in the long run.
4. Don’t be allergic to process. “Don’t equate process with bureaucracy,” says Kaplan. “Types who like to be spontaneous are prejudiced toward doing things in a regular and orderly way. A lot of what gets in any manager’s way is their own biases and prejudicial attitudes.”
5. Don’t be abusive to other people. That includes not making a habit of keeping other people waiting.
Most of us have worked for abusive bosses at one time or another. Many executives have so much power they can get away with it, but it’s bad management. Personally, we worked for an abusive boss about a decade ago who got away with his abrasive style for quite some time before it cost him his job. “Be as direct as you want,” Kaplan suggests, “as long as you’re constructive.”
6. Don’t monopolize conversations, you’ll suck all the oxygen out of the tent. We don’t know about you, but there are times when we have to mentally remind ourselves that you learn more listening than talking.
7. Don’t stock your board with yes-men. That’s pretty self-explanatory.
Kaplan also suggests a few “To-dos.”
Do know your own craziness and know your own anxiety, for instance. You want to avoid acting out of fear of failure, inadequacy, and sensitivity to being rejected. “Executives who are effective know the reality of their own crazy tendencies and manage accordingly, Kaplan says.
The book, “Fear Your Strength,” offers a more in depth look at managing your leadership mindset.
Some of us are lucky enough to know that rare individual who conceives of a great new idea. Few of us can fathom the challenges these entrepreneurs face as they nurture their intellectual infant to pre-school.
cThey become the chief cook and bottle washer of their domains. Typically, tax planning is far down on the list of priorities.
Here are ten tax topics to consider as you nurture the intellectual toddler.
Choose an experienced tax advisor. As consumers, we seek to obtain the least expensive and most accessible products and services. Tax and legal advice tend to defy this logic. A missed opportunity or omission is frequently far more expensive than the cost of professional fees. Find a practitioner who has a track record of serving similarly situated companies. You do not want someone “learning” on your account.
Continue to re-evaluate your exit strategy. The smartest entrepreneurs are continually honing their exit strategy. Whether to sell to a single customer, create a lifestyle business, create a natural business extension for a larger company, or aspire for an initial public offering, your ultimate plans often affect tax planning alternatives.
Choice of legal entity. Your choice of legal entity can be influenced by a variety of factors. Many types of legal entities provide tax characteristics that can morph to provide different tax characteristics that are more appropriate as the business changes (for instance a single-member LLC, which operates as a flow-through, can convert to a legal entity with C-corporation characteristics for tax purposes). It is important to understand the flexibility that is afforded by each choice.
The case for flow-throughs. Flow-through entities such as LLCs and S-corporations allow business losses to flow through to the shareholders. Eligible shareholders must be “active participants” in the business in order to offset business losses against other forms of income, and they must be “at risk” for the losses.
Even if the shareholder is not an active participant, business losses retain their character as “ordinary loss deductions” upon disposition. Contrast this with a capital loss in a corporate environment and understand that individuals can only deduct capital losses against capital gains, plus a small amount of ordinary income. (Section 1244 may provide relief from this rule.) If the company is successful, shareholders will be rewarded with a single level of taxation.
The case for corporations. Most institutional investors do not want to make investments in flow-through entities for many reasons. If institutional equity will be sought, C-corporations may be the best choice.
C-corporations and S-corporations can participate in tax-free reorganizations, SMLLCs and partnerships generally cannot. Thus, corporations allow their shareholders to exit via tax-free share for share exchanges. Corporations have the drawback of taxation both at the corporate and shareholder level. (Section 1202 may provide partial or complete relief from the shareholder gain.)
Maximize federal tax incentives. The most common federal tax incentives affecting smaller technology companies include the credits for increasing research activities, the small employer health insurance credit, the manufacturing deduction, the deduction for research expenditures, and recently expanded limitations on a business’s ability to expense depreciable assets and bonus depreciation.
Maximize state tax incentives. Each state provides a myriad of tax incentives. These incentives manifest themselves as state tax credits, such as the jobs, investment and research tax credits. These are typically limited to the company’s state income tax burden. Since many companies are loss-making, these credits may not provide immediate relief.
Entrepreneurs should be particularly aware of credits that may be applied against payroll taxes as these will typically provide immediate benefits. Other incentives come into play with regard to how states source income or view certain types of income. More and more states are moving to single-factor sales apportionment. These rules favor companies that tend to export most of their products or services.
Beware of sales tax. The digital revolution has found states scrambling to update sales tax laws. Furthermore, as brick and mortar businesses wane, state taxing authorities are broadening the reach of state sales tax to subject more transactions to tax.
The consequences of failing to collect sales tax can be catastrophic. Many times these issues don’t emerge until the company is being acquired and potential buyers are seeking to escrow millions of dollars to mitigate these risks. Companies must monitor their obligation to collect sales tax in each state, periodically evaluate their service and product offerings to determine which sales are taxable, and be vigilant in maintaining documentation that exempts them from sales tax such as resale exemption certificates.
Domestic expansion. Companies should consider tax implications of doing business in multiple states. These can include the need to register with multiple states’ Secretary of State, to withhold payroll taxes and incur state unemployment taxes, to begin collecting and remitting sales taxes, and to start filing income taxes. Even if your employees do not reside outside your home state, but they work for extended periods of time outside their home state, beware of state payroll laws which require you to withhold taxes and report wages in the destination state.
Payroll and Benefits. Obamacare has brought unprecedented complication and administration to providing routine health care benefits. Companies should investigate the use of professional employer organizations (PEOs) to outsource payroll and benefit functions.
Jerry Weil is a shareholder at Bennett Thrasher PC in Atlanta with more than 30 years of experience in providing tax advisory services. He has extensive experience with clients in the technology, manufacturing and distribution industries, with such clients ranging in size from closely held start-ups to publicly held companies. Jerry has a broad knowledge of corporate and partnership taxation and has assisted dozens of inbound and outbound business entities. He has extensive experience with assisting companies with the financial accounting aspects of their income tax positions.
Entrepreneurs have an intoxicating and contagious attitude, full of energy, enthusiasm and inspiration. Where one sees a desert, an entrepreneur envisions a city, viewing things not as they are, but as they could be. They live and breathe their company and work unbelievably hard to be successful.
Sadly enough, research shows that only 35% of small business in the United States will survive for five years. Unfortunately, the reality of entrepreneurship is failure – not success. But ask any entrepreneur about their personal odds of success?
They don’t think this statistic applies to them. The fact is, many entrepreneurs lose perspective, and this increases the risk of failure.
Over the last twenty years, I have been very fortunate to work with entrepreneurs. I have witnessed first hand the consequences of failure on the business and the family.
Below are three recommendations to help preserve what you worked so hard to earn.
1. Don’t forget your struggle. Struggle is generally something successful entrepreneurs wish to leave in the rear view mirror. I think this is a big mistake. Struggle produces focus, and focus encourages us to think properly. It helps us identify what really matters then demands we concentrate on it. No one feeds cash to bad ideas or wastes weeks at a time when you don’t have either. Once entrepreneurs become successful, money mutes the pain of failure.
Money extends the financial runway and gives the illusion that the idea can taxi longer than it should. Partial success is worse than failure because it creates the feeling that just a bit more effort, a bit more time and a bit more money will help. If we forget the struggle and operate like we have unlimited resources, we increase the likelihood of failure. Impose a process with limits of time, money and resources to keep the struggle mindset alive.
2. Learn the importance of “No”. When success happens and there is money in the bank, the world is at your fingertips. You can do anything you want whenever you want. You instantly become the everyone’s best friend. Other entrepreneurs will pitch great investment ideas, banks encourage you to borrow money, charitable foundations will offer you a seat on their board, and distant relatives suddenly reconnect on Facebook. They all want what you have: cash.
Every idea is presented with passion and the entrepreneurial problems solving skills go into high speed. Saying no is painful, saying yes is easy. We want to help. Remind yourself that most ideas end up in the graveyard and you don’t want to buy the gravestone. Just remember opportunities are like busses, there’s always another one coming around the corner. My personal metric. Say no 99 times for every yes.
3. Find a Board of Advisers. Our perception of reality is more like a painting than a photograph, sort of like the difference between a Van Gogh landscape and a photograph of the same landscape. The reality we think we see is a combination of our mind’s interpretation and fact.
Van Goth’s “Starry Night Over the Rhone” landscape.
Our brains are so good at creating this landscape that it is hard to spot when it is a fake. This is especially problematic for the entrepreneur with business, family, and employees at risk. To protect yourself from the cavalier, the impetuous and the sane (which is really an insane idea), assemble a team of advisors you respect.
For instance, my support network includes clients, consultants, fellow entrepreneurs and even some of my competitors. Most are surprised by the number of people I have helping me to see reality. Other people see my problems with a clarity I just can’t. Clarity is something the entrepreneur can’t afford to live without.
Following these guidelines will not be easy and will take a great deal of discipline, commitment and determination, but they will give you a fighting chance in an uncertain world.
Russell Holcombe is CEO of Atlanta-based investment firm Holcombe Financial and author of the award-winning book You Should Only Have to Get Rich Once. Holcombe earned his MTX (Masters in Taxation) from Georgia State University, his BBA in Finance from Southern Methodist University, and is a CERTIFIED FINANCIAL PLANNER™.
Getting your customers to fund your business by buying things is still the best way to get capital. Nevertheless, many businesses seek venture financing or commercial loans to start or expand.
A group of entrepreneurs interviewed by loans.org, however, think it is unwise to borrow money to start a business.
Loans.org interviewed six entrepreneurs to discern just how vital or unnecessary borrowed financing was to launching their start-ups. The interviewed entrepreneurs were clearly divided.
To borrow or not to borrow?
One entrepreneur said that she bootstrapped her business and only dealt in cash. She believes that had she borrowed money, it wouldn’t have helped her become successful faster.
Another entrepreneur, Robert Smith, believes that anyone creative and persistent enough can run a business without borrowing money. He said that business debt creates additional stress in an entrepreneur’s life.
Smith, owner of Champion Media Worldwide, told loans.org, “We are programmed to think that we need financing and no one teaches how to grow organically with very little money.” He found strategic partnerships worked for his firm. “If you are creative and persistent enough, all businesses can run without financing,” said Smith.
On the other hand, others said that borrowing money can be very beneficial for businesses (not surprising from a study by loans.org, although it’s interesting that they include the other side of the coin as well).
Alternative financing choices
One used financing to hire and pay employees — saving him from dipping into his personal savings.
Another entrepreneur borrowed money from the SBA which led to his company growing to over $1 million in sales and creating six additional jobs.
Here at the TechJournal, we think businesses should also take a look at various alternative methods of financing, especially if they have decent revenues. Atlanta-based Kabbage, for instance, offers capital advances to qualifying businesses.
Also, angel investment groups may be a good way to go if your company needs $1 million or less – and now that many are looking a geographically dispersed larger deals, they may even step up to Series A levels of $1 million to $3 million. — Allan Maurer
Investors in early stage companies in South Carolina don’t need to be South Carolina tax payers to receive the substantial 35 percent tax credit available via the High Growth Small Business Access to Capital Act passed the first week in June.
Matt Dunbar, managing director of the Greenville, SC-based Upstate Carolina Network , an angel investor group, tells the TechJournal that investors who don’t pay SC taxes can sell their credit to a business that does. “It’s transferable,” he says. “Folks from out of state can sell the credits and benefit even if they don’t have an SC tax liability.”
Dunbar says the state is in the process of setting up a marketplace for that and it will be available within weeks.
The SC bill is meant to encourage individual angel investors to put money in early-stage, high growth businesses and increase the number of quality, high-paying jobs in the state.
Annual cap per investor
It’s also intended to support businesses commercializing technology developed in the states colleges and universities.
There is an annual cap of $100,000 per investor and $5 million in aggregate. Investors must meet the U.S. Securities and Exchange Commission’s definition of an accredited investor, and no brokerage fees or commissions are allowed.
For businesses to qualify for investments under the bill, they must be headquartered in the state; started within the last five years; employ fewer than 25 people and accrue annual revenues of less than $2 millio
Similar legislation works in other states
The legislation, which the SC House passed 94-10, is similar to bills in about 25 other states, including Georgia and North Carolina. Data from the similar legislation in other states shows the programs are effective in attracting capital, creating jobs, and producing revenue for the state.
The reason such legislation is needed is a persistent early-stage funding gap that leaves many startups struggling to nab seed or Series A financing. Venture Capital firms increasing want the potential for $100 million plus exits and firms with substantial revenue or profitability before they invest, while many angel investors were subdued by the recession.
Dunbar says the total amount available via the bill, $5 million, “Is a great place to start. We’re going to track the metrics so that we have data to go back and increase that amount if it does what we think it’s going to do.”
We recently interviewed Dunbar about the trend of angel investors to form syndicates and do larger deals with wider geographic spread than the typical backyard deals that angel investors have preferred.
Atlanta Technology Angels (ATA) decision to join other angel groups in financing Austin-based Wisegate, was significant in more ways than one, says ATA and Wisegate board member Jamie Lewis.
Lewis, formerly CEO of The Burton Group, like Wisegate, an IT research and advisory firm that sold to Gartner for $56 million in 2009, tells the TechJournal the ATA/Wisegate deal “Is largely a reflection of how significantly the capital markets have changed in the last five years or so.”
National, not just regional deals sought
A member of ATA for about a year, Lewis notes there is a move afoot in the Angel investor space to create a national syndication network so deals can happen nationally rather than just regionally.
The ATA itself says the decision to invest in a company outside of Georgia represents its own desire to expand its footprint throughout the Southeast and possibly beyond.
Reasons for the change
“There is a lot of interest in deals occurring as widely as possible, even though it’s natural for most to occur regionally,” Lewis says.
A primary reason for this change in angel investing strategy, says Lewis, is that many venture capital firms have altered their own strategies.
“Back ten or 15 years ago,” says Lewis, “the typical VC was doing lots of early stage deals, including companies with a little seed funding, not a lot, and maybe some revenue, but not profits.”
VCs more like private equity firms
Not so much any more, he says. “Most VCs now act more like private equity firms,” he says. “They like later stage deals, investing in companies that have proven themselves in the markeplace and are well beyond the seed stage.”
That creates a much talked about early stage funding gap.
Why? “It’s by choice,” says Lewis. “They don’t want the risk.” He adds that it also has to do with the risk profile of their limited partners (those who invest in the venture funds). They’re taking money from institutional investors and pension funds. Those have a much different risk profile than the typical angel investors.:
Many angel investors are themselves former or current entrepreneurs who are more accustomed to risk, he notes.
The change opens the field for angel groups to step up. The syndicate that invested $3 million in Wisegate included Texas, New York, and Georgia angel groups. By investing together, the groups can structure larger deals the size of many Series A rounds.
Not your typical IT service firm
“That’s how Wisegate sees this,” says Lewis, “as a Series A raise. It’s interesting that a syndicate of angel networks can pull together that kind of money and fund a company at that level. ”
Wisegate, he says, “Is not your typical IT service company.” Right now it is focused on what Lewis calls “One of the biggest issues worldwide – the whole concept of Bring Your Own Device (BYOD).” That is causing security problems for many companies.
Wisegate brings -by invitation only – IT experts together to discuss best practices, what works, what doesn’t, which tools are effective, which not, and so on, to provide clients with IT advice from people in the know.
For more about Jamie Lewis, see “Be What You Aspire to Be.” In it, an interview about commitment, determination, and passion in business and life, he quotes Randolph Bourne who said, “He who mounts a wild elephant, goes where the elephant goes.”
Fasken Martineau, a leading international business law and litigation firm, says a survey of senior M&A executives primarily based in the United States that leads to some compelling observations about the growing use of social media platforms such as LinkedIn and Facebook in reporting M&A deals.
The study found that some 32% of respondents reported using a social media platform to communicate a transaction.
Fasken Martineau surveyed these executives before the Securities and Exchange Commission issued its April 2, 2013 report providing companies with positive guidance for communicating material, non-public information via social platforms.
Testing attitudes toward social media
The well-publicized report was the result of an investigation into whether a Facebook post from Reed Hastings, Netflix CEO, may have violated Regulation FD, which prohibits public companies from disclosing material, nonpublic information to certain individuals before it is made available to the general public.
This new survey from Fasken Martineau creates an opportunity to test whether the SEC’s guidance alters attitudes towards social media in the M&A realm.
“Our survey revealed that senior M&A executives are certainly using social media, and some are using it to research and communicate deals,” said Kareen Zimmer, a partner in Fasken Martineau’s corporate and M&A practice groups.
“Interestingly, however, social platforms are currently viewed by M&A professionals as having less value than other sources of information, and most don’t currently see great value in social media’s application outside of post-merger integration. It will be very interesting to see if the SEC guidance will impact this perception and if in fact we will see an increased acceptance of these tools in the M&A and general Finance community,” added Ms. Zimmer.
Entrepreneurs looking for an exit should not ignore the quality of their social profiles:
36% of respondents used social media platforms to research potential acquisition targets in the last year
48% used social platforms to investigate companies involved in transactions.
LinkedIn and Facebook play different roles among M&A executives using social media:
72% said that LinkedIn added the most value to due diligence versus other social platforms, while only 50% said Facebook added value.
Of those that used social media to disclose a transaction, 78% used Facebook while 44% used LinkedIn.
Even with guidance from the SEC, social media may remain a minor player in the M&A realm for some time to come:
Given the unsettled state of regulatory guidance for the use of social media at the time of the survey, the percentage of executives who used social media to communicate a transaction (32%) may be considered high.
However, a large majority (77%) said that they do not have a social media strategy specifically for M&A, 65% do not anticipate developing such a strategy, and 74% were neutral to negative on the importance of a having a social media strategy specifically to impact M&A transactions, a bias that may be difficult to overcome despite the SEC’s guidance.
Survey respondents reported that among the many types of corporate events, they see proxy issues discussed most prominently on social networks, beating out managerial announcements, M&A transactions, quarterly financial results, restructurings and recapitalizations.
Fasken Martineau has a strong leadership position on the subject of proxy contests, having published its 2013 Canadian Proxy Contest Study in February. This study found that dissident shareholders are winning most proxy contests that occur at Canadian-based companies.
Convincing investors to put money into your company requires one essential element: you need a good story.
Storytelling isn’t difficult. We’ve all been doing it since childhood. Stories require a beginning, a middle and an end – and so does a good pitch to investors.
When you consider beginnings, think about this: when Hollywood retells the stories of comic book heroes from Superman to Batman and Spiderman, which story gets retold the most? The “origin story.” People like to know how things started.
How did you get into your business? What gave you the idea for your product or service? Why are you uniquely qualified to create and run your firm?
The middle is simply where do you go from there and how you’re going to get to a logical, believable end point. Keep in mind that venture capitalists and angel investors have built-in crap-detectors. They aren’t going to swallow the idea that you’re going to capture the lion’s share of some billion dollar market overnight. Dream big, but be reasonable. – Allan Maurer
Here’s an infographic from the helpful site, investorpitches.com on The anatomy of a winning pitch:
div class=’visually_embed’ data-category=’Business’ rel=’infographic’>
Vienna, VA-based Grotech Ventures, which invests in early stage tech firms, has raised a new $225 million fund. The fund was oversubscribed by more than 10 percent, and was raised from both existing and new investors. GV II bringsGrotech’s total capital under management to$1.3B across all funds.
Frank Adams, the firm’s managing general partner, told PE Hub that raising the fund took 20 months because institutional investors were “slow and methodical in their due diligence process, more so than in the 29 years we’ve been doing this.”
Grotech Partner Don Rainey tells the TechJournal that the company is investing in Mid-Atlantic and Mid-West early stage IT firms in Enterprise and infrastructure software, social and cloud computing, security tech, consumer Internet, ecommerce, and energy and healthcare It.
Includes Charlotte, Atlanta, RTP
For Grotech, Mid-Atlantic includes the Carolinas and Atlanta, Rainey notes. Adams told PE Hub the company is spending a good deal of time in Atlanta and Charlotte, NC, for instance, developing deep relationships.
Rainey says that while parts of the social sector are crowded and the opportunity has passed, “There is still a lot of greenfield in it.”
Grotech typically invests the first institutional money a startup raises and continues to invest as the firm grows. Its strategy includes forming top-tier industry syndicates with other investors. It generally invests from $200,000 to $20 million in startups, although initial investments tend to be smaller.
Grotech, which has offices in Virginia, Maryland and Colorado, has already made 12 investmetns from the new fund and continues to invest from its current fund, which has performed well.
We asked Rainey if its harder for tech startups to get that first investment these days.
“For top tier entrepreneurs its about the same,” he says. “For the next tier that isn’t as obvious as a backable startup, it’s tougher. If you’re the guy or gal who sold your last company for $500 million and you’re doing another raise for a new company, you can expect the processs to be about the same as it was two, five, or ten years ago.”
It recently secured a major exit with NexGen Storage, which Fusion-lo Inc. acquired in April for about $119 million in cash and stock.
It’s largest exit so far was from the DC-based daily deals site LivingSocial. It led the company’s $5 million Series A round and has since sold chunks of its stake to Amazon, Lightspeed Venture Partners, T. Rowe Price and other buyers for more than $200 million.
Overall, Grotech’s last $109 million fund, which closed in 2009, has a current IRR of 70 percent. — Allan Maurer