Adapted from the Journal of the Heartland Angels By Michael Gardiner Chicago’s startup scene has grown dramatically in recent years. That includes a rapid increase in local accelerators, incubators, tech parks, and similar programs. The term accelerator is used somewhat loosely, but the prototypical accelerator involves cohorts of between 10 and 20 startups that spend three to four months in a common physical location. Accelerators are sponsoring organizations that provide startups with a combination of small cash investments, intense mentoring, formal and informal networking opportunities, and organized investor pitch events—all designed to dramatically “accelerate” a startup’s development. Typically, graduating companies immediately seek a significant angel investment or venture “A” round funding. . Continue reading
Software is slowly eating venture capital, and it’s making fundraising easier for startups.
In a not so long distant past, big ideas started on napkins, and made their way to powerpoint presentations. We used to e-mail business plans, pitch over the phone, stalk vc’s and superangels to simply get an opportunity to pitch. Raising a round, if successful could take anywhere from 3 to 9 months.
Business Angel Networks
My experience with Business Angel Networks (BAN’s) wasn’t too positive and mostly a waste of my time. I had to fill out archaic old-school forms, attaching business plans, include revenue projections for the coming 3-5 years and in most cases even think of possible exits. Once accepted I was “allowed” to pay a fee to present in front of a bunch of passive angels. I only remember being super-frustrated by the lack of responsiveness and interest in my space.
Most BAN’s haven’t changed all that much. And even though most started using Gust, they remain set in their old ways.
Traditional “Business Angel Networks” are too passive and docile for the fast-paced tech-entrepreneurs.
The Techcrunch effect
There used to be a time when getting a post on Techcrunch was enough to boost interest in a startup, and get instant introductions to many big-name vc’s. A few years ago I got 17 intro’s to big name vc’s/angels, including Lightbank, following a post by Robin Wauters on Techcrunch.
But as more quality tech-blogs (The Verge, Pandodaily, The Next Web, Gigaom, …) gained notoriety, the “fundraising” value of a post on Techcrunch (and any other), has diminished to almost zero.
These days most posts on Techcrunch are of the “X raised Y to do Z”-format, which doesn’t help fundraising at all.
Startup competitions and events
As many entrepreneurs, I’ve attended Techcrunch Disrupt and Leweb Paris/London, with the hope of meeting investors. That doesn’t work.
If you’re not on stage at Techcrunch Disrupt, you’re wasting your time and money.
Although stories about startups like Layer (which I love by the way), the winner of Techcrunch Disrupt SF in 2013, may seem like an overnight success, mainly thanks to Techcrunch, they aren’t. Tomaz, the co-founder of Layer, and his team worked non-stop for a year, and raised funding, before they even got on stage.
Building a startup takes guts, perseverance, hard work and most of all ultra-focus. Time is your most valuable resource. Don’t waste it going to events where you are not the main attraction.
If you do want to attend an event, don’t expect to close your round right there and then. Do it to grow your network, and meet as many new people as possible. Manage your expectations. Events are great to meet investors, you already know, and improve relationships, since they’re in one place. But you’ll need to set up meetings long in advance.
The value of influencers like Robert Scoble
Uber-startup evangelist/blogger Scoble has a huge following, including many a-tier vc’s, angels, startups and fellow-bloggers. And if he really likes a startup, he can become your best evangelist. Many may remember his efforts to push Highlight.
If you have a chance to meet and talk to Scoble, get him to use your product instead of talking about it. Again, manage your expectations.
If you have something cool, a post by Scoble may move mountains or may not. But it’s still fun to try.
The Accelerator “mafia” era
Accelerators are the new MBA programs on steroids. Fred Destin (Atlas Venture), an investor in my previous company, suggested I should try Seedcamp. I did, and never regretted it. I joined Seedcamp in 2011 in New York.
I got instant access to hundreds of mentors, introductions to big names in venture capital and hands-on support (fundraising, product, marketing, positioning, pitching). It’s a rough experience, where your assumptions and beliefs are tested to the core, and much of the time you will hesitate, and doubt most of your assumptions. But in the end, this truly helps you become a better entrepreneur.
If you have a chance join an accelerator like Seedcamp, do it. You’ll meet great entrepreneurs. Even if you don’t succeed the first time, you’ll learn how and get access to a network which will catapult your next venture.
VC’s are more inclined to believe in you, if you have gone through an A-brand accelerator (Seedcamp, Techstars, 500startups, Angelpad, …).
AngelList : The Linkedin for Angels and Entrepreneurs
AngelList is a must-have for any startup. Even if you are just starting out, you should get an account and start building your entrepreneur footprint. Start early on creating a profile for yourself and your startup. But only publish it, once it’s ready. You need to stand out, and your profile should answer most questions an investor may ask. You only get one shot. My startup was “trending” on AngelList for 4 months. It got us +2.000 followers. Read here how we did it and learn from our experience.
AngelList is also great to check out the competition, meet fellow founders, apply to accelerators and start your fundraising effort.
Like with all good things, there is a back-draw. You can only send a message to someone, if that person follows you. That’s where Angie comes in.
Angie: Matching Angels and Entrepreneurs on Mobile — Tinder-style
Apart from being the leading mobile app for AngelList, Angie recently introduced investor/startup matching. Every day Angie will show startups a list of investors they should connect to, based on shared markets and interests.
Thanks to Angie’s startup discovery-engine, your startup’s profile ends up on investors mobile screen, and you can start getting followers.
99% of startups on AngelList are invisible to investors. Angie solves that by matching startups with investors.
Caveat: Public versus Private fundraising
Although it may seem a great idea at first, be aware that many of the people who may want to invest in your startup, after seeing a post on Facebook or a tweet, may not be eligible. Most of them won’t be accredited investors. Using public fundraising may provide more issues than benefits (for now at least). Once non-accredited investors can join, we’ll need to revisit this question.
By taking your fundraising public, you are actually limiting your changes to raise from friends, family and “fools”.
Consult your lawyer.
Stop wasting time traveling to overpriced events, attending pitch contests or demo-days, stalking vc’s and angels or begging for posts on tech-blogs. Join AngelList, install the Angie app and use Angie investor matching. And spend the time you save on building a better product.
You can raise smaller amounts, as many times as you want, or need. No one is forcing you to start raising $500K or $1M immediately. The pre-seed, seed, A, … rounds were the standard before, because you had to work within a framework built by traditional vc’s.
Times have changed, play by your own rules. Use all resources and instruments.
You can start by combining a $50K round via mobile invest on Angie, with a crowd-funding campaign, and do a follow-up investment, as you are growing and achieving new milestones.
And most of all, tell your story, engage with your customers and turn them into your ambassadors. Some may even become your first investors.
- Seedcamp Berlin winners announced: Get ready for a “Dropbox for email” and a “real-time story creator” (venturevillage.eu)
- AngelList: VCs in sheep’s clothing? (vcwithme.co)
- Recap of our 2nd US trip this year: http://t.co/DCVmtuuYLo apply to @Seedcamp London if you want to be part of the next one! (seedcamp.com)
- Guest Post: How I (finally) found a technical co-founder and got accepted to Seedcamp by Steven Renwick (seedcamp.com)
- Everyone Can Learn Angel Investing Using Kiva (adammcnamara.com)
- AngelList’s Naval Ravikant on His Syndicates Program, Two Months In (strictlyvc.com)
- The Great Unbundling of Venture Capital (davelerner.com)
- How to decide whether AngelList syndication is right for you | PandoDaily (pando.com)
- 4-Hour fundraising: Tim Ferriss, the JOBS Act, and why Miley Cyrus could be an instant VC (venturebeat.com)
- What You Need to Know to Become an Angel Investor (online.wsj.com)
There’s a rotating cast of bullshit artists encountered while building a company. Vendor New Biz Guy promises seamless API integration, but he doesn’t know what API stands for. SEO Expert Bot thought you might like to know some reasons why you are not getting enough Social Media and Organic search engine traffic, but … you’re not really replying to those emails, are you?
Perhaps most dangerous though, is the Investor who boasts of big checks and high-level connections, but … you have to pony up if you want to talk. What follows is a peek at an actual encounter we had with one such investor while raising our seed round for Bombfell last year.
Quick context: we meet PayMeFirst Investor, who says he represents a club of wealthy investors and celebrities, at a trade show. On a call, he tells us that as part of their investment process, we would pay $2,500 to host a party for these wealthy investors and celebs so that we can talk to them. Wait, what?
We decide to end discussions there, sending what we think to be a pretty polite email:
Shortly thereafter, PayMeFirst replies:
“Everybody,” take “cover”!
- What I Learned from 10 Months of Starting Up: Social Media Isn’t Great for User Acquisition (nextbigwhat.com)
- Colorado Online Marketing Agency Boulder SEO Marketing Announces Another Record Year (prweb.com)
- Manalto Raises $1M to Launch Innovative Social ERP Software Solution and Premium Services for Content Management (sys-con.com)
- VC Firms Don’t Back You, VC Partners Do (hunterwalk.com)
- How Much Do Angel Investors Own After Future Funding Rounds? (seedchange.com)
- American Real Estate Investors Academy Creates Apprentice Program (prweb.com)
- Why Naming a Startup Funding Round Wrong Could Cost Millions (alleywatch.com)
- Is Seed Round Funding from VCs Good for Startups? (modeanalytics.com)
- What Does the Pinterest API Really Mean? (tailwindapp.com)
- Benjamin Weber: Typesafe database interaction with Java 8 (benjiweber.co.uk)
Impact Engine – Part 6
~ VERBATIM from a special correspondent ~
Loop Lonagan here. I’m at a place where my natural greed ‘n’ avarice can do some good fer dis poor worn-out world. This is the Chicago CleanTech Competition—what you might call a race between high-tech global janitorial services. Ten distinguished judges will pick the best o’ da best—companies that’re really doin’ somethin’ to deal with the mess we’re makin’ outa our little corner o’ God’s creation. What we got here is da last ten finalists in our great city and tonight that gets cut down to five.
Every one o’ these companies is a specialist with a different slant on how to get the job done. You know as well as I do—the only company that succeeds in this world is the one that makes good business sense. But are those the ones that’ll win? Probably not. But we’ll see.
The MC makes sure we know today is Earth Day, which gets a shrug all around. Then he explains how the winners move on to the big international GCCA event and compete with companies from Europe ‘n’ Asia. You heard all about that organization, right? If you didn’t, see the link and the video at da bottom. I got no time to explain.
A Strange Encounter
Lemme give you summa da local color. Things is movin’ along real nice when I hear this harsh voice all the way from the other side o’ the room. He’s yellin’ at an elderly gentleman for nodding off during the meeting. Then he turns his foghorn on me: “Hey Lonagan, are you going to be writing this up? Because I’m going to call you every hour on the hour till you do!”
Sheesh, I ain’t kiddin’. The guy blares that out right in the middle o’ da meeting in fronta all these gentle souls. I’m wonderin’ if any of them clean tech folks ever ran into anybody like Rong Mayhem before.
I know that Rong singled me out ‘cause of a simple misunderstanding. He thinks I’m some kinda reporter. Well, this ain’t no newspaper and nobody sticks me with no deadline. I’m lookin’ for companies to invest in. So’s I keep takin’ notes.
Then he howls. “Lonagan, what the hell are you doing?”
This time I answer. “Just writin’ down what you say, Rong.”
But he’s got a come-back to that: “You know what you are? You’re a legend in your own mind!” Then he repeats it a couple times.
After that, things quiet down for a while. And I’m smiling to myself, thinking about the poor MC tryin’ to control the meeting. So I glance over the program and get a jolt. Outa these ten companies, I see two graduates from Northwestern University’s Impact Engine. Lemme tell you about one o’ them:
George Page is the founder of Portapure and he’s da keynote speaker tonight. He’s also one o’ da judges, so maybe things’ll work out all right after all. He’s a chemical engineer that worked in Chicago water projects so he’s a practical guy. And he’s on a mission. He wants to make clean water available to anybody, anywhere, anytime. To do that, he makes water filtration affordable for the developing world.
Portapure won this event last year and ended up among the top 30 in the world. I first seen him at BNC Venture Capital when he invented a pocket size water purifier. I’ll tell you about that one first:
Picture this: Say yer goin’ into the jungles of Haiti to do disaster relief. Yer gonna be
there for weeks and the water is mostly muddy streams and swamps. This is da 3rd World. There ain’t no EPA out there to slap people with fines fer makin’ a mess. Still, you gotta get yer butt out there no matter what the conditions. So whaddaya do? Pack in lotsa fresh water, right? Think again. Got any idea how many pounds a few gallons o’ water weighs? It’s impossible to lug all that with you. Airdrop it, maybe? Not a practical solution.
As it turns out, you don’t even need to carry a canteen. Instead, you take along a little pocket-size device called PocketPure. It weighs next to nothin’. Any time you get thirsty, you stop at a convenient swamp and make yerself some clean drinking water—one cup at a time. You can stay in the field as long as you want ‘n’ you never run outa water.
Up till now, all anybody had was water purification tablets. Those take half an hour to work and you still gotta filter out the dirt somehow. But technology moves forward and you might as well take advantage of it. As you might’ve guessed, Portapure is sellin’ these things to NGOs by the boxful.
Drinking water is in short supply across the world. Lotsa people in all kindsa places die of E. coli and such. Kids even. That brings me to Portapure’s next product:
This one’s on a bigger scale. It’s a three-phase filter with a 5-gallon capacity—just right for yer typical grass hut. Hey—people in the developing world want clean water for their families, too.
This thing filters both bacteria and viruses outa real filthy water. I’m talking real nasty critters like cholera, typhoid, amoebic dysentery, E. coli, coliform bacteria, cryptosporidium, streptococcus, salmonella, giardia, and of course, yer ordinary dirt ‘n’ sediment—it’s enough t’ make yer flesh crawl. This device filters out 99.99% o’ that muck—the definition of clean water according to the World Health Organization. And the filter lasts for maybe 10,000 gallons! This thing was tested in an NSF certified lab and reduced the E. coli count from 5490 to less than 1.
This keeps getting better. He sells these things to NGOs, but there’s another angle. Clean water’s at a real premium. It’s like liquid gold in some places. And folks livin’ there wanna make a living just like anybody else. That gives Portapure a natural distribution network and a sustainable solution that pays for itself. At the same time, they’re putting people to work and boosting the economy in these far-flung places.
This company’s got its share of ‘em:
- Impact Engine graduate
- GCCA Global Top 30 company
- Chicago Innovation Awards 2011 Up & Comer
- Office of the Treasurer Small 2012 Business Plan finalist
- Tech Cocktail 2011 Finalist
Here’s a good video on Portapure:
I wanna tell you ‘bout the other companies and who won. But I ain’t got room to do it justice here, so I’ll be back with more.
LOOK FOR PART 7 – COMING SOON
Go back to Part 1
Meanwhile, here’s a video that explains the whole international competition:
Portapure – www.portapure.com
Contact – Info@PortAPure.com – 773 251 5779
Chicago, IL. 60615
Portapure on 5 NBC Chicago
PortAPure’s George Page is Saving the World
Portapure on Crain’s Chicago Business
Chicago Clean Energy Alliance
GCCA—Global Cleantech Cluster Association
Images and video courtesy Portapure, CCEA, GCCA, Impact Engine, and AP.
Chicago Venture Magazine is a publication of Nathaniel Press www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link . This is not investment advice. We do not guarantee accuracy. It’s not our fault if you lose money.
.Copyright © 2013 John Jonelis – All Rights Reserved
Many investors are only interested in investing money into an enterprise for a limited amount of time. They want to know when they will get their money back and what sort of return they will be receiving at that time. Both issues are closely linked. Therefore, when preparing your business plan, to pitch to potential investors, you will need to make sure that you have outlined your long term plans and a sound exit strategy.
In order to do this properly you will have to ask yourself a few questions about your own personal plans regarding the business. Do you wish to stay involved in this business in the long run, or are you more interested in getting it off the ground and letting someone else take over then? These are the kinds of questions you should deal with in your exit strategy.
You will also want to know a little about the investors you are pitching to and what their expectations are regarding the future of the investment:
- If you are dealing with venture capitalists you have to be aware that they are looking for a high return. They will generally be expecting the business to go public at the end of the period or make some other high profit move. The period they are willing to invest is about three to seven years so you will need some sort of high return exit strategy at the end of that period. However, you should not opt for going public unless you are confident that it is a realistic goal for your company. Public offerings are very rare for small businesses and the investors you are speaking to will be all too aware of that fact.
- If you are considering an angel investor then again they will be looking for a high return but will not be overly concerned with the type of exit strategy under consideration, as long as it seems sound. They will be less sophisticated than the venture capitalists or institutional investors you may deal with and are more likely to be involved because of a personal relationship to you or the business.
There are a number of exit strategies you can consider:
- The most basic exit strategy would be to simply bleed the business dry. This can be done by giving yourself a huge salary or other remuneration, regardless of the performance of the business. While it is not appropriate in most cases, there is no doubt that it can get a lot of your investment back out of the company in a short time.
- Another simple option is liquidation. Simply close the doors and wait for the company to be wound up. All debts will be paid off, and then whatever is left over will be clear to the shareholders.
While these two options above are quite practical and effective, they are professionally frowned upon and you may wish to propose a more sophisticated exit strategy if you wish to impress potential investors.
- Another option could be selling to a friendly buyer. While you may have come to the end of your relationship with the business, there may be many people who would be saddened to see it end and may well be willing to step in to take over. This might include passing it on to another member of the family, or selling it to employees or customers. There are many businesses where this will be a realistic option, however it is difficult to predict it at the beginning of the venture.
- Another option is acquisition. This is when a rival firm, usually one wishing to expand, agrees to buy you out. You can negotiate the price and terms with the buyer and there is a good chance that both of you can come up with a very attractive price. You will get a good price because together with your assets, the buyer will be willing to pay for good will, market share, client contacts etc. This means you can get a very good price for the business.
- The IPOs that we previously talked about are the final option. These are potentially the most lucrative of all, but when reality kicks in, they might not seem like the dream you thought they were. In reality, a minuscule percent of companies manage to make it through an IPO. The process costs millions, includes lawyers, analysts, publicity agents and a lot of other costly professionals. The odds are against you ever making it. And if you do, you will probably be left with only a fraction share of the company you used to own.
Funding Feeding Frenzy – Part 2
VERBATIM transcript of a recording by Loop Lonagan—investor and man about town.
Loop Lonagan here. I’m headin’ out to this year’s Funding Feeding Frenzy. It’s the big event if ya wanna see all o’ Chicago’s best startups in one place. This time the FFF is happenin’ at a place called the Chopin Theater northwest o’ downtown and I wanna see how that’s gonna work out. Will there be a string quartet? They yusta hold it at a huge automobile showroom which seems weird but worked out. It had about half the floor space of McCormick Place and plenty o’ room fer hordes o’ people to roam. But this is gonna be a lot different.
One thing I wanna impress on your readers, John, is about Chicago itself. You know I love this place but face it—it’s a city with all the usual warts ‘n’ barnacles. And every neighborhood is different, so yer either at home here or yer not. Nobody never gave me no trouble. Maybe I’m no pushover, so I got an advantage. But if I’m gonna tell this story, I gotta give you the whole picture. And I’m gonna give it my best shot.
I’m comin’ in by train and can’t resist gettin’ off at the old Clybourn Station. From here, it’s only a mile walk to where I’m goin’. That looks real good on a map. But my advice to you is don’t do it. Get off all the way downtown and take a nice comfy cab to the event. This ain’t a bad part o’ town. Nothin’ like that. Just take my advice.
Once I’m on the Clybourn platform I draw in a lungful o’ cold air. It’s feelin’ like the Christmas season just gettin’ started up here and I got a wad o’ money in my pocket. I get my choice o’ passages down to street level. That always feels like descending into the bowels of hell. Mincing little concrete steps winding through grimy concrete tunnels. Once-yellow paint peeling off the walls. And the best part is you get yer choice o’ tunnels! They’s all the same!
It’s still early and the usual crowd is layin’ about the sidewalk. I step over Old Man Percy, ‘cause I don’t wanna disturb his sleep, but the others is startin’ to rise’n’ shine. I give a hearty good morning to Fred and Big Bubba and ignore Merry ‘n’ Pippin huddled in a corner—those two give me the creeps. Summa these people are new to me but you can’t never know ‘em all. Familiar faces go missing but still, there’s never no shortage. I got it on good authority that the poor will always be among us.
People tell me these guys makes Fifty Gs just panhandling. I say it’s a buncha hooey. The idea got invented in that Sherlock Holmes story, The Man With the Twisted Lip, ‘n people been repeatin’ it ever since. If it was true these guys’d find a warm place to sleep. Ever try an icy sidewalk ‘round about Christmastime? And there’s more ‘o these people hangin’ ‘round than ever. That means more competition. That means harder times fer all o’ them. Sure, any profession’s got it’s elite that strike it rich, but that leaves the multitudes, scrablin’ fer crumbs.
I always say there’s a lot to bein’ a good bum. You feel so warm inside when you drop a buck in his hat. ‘Specially near Christmas. Makes your whole day. Some ‘o these derelicts play musical instruments and summa them is pretty good at it too. Come to think of it, these guys fill an important role in society. They’re public servants. Maybe the city should fit ‘em into their patronage system. It’d mean more votes for The Chicago Machine. After all, The Machine is politicians. And politicians is people paid to be bums.
Hell, when you get down to it, there ain’t much difference between these guys ‘n’ me. Maybe I invest alota money, drink good liquor, sleep in a warm bed. But whadda I really do for the world? I been givin’ that some thought lately and all I comes up with is this—I provide liquidity. Sounds pretty shallow, don’t it? Let’s just imagine some day I make a big mistake and lose it all. They throw me on the street. In no time, I’m part o’ this crowd. Makes a guy think. Maybe I got a talent for it, though—who knows? But it’s a profession without nobility.
Of course there’s gangs and outright criminals in the mix. Then there’s a lotta homeless people with no hope. Alcoholics, drug addicts, and whack jobs. Minds gone over the edge. They say Old Man Percy’s got millions stuffed in the bank but he’s sleepin’ here on the pavement whenever they shove him outa the loony bin. You think you can change him? Think again.
Everybody’s awake now. I always ask if one of ‘em can recite a famous quotation. Gotta keep up the level o’ education here. So I calls for somethin’ Christmassy. I give ‘em a choice—Isaiah 7:14 or Matthew 1:23, whatever their preference—theys exactly the same text. And Fred rattles it right off while Big Bubba stares him in the face, mouth hangin’ open. Fred’s a real intelligent guy. He’d be a good addition to my team.
Note to John – Why not make him a reporter?
Note to Loop – Bring him around for an interview.
Anyway, Fred’s recitation earns a C-Note for every one of ‘em that’s present—even Old Man Percy and the two Hobbits. Except I peel off ten fer Fred. Hell, it really is almost Christmas. I know most of ‘em is gonna waste it but I ain’t tellin’ these guys what to do with their own money.
Then Big Bubba rumbles to himself in a deep bass, “Emanuel—I thought dat was da name o’ da mayor.” Whadaya gonna do with guys like that?
Note to John— I ain’t had no coffee yet this mornin’ after a real rough night. Too much booze and no sleep, so maybe you oughta clean up my copy. I think I’m runnin’ on like the old days—I mean before I got some college. Understand what I’m sayin’?
Note to Loop— I find your account lucid and concise. I’ll publish it as is. And a graduate degree in finance at the University of Chicago is more than “some” college.
Stumbling over the Truth
Fred and Big Bubba take me up on my offer of breakfast. There’s a good old diner along the way. That’s the real reason I picked this station. But before you get to the gentry part o’ town, you gotta walk under the overpasses. The Kennedy Expressway bridges make natural roofs fer the homeless and the piles o’ rubble at the sides reek somethin’ horrible. Yeah it’s raw but so is any city.
Another thing about cities is potholes. In good times there was always holes in the street. Now, with this economic depression it’s worse than ever. So we’re walkin’ down Ashland Avenue at a brisk clip, enjoyin’ each other’s company and I’m scannin’ around like any careful city dweller when the next thing I knows I’m on my face. Lousy pothole—right in the sidewalk of all places.
Fred and Big Bubba haul me back to my feet and brush me off and I check for damage. Maybe a guy can get away with slashed knees and filth on his rumpled blue jeans but it don’t look right on a $2,000 suit. In an instant I go from Mr. Bigshot to a reject from the Salvation Army. But now I fit in with my companions, so I shrug it off. And I got a mile ahead o’ me to walk off the sprained ankle. But in a couple blocks we reach the nice section and the diner I told you about.
The Private Room
The cashier at the restaurant tries to push us out the door like we’re the Blues Brothers or somethin’. Probably thinks we’ll drive off the clientele. Phooey. Maybe this is a classier joint than Julio’s House of Jalapeños but hey—it’s still a diner, not the Chez Paul. So I ask for Lonny, the owner, and he leads us to a back room stacked with boxes. They lay a nice table for us and the room is perfect for planning out crimes and runnin’ poker games.
Big Bubba orders three stacks o’ pancakes. He butters every one of ‘em and drowns ‘em all in maple syrup. Fred sticks with a piece o’ pecan pie. But I dig into steak ‘n eggs with toast and A-1 Sauce ‘n’ bacon. And more important—a big pot o’ coffee for each of us. Round about the fifth cup I’m feelin’ a whole lot better. Fred smokes a cigarette. We talk. Lotsa stimulating conversation. It cheers me up. Now I’m ready—ready to meet with big money at the FFF.
Back on the street, Big Bubba and Fred part ways with a wave and a Merry Christmas. When I suck in the brisk air, I feel more coherent and alert—ready to pick winners, negotiate terms. Less than a mile left to walk off this sprained ankle. I think about them that puts their heads down on a frozen sidewalk and the ankle don’t seem so bad no more.
Note to John—Do I sound more coherent and alert now that I had my coffee?
Note to Loop—You’re always alert.
Here’s another thing I find interesting about the city. Here in these gentrified sections you can never tell what’s inside a building. Alotta these are new construction or complete makeovers with big-time brands on their signs. Those buildings are nice inside—most o’ the time. But the others can surprise you. The outside of the Chopin Theater looks like a dump that’s been a dump for the last hundred years. Turns out completely different once you walk in the door. This place is gorgeous. A great spot for the FFF.
A beautiful lady greets me like royalty. I check the layout. Nice lobby. Nice coffee bar. Nice theater space for the companies to present. Steep stadium seating so everybody can see. Doors and windows floating around the stage give it a class look. I figure them’s props for some production but it’s a bonus for us.
I take in the morning’s presentations. Then I go bummin’ downstairs. Wow! A huge room with a great spread of food and drink. This is way better than the old place. People can talk and strike deals while they feed at the trough and make all the racket they want. Meanwhile, the presentations go on in the kinda setting they deserve—quiet and focused. Kudos to David Culver and company for finding this spot and nailing it down.
So what’s the FFF all about? One o’ the most important things in the world—starting brand new companies! That means keepin’ as many people off the streets as we can! So here I am wolfing down food, crackin’ jokes, and talkin’ to intelligent company. Lotsa stimulating conversation. It cheers me up. Just like breakfast with the bums. Now I’m ready—ready fer the rest o’ the day.
Listen John, I went off on a tangent and didn’t even cover the event yet. Now my batteries is gettin’ kinda low. I’ll buy some fresh ones and get back to ya later. Fer now, have a joyous Christmas.
Funding Feeding Frenzy
Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link. This is not investment advice. I do not guarantee accuracy. It’s not my fault if you lose money.
.Copyright © 2012 John Jonelis – All Rights Reserved
The Chicago Innovation Awards – Part 3
I’ve jumped aboard a Gulfstream G450 to interview the legendary Loren Bukkett. I want his take on the Chicago Innovation Awards. He finally puts away his phone and turns to me. “Okay, let’s talk,” he says.
I take that to mean he’s already finalized all the deals that peaked his interest. Nice to have a large staff to handle the details. But here in the jet cabin, it’s just Loren, his wife Aussy, and me.
Aussy is doing some form of shorthand on a tablet computer. That woman hasn’t spoken since I climbed in the plane. Maybe Loren asked his wife to keep it buttoned. Maybe he wants to control what information gets out. At this point, I’m afraid to ask her a direct question. I even wonder if this is their secret strategy to keep outsiders off balance. If so, it’s working.
They give out so many honors at the Chicago Innovation Awards tonight that I can’t keep it all straight. So much glitz and pizzazz. Jumbo screen. Music. Entertainment. Applause. Streaming internet content. I appreciate the way they present a standardized set of videos to highlight the mission of each winner. A professional job and it moves things along nicely. With sponsors like Disney, Comcast, and Wrigley, they can afford to do it right.
I pull out my notes. “Let’s do the ‘Up-and-Comer’ category first.” I proceed to read off the list but Loren waves me to a halt.
“We’ll do it my way,” he says. And he goes on to tell me about every company that won an award at that event. He does it in depth. No notes. No prompts. At his age, that kind of memory astounds me.
“Now John, keep in mind that for twelve years, every company with an award from this group is a success. And there are a lot of them. That’s impressive and gives an old investor like me a feeling of confidence. Of course my people check out these companies in depth, but you can’t help but come away with some degree of certainty—a belief deep down that every one of them will find a way to make it.”
“You said they’ll break that perfect record this year.”
“That’s the awards to those two politicos, not the companies. No as I see it, what we have here is a large pool of opportunity. I already set some wheels in motion. Don’t ask me which ones.” He clasps his hands behind his neck and leans back. “When you get to be my age, you either turn into a curmudgeon or you win back some of that idealism you enjoyed as a youth. These days, a big part of my strategy includes companies that are doing-well-by-doing-good. I saw a few tonight. One of them is BriteSeed.”
I nod. “I saw them pitch earlier in the year—at BNC I think. They made a big impression on me.” I splash three fingers of his excellent Hennessy into each of our snifters. Maybe the combination of spirits and altitude will keep him loose.
“It’s a hot sector,” he says. “Their SafeSnipstm technology could be life-saving. Imagine it on a large scale. No more surgical accidents. Billions of dollars saved.” He leans toward me and lowers his voice. “Keep your eye on Northwestern Global Health and their rapid HIV diagnosis. And Recall-Connect built an automated system to match defective medical implants with patients. No more wading through reams of paper files. Medline came out with an anti-viral face mask. Preventing disease is real attractive to me, but this one’s a family company, so…”
“No need for investors?”
“We’ll wait and see. My only concern with Feeding America is scalability. But they won the Social Innovator Award so people need to take that group seriously—very seriously. Any way we can fight hunger, we oughta do it.” He gingerly takes a tiny sip of his cognac as if he’s already had enough to drink. “I’m interested in the People’s Choice Awards winner,” he says. A little company, New Futura, wants to help Latinos achieve the American dream. Naturally I’m attracted to those kinda offerings. Then there’s Moneythink helping high school kids with their careers. That’s about it for the do-gooders.”
He pauses a moment, pats his stomach, then grins. “That’s another hot sector. That company is off and running in 10 markets with half a million customers already. I’m sure they’ll do well. But I’m not in the mobile app or social media space.”
“Doesn’t that limit your exposure to startups?”
“That it does, John. That it does.” He takes another tiny sip of cognac. “Anymore,” he says, in his Midwestern idiom, “Anymore there’s so much money chasing mobile. So many new startups and only a few will pay off. The good ones get bid-up. Way too high for my liking. New York, Boston—all those great centers for venture capital are in love with mobile and social media. Maybe it’s good for Silicon Valley but it doesn’t fit my strategy. That’s why I come to Chicago. Of course I make exceptions.”
“Do you see a bubble?”
“Well, you always need to keep that in mind. For me it’s more a problem of value.”
That catches me off-guard. “Some. I saw them present at the MIT Whiteboard Challenge. Seems like a winner to me but with so many great offerings, the judges at that event looked elsewhere. Do you think the technology is practical? Can they actually store and transport natural gas in bulk the way they suggest?”
“Keep your eye on them,” he says. And suddenly I wish my investment portfolio could stretch that far.
He takes more from his snifter and my hopes of getting him to comment on the awards to the governor and mayor are one step closer to reality. “1871,” he says. “That is without a doubt the most significant incubator I’ve come across. They made up their minds to do it right. 50,000 square feet with an option to double. Three universities keep offices there. Venture capitalists too. A successful startup from Northwestern keeps two big rooms to teach folks to code in new languages. Lots and lots of aspiring companies—and you gotta pass their standards to get in! This is one of the new hybrids—part incubator, part accelerator. Most of their companies are outside my investment horizons but every one of them is highly interesting. It must be a great resource for you.”
Loren lifts his feet back to the tabletop. “That one hopes to cure a sore point of mine. They want to help the little guy fight back against high frequency trading syndicates. We’re talking trading in-and-out in nanoseconds. Nowadays these guys own 70% or more of the volume on most of the exchanges. And naturally, the exchanges reciprocate by giving them the same privileges as market makers. But they don’t carry any responsibility like market makers. Or risk. They don’t make orderly markets. No, they hit and run. They’re speculators. Why should they get the first look at all the trades? It’s all driven by greed on the part of the exchanges. I think it should be illegal.”
I’m leaning forward and nodding vigorously. “It’s the High Freaks that changed my approach to trading. I had to slow my timing way down and widen my stops—take on more risk.”
“Well alotta people are going broke because of it. These operations spend upwards of $100,000 a month for the fastest hookup and shortest wire to the exchanges and then run everything by computer algorithm. This new company wants to level the playing field.”
“The jury is still out.”
Loren talks another twenty minutes to cover it all. Food Genius, mentormob, and mobcart, all leverage the Internet to aggregate information and communication. Cummins Allison of all people is selling a document scanner for banks. Borealis makes a light that takes 90% less energy and lasts 30 years.
That leaves Bright Tag, Catamaran, Littelfuse, and SMS Assist. An impressive event in execution, scope, and promise. It amazes me that so many fine businesses are right here in Chicago. All they need to succeed is a boost in the economy.
We clink glasses. “So Loren, I still want to talk in-depth about the awards to the governor and mayor.”
Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts are welcomed and encouraged. This is not investment advice – do your own due diligence. I cannot guarantee accuracy but I give you my best.
Copyright © 2012 John Jonelis – All Rights Reserved
The Chicago Innovation Awards – Part 1
I’m talking to investing legend, Loren Bukkett—the Prophet of Pekin, immediately after a big event in Chicago. “Twelve whole years,” he says. “A hundred percent of their winners are all still in business. And tonight they break that perfect record.” He’s talking about the winners of the Chicago Innovation Awards and he’s got my attention. Which companies are going down?
This guy is seemingly unassuming. Uncombed hair. Rumpled blazer. Now he leans across the lounge table of the big Gulfstream G450 and speaks softly to the lady taking shorthand. “Pardon me Aussy,” he says, “Would you please file this conversation with the rest of tonight’s papers?”
She nods and then graces me with a striking smile and I think back to a time before they got hitched. One smile, that’s all, and I’m lost in the past, only vaguely aware of the man’s voice in the background. This gal sure doesn’t show her age.
“Hey Jonelis, you awake?”
With that, I stop ogling his wife and look him in the eye. This is turning into a strange interview. Because of his tight schedule, we’re going Mach 0.8 at 40,000 feet in this beautiful corporate jet enroute to—I don’t know where. In an hour, he says he’ll send me back in another plane. I’m hoping for something small. A Piper Citation can land at my home airport for an early-to-bed. This big jet is a corporate timeshare. I saw a similar timeshare scheme pitched tonight, but with trucks instead of airplanes.
An acerbic voice jars me to my senses: “Jonelis—are you done daydreaming yet?”
I smile. “For now, I guess—till I get another chance.”
“Good, then stay alert. As I was saying, Chicago’s in big financial trouble. A lotta trouble. You know it as well as I do. Heck, the whole state’s in trouble—almost as bad as California.” He gives me a down-home grin. “And as you’re no doubt aware, that’s what brought me here tonight.”
“You see a bottom?”
“A bottom? Nobody ever knows if it’s the bottom but use your common sense. This place will bounce back eventually. I’m not saying this town will solve its problems—likely as not they’ll do nothing or move in exactly the wrong direction. But business here has such a long, long way to bounce—a heck of a long way. I’m willing to take a position on that. The trouble with young investors any more is they don’t have the nerve or the stamina.”
I scribble some notes. It seems a safe bet he just took a stake in some of the companies honored at tonight’s event—maybe all of them. Could be he acquired all of them. He’s going on:
“One thing most people don’t understand about hard times—and John, these are real hard times—no doubt about that. The thing people get wrong is this: Tough times don’t blunt the sharp point of innovation. Not at all. When it gets this bad, desperation feeds creativity. Invention kicks in. People find a way to survive. Look how India and China exploded out of utter ruin in spite of their governments. I see Chicago as the next center for thought leadership in the entrepreneurial world. It could rival New York, Boston, Silicon Valley.”
“You’re really sold on Chicago?”
“I think I made myself clear on that. I’m not betting on the city—not even the state. No, I’m looking at individual companies that rise out of these terrible circumstances. Only strong organizations succeed in an environment this nasty. If they can make it without greasing palms, I’m interested.”
I scribble more notes and try to memorize as much as I can. “You’re telling me that squalor makes it easy for you to pick winning companies.”
“You think you got me figured out. Put away that blasted pencil.” He glances at his wife. “Aussy, see that Mr. Jonelis gets a transcript, would you please?” Then he swivels his leather chair and faces me head on.
“I’ll lay it out for you straight. It’s real simple. Here’s my secret: Hard times create a supply and demand imbalance. Innovation takes off, but at the same time investors run scared. Banks won’t lend. You end up with too many good ideas and not enough capital. That’s when I buy.”
“At a bargain?”
He looks at me from under his shaggy eyebrows. “D’you think?”
That draws a laugh out of me and I tuck away my notes.
“John, you’re the one that lives in that town. Look around. Don’t you see the huge vacuum? You know what happens in a vacuum?”
“Sure. It gets filled. Real fast.”
“That’s exactly right.”
Now that I’m in on his game, I can picture how it unfolds. “And when that happens, politicians grab the credit.”
He just smiles.
“And you laugh all the way to the bank.”
He tenses like a gambler holding his cards to his chest. “Let’s just leave it that the vacuum gets filled.”
“So what’s your take on the mayor and governor getting awards at the event?”
He grins. “That’s how the Chicago Innovation Awards loses its perfect record. But you do not want to get me started on politics!”
Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts are welcomed and encouraged. This is not investment advice – do your own due diligence. I cannot guarantee accuracy but I give you my best.
Copyright © 2012 John Jonelis – All Rights Reserved