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Silicon Valley Hustle: Former Motionloft CEO Accused Of Defrauding Investors


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Silicon Valley Hustle: Former Motionloft CEO Accused Of Defrauding Investors

Thanks to a series of high-profile exits and a generally frothy financing environment, it’s not unusual to see startup founders spending money lavishly these days. But the story of Motionloft and its founder Jon Mills could serve as a cautionary tale, especially for unsavvy investors drawn to a big payout.

On the surface, Mills seemed like a successful entrepreneur. His company, Motionloftprovided real-world analytics for store and property owners who needed to analyze pedestrian and vehicle traffic that passed by their respective establishments.

Mills was a first-time entrepreneur, but he had received backing from high-profile investors like Mark Cuban, and according to the Motionloft website, the company had secured clients like CVS, Saks Fifth Avenue, and Cushman & Wakefield.

Several former friends say Mills was also fun to be around and generous about inviting them to party with him at various music festivals and in places like Las Vegas.

All of which is why, when Mills started asking friends if they wanted to invest in his company, a few of them jumped at the opportunity.

They say Mills cashed checks that altogether were worth hundreds of thousands of dollars, promising them a small percentage of the company. Later, when he told them an acquisition was imminent, they felt confident they had made the right decision.

Mills is no longer part of Motionloft, and the validity of the investments his friends made while he was there is being called into question by earlier investors. As a result, after months of waiting, those friends now believe that not only was there no acquisition, but that it is possible they won’t get any of their money back.

We’ve spoken with Mills, and the former CEO admits to leaving the company in November. But he also says that all money he took as investment from friends was legitimate and used for company expenses, and he denies telling friends the company was going to be acquired.

New Investors

It all started in early 2013. Around the time of the Super Bowl, sources say Mills told some friends he had a couple of Motionloft “advisor points” he could use at will, enabling them to buy a small percentage of the company. For some, he also dangled the possibility of an acquisition that would make the investment pay off.

“He told me, ‘Mark Cuban said to pick two good friends who could afford [the advisor points],’” said one former friend, who we’ll call “Stephanie.” (Several of our sources have asked us not to use their real names.) “He said, ‘Give it to Motionloft, and come June you’ll get a percentage of the sale.’”

Stephanie (again, not her real name), was a friend of Mills’ girlfriend and had spent a lot of time with him over the previous two years. She trusted him enough to empty out her savings account and write a check for $20,000. Mills then promised her documents showing she was a shareholder in the company soon after, but she says that paperwork never came.

To celebrate, she was asked to join Mills and his then-girlfriend, along with some others, on a trip to Coachella that included a ride in a private jet and stay in a rented villa outside the music festival.

Mills claims that Stephanie was given a convertible promissory note in February, and his attorney has sent us a copy of the contract. It is dated February 21, 2013, the date that she made her investment.

jets

Jon Mills and entourage loading up two private jets for a trip to Palm Springs.

Stephanie wasn’t alone in being asked to invest, nor was she the only friend and investor that Mills took on expensive trips. Throughout the spring and summer of 2013, Mills courted other investors to the company from his group of friends.

Another former friend, who we’ll call “Jason,” tells a similar story. In April he was asked if he wanted to invest, and was told that the money would be used as a bridge loan to cover Motionloft expenses.

Jason ended up writing a couple of checks for a total of $200,000, but unlike the earlier investor we spoke with, he received paperwork to confirm his investment.

No one seems to know exactly how much Mills collected during the period in which he was soliciting money from them. Jason and Stephanie know of a few others within their group of friends and that they were invited to events with.

But so far, most have declined to share even with each other how much they invested for the same reason everyone we talked to didn’t want their names to be used for this article — that is, they are all embarrassed that they fell for what they now believe was a series of lies by Mills.

“As far as how much money was raised, Jon is the only one who really knows,” one of them told me.

Unlike Stephanie, not everyone invested because they were told an acquisition was imminent. A couple of people we talked to believed in the Motionloft business. But in the fall, Mills began telling people who had invested that the company had been sold and they should expect a payout soon.

Jason shared with us copies of text messages that Mills had sent him, some as early as mid-October, in which Mills boasted that the company had been sold. Mills showed Jason an incoming pending transfer of $37.7 million for his share of the company, and said the friend’s stake was worth $2.9 million.

Mills denies ever telling people that the company had been acquired and claims the texts as they appear below were written by someone else.

texts1

But Jason isn’t the only person claiming Mills told them Motionloft had been acquired. Stephanie and another source, who we’ll call Matthew, confirmed that they were also told the startup had been sold.

“He told us, ‘The company has been sold, you guys are all millionaires,’” Matthew said. For those who had invested in the previous months, the deal seemed too good to be true.

It wasn’t until later that they found out it was indeed too good to be true, and that Mills had been lying about the acquisition all along. There was no big payout coming.

What Happens In Vegas

Mills had a habit of inviting friends to join him for opulent parties, dinners and trips. Sources say that in a strange way, his profligate spending was part of the reason they felt confident investing in his company.

After all, he wouldn’t be spending tens of thousands of dollars a night at clubs if Motionloft weren’t doing well.

But the same spendthrift behavior that once assured them when writing checks to invest in Motionloft also eventually led them to believe that something was amiss.

It all came to a head in late November 2013 when Mills invited about a dozen friends to join him and his then-girlfriend in Las Vegas for a weekend to celebrate her birthday and the acquisition, which Mills said had finally closed.

It was the third such trip that Mills had taken people on over the course of several weeks, and it was the most excessive of the bunch.

Over the course of a few days, Mills racked up hundreds of thousands of dollars in expenses that included private jets, a penthouse suite at the Palms, and extravagant dinners.

Stephanie tells us that she had reservations about going on the trip at first. She had little money in her bank account and was waiting for the long-promised sale of Motionloft to finally close.

The reason she went — besides the fact that it was to celebrate her friend’s birthday — was that she was hoping to find time to confront Mills and ask for some of her money back. But there never came a good time to approach him. Sources we spoke with who were on the Vegas trip say that Mills seemed agitated the whole time.

His behavior, especially when it came to money, also raised red flags among some of his friends. For instance, Mills had booked private charters for his friends to fly into and out of Vegas and was staying in the penthouse suite at the Palms, but guests were asked to book their own rooms.

There was also the occasion of a large, expensive dinner at Hakkasan in the MGM Grand. With two tables and plenty of drinks and dinner, the tab came out to nearly $20,000. But Mills arrived late to his own party and left early, meaning that it ended up on Jason’s credit card instead.

miguel

Jon Mills booked R&B singer Miguel for a private performance, which sources say cost $100,000.

The reason Mills left early was so that he could prepare the suite for the coup de grâce of his expensive weekend retreat. When his guests finally arrived back at the suite, they were treated to a private performance by R&B singer Miguel.

After spending the entire trip seeming preoccupied, it wasn’t until the private concert that Mills finally cracked a smile, Stephanie told me.

“It was like he was thinking, ‘I did this. I made this happen,’” she said.

Fallout

After realizing how much the previous few days had cost, the friends who had once written checks to invest in Mills’ company began to wonder when they would get their share of the proceeds.

Mills, in an effort to alleviate their fears, showed them what appeared to be the dashboard of his online bank account. It had $38 million in it. Their portion of the payout, he said, would be coming soon.

Below is a photo of the checking account balance Mills showed to others we spoke with. He denies that the phone is his, saying he never owned one with a crack in it.

That much is true: The photo is actually of a screenshot he shared with Stephanie. The reason she took a photo of her phone, she tells us, is that Mills wanted to share his good fortune with her, but told her she needed to delete the screen shot immediately after seeing it. She deleted it, but not before taking a photo of it on her screen.

mills account balance

Nevertheless, some on the trip began to wonder why they kept having to foot the bill if Mills was so flush with cash. After the Miguel performance, according to people who were invited, some guests began to confront Mills about money he owed them for personal expenses.

For instance, Jason, who got stuck with the previous night’s tab, confronted Mills. He said to Jon, “You just got all of this money, why did you stick me with the club bill?”

Mills promised they would get their share of the sale soon, but the wires never appeared in their bank accounts. Moreover, the group soon began to suspect that Mills wasn’t paying other bills.

Sources say the private performance by Miguel, which cost $100,000, was never paid for. That was also true of the private jet charters, which included three separate flights into Vegas and four flights out, and cost nearly $100,000 altogether.

Justin Sullivan is the CEO of Private FLITE, the private jet service Mills used to charter the flights in November. He told me that Mills promised several days in a row he would pay for those flights by wire and later told Sullivan he would FedEx a check. Neither came.

After multiple attempts to reach Mills on the phone, Sullivan confronted Mills at his house to demand payment. Mills then wrote two checks for a total of nearly $294,000, but both bounced, Sullivan told me.

Sullivan then created a website called JonMillsFraud.com in which he has uploaded copies of the receipts for Mills’ trips, as well as screen shots of his own text conversations with Mills.

He also began reaching out to other people who had been on the charters and found many of them were also owed money by Mills. Seemingly all at once, everyone began to feel like they had been duped.

motionloft tshirt

One investor had this T-shirt made after things went bad.

A Plea To The Board

With little other recourse, some of those who gave checks to Mills turned to Motionloft’s original investors who confirmed their fears: There was no acquisition pending. There was not even a conversation with an acquirer, they had been told.

In retrospect, some wonder why Mills told them the company was about to be acquired, especially those who invested, because they believed Motionloft was a solid, viable business.

Jason and Matthew both told me that they wouldn’t have realized anything was amiss if Mills hadn’t boasted that a deal had been done or took the group on the trip to Vegas.

After they figured out something was up, Mills’ friends seeking to be repaid the money they invested in the company went to Mark Cuban. According to our sources, they were told the company had no record of their investments.

Apparently Mills and co-founder Chris Garrison had created a separate checking account from the company’s main account when they began soliciting funds from outside investors. Mills has confirmed this is true, but claims this second account was only ever used for company expenses.

Not everyone who gave Mills money has documentation to prove it, except for cancelled checks written out to Motionloft. Those who do have paperwork have been told by the board that its validity is questionable. We took a look at the paperwork that was given to one investor, and passed it by an attorney to review.

We were told that the document, which is structured as a convertible promissory note, appears to be legitimate, although it was not exactly a “well-written contract.”

Our sources have been told, however, that Mills had no authority to sell any shares without the board’s approval, unless they were his own. We’ve obtained a copy of the original investment agreement between Motionloft and investor Mark Cuban, dated June 30, 2010, which states that the company cannot issue any securities or guarantee any debt without Cuban’s prior written consent.

In an email exchange obtained by TechCrunch between Jason and Motionloft investor Mark Cuban in late November, Cuban wrote:

“Motionloft can only be responsible for what Motionloft has paperwork for… Anything that Jon has done that is reckless or illegal is Jon’s responsibility. Not Motionloft’s.”

Those who received documentation had been issued convertible notes that mature a year after they were issued. Those notes come due beginning early next year and throughout the summer, but Motionloft might not be able to pay them off at that time.

Later in the email exchange we obtained, Cuban said that the company had no money to repay those who Mills received investment from. In fact, he wrote that he would likely have to recapitalize the company to keep it going.

mills cuban

Jon Mills with investor Mark Cuban at SXSWi 2013.

“The company is bankrupt,” Cuban wrote. “I had to put up a credit card yesterday so they would not get kicked out of their offices for 30 days. They have no cash. I’m trying to figure out how to keep them in business.”

In that exchange about six weeks ago, Cuban also urged the person who contacted him not to go to the police until he had a chance to “figure out what is going on” and “see where i can take this.” He wrote:

“If we go right to the authorities and it becomes an issue that drains resources than it hurts our chance to do anything… I can’t handicap the odds of any of us, but my guess, and its only a guess is that if it becomes a police matter in the short term, it gets much harder.”

That’s one reason why those affected have held off on getting the authorities involved. Those I’ve spoken with recognize that contacting the police or going public with the story would reduce the likelihood of either Mills or Motionloft paying them back.

In the weeks that have passed since they first contacted Cuban, we’ve been told that communications have hit a stand-still. Whatever hope investors had a month ago that Motionloft and its earlier investors would honor Mills’ agreements have since been quashed.

Cuban declined to comment, except to confirm that Mills is no longer associated with Motionloft. Indeed, Mills’ name and bio disappeared from the company’s management team page shortly after his trip to Vegas. But for those who invested, it was already too late.

Denial

As for Mills, he categorically denies all the claims against him. When we first reached out to him on December 23, he pleaded for more time to collect documents which he claimed would prove his innocence.

In the next few days, Mills only sent a limited screenshot of an Excel spreadsheet — presumably meant to show that the investments people made went into the same bank account that Mills used for expenses — and a canceled check from that account that Mills claims was to pay for Motionloft’s rent.

On December 26, Mills began working with Los Angeles-based attorney Marty Singer, who I’ve been speaking with ever since. Singer, in case you haven’t heard of him, is the “pitbull attorney” celebrities turn to in times of crisis. He’s the guy Charlie Sheen called in his dispute against Warner Brothers, for instance, and he represented Scarlett Johansson when nude photos of her hit the Internet.

Mills’ attorney sent me a copy of Stephanie’s promissory note to show that Mills had a record of her investment, although she still claims she hasn’t received it, and her signature is not on the document. Singer also sent me a prepared statement from the following statement from Mills:

The investors’ money was all deposited into company accounts and it was used for company expenses. I never told them that the company was being acquired. I did not send the text messages as they appear in the screen shots. The text messages shown to me by you were created by another person. Also, I never had a phone with a cracked screen. I last worked for Motionloft during the last week of November.”

However, Mills’ statement came after Jason sent me a series of texts asking for more time before we published this story. He said the extra time was necessary so that his attorney could speak with Mills’ attorney. When I told him that we couldn’t guarantee that, he sent a text retracting his previous statements.

“Until the attorneys speak, I retract everything. I made it all up,” Jason wrote.

made it up

Text conversation between Jason and Jon Mills.

The email containing Mills’ statement, which was sent after Jason’s retraction, also contained the following note:

Also attached (below) is a text message from [Jason] sent to my client today, confirming that he made up the text that you sent to our firm earlier today. Therefore, to the extent that you are relying on any information from [him], he is an unreliable source, since he has confirmed that he created a phony text to justify your story against our client Mr. Mills.

I trust that you will not defame our client.

When I sent Jason a screenshot of the statement I received from Singer, along with the word “Thanks,” he responded: “Are you being sarcastic? His lawyer is up my ass.”

In the several weeks that I’ve been speaking with Jason, he didn’t strike me as the type to make up a story this elaborate, let alone create and backdate a series of phony text messages. It’s also not clear how Mills could have known who sent me the texts in question, if they had been written by someone else.

More importantly, however, Jason’s statements, and the documents and texts he provided, correspond with evidence we received from other sources, which is why we’ve decided to include them.

At the end of the day, Jason is just a guy who gave money to Jon Mills and wants it back. In that respect, he’s not alone.

Featured image: Floris M. Oosterveld via Compfight cc. Photo of Jon Mills and Mark Cuban from Jon Mills’ Twitter account. Photo of Jon Mills and Miguel from JonMillsFraud.com. All other photos provided by sources.

http://techcrunch.com/2013/12/30/motionloft-jon-mills/

 

A Close Encounter with a Pay-to-Pitch Investor


Oh, the people you’ll meet raising money

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”!

Written by

Co-founder @Bombfell (@500Startups ‘12). Lacking in smarts, making up for it with false humility.

 

Let yourself fail


Admitting to fail was the hardest thing I ever had to do. At the same time, it was the most valuable and learning experience in my entire life.

Image representing TechCrunch as depicted in C...
Image via CrunchBase

 

I’ve always considered myself a very lucky person. I started my first company kind of by accident at the age of 15. Now I run three companies, all of them co-founded with the best friends. I enjoy the journey very much, I’m healthy and young, I have great family and friends.

Not that long ago, I wasn’t used to failure.

At the age of 18, I thought: let’s make something even bigger. Let’s create a global product, get investors onboard and make it huge. I read on TechCrunch that this is what cool kids are doing these days. MyGuidie started at 1st Warsaw Startup Weekend. Amazing team, great idea, big vision… We built a product, we got some traction, we won international startup competitions. I was already a well-known polish entrepreneur at the time, so we got a pretty big coverage and we gained some investors attention. We even sold 1% of shares on the auction and that got us a lot of hype and coverage in press or national tv. We were on the top of the world for a while but at the same time we didn’t stop working hard on getting more traction.

And we still failed. From the very top all the way down.

I closed this startup more than one and a half year ago and it was single, most learning experience I had in my life. I’m sure everyone who failed can say exactly the same.

source

Read more – > https://medium.com/lessons-learned/5ef5adcd05f8

 

 

THE FRENZY


Funding Feeding FrenzyBill Blair - special correspondent –

as told to John Jonelis

Bill Blaire here. Mr. Jonelis wants I should go to this FUNDING FEEDING FRENZY thing. Says I’m gonna give a completely different slant compared to the resta this crowd here. I cut my teeth in the Local #1 Boilermakers, then as a Cement Contractor till I packed up my tools fer good. Continue reading THE FRENZY

Icahn, Southeastern mount challenge to Dell buyout


Files photograph of a Dell laptop computer in New York

(Reuters) – Carl Icahn and Southeastern Asset Management Inc have mounted an aggressive challenge to Michael Dell’s controversial $24.4 billion offer to take Dell Inc private, offering $21 billion in cash to shareholders while vying to wrest control of the company from its co-founder.

Michael Dell, major shareholders such as Southeastern and billionaire activist investor Icahn are waging a battle over the future of the world’s third largest personal computer maker, once a tech-industry high flyer, but now struggling to evolve as people embrace smartphones and tablet computers.

Michael Dell and private equity firm Silver Lake want to take the company private for $13.65 per share, making it the largest buyout since the 2008 financial crisis. But many shareholders, including Southeastern and T. Rowe Price, complain that offer severely undervalues the company.

Instead, Icahn and Southeastern, two of Dell’s biggest shareholders, proposed a deal that gives shareholders $12 of cash for every share they own, as well as allow them to keep their stock. Given that they retain their stake in the company and that the rival offer is for $13.65 a share, every stock owned takes on a value of $1.65, Icahn and Southeastern argue. (r.reuters.com/tug97t)

At $12 apiece, the cash portion of Icahn’s and Southeastern’ s offer will come to $21 billion.

Should Dell’s board rebuff them and put the go-private offer to a shareholder vote, the pair will nominate a slate of 12 directors to challenge the current board. In an interview with CNBC on Friday, the activist investor said Michael Dell will no longer run the company should his slate of candidates be elected.

The initial reaction from shareholders was favorable, though some investors hoped the latest offer would prompt Michael Dell to offer a counter. David Moon, Chairman of Moon Capital Management in Knoxville, Tennessee, said his firm sold its Dell shares weeks ago and warned that failure to secure any sort of deal might send Dell’s shares back to $10 a share, before Michael Dell’s takeover offer.

Mario Gabelli, chief executive of Gamco Investors Inc, said via e-mail he would vote in favor of the latest proposal. On Twitter, he wrote it was a “good alternative” to a leveraged buy-out. Gabelli investment funds own about 5.2 million Dell shares, latest filings show.

“It’s improvement. It gives people a choice. The other (proposal) comes across like a ramrod,” said Donald Yacktman, founder and CEO of Yacktman Asset Management which holds 14.8 million shares, according to Thomson Reuters data. “Whichever way things evolve, what this is doing is forcing better capital allocation than we have seen in the last five years.”

On Friday, Icahn again suggested Michael Dell would be the biggest beneficiary of his own proposed buyout, which would exclude current shareholders from participating in the fruits of his restructuring effort.

Icahn’s offer “gives us the opportunity to continue our participation in Dell’s operating business and thus we believe it to be superior,” said Tim Piechowski, associate portfolio manager, Alpine Capital Research, St Louis, Missouri, which owned 2.5 million shares as of May 10.

Dell shares were up 0.7 percent at $13.42 in late trade.

VISION

Icahn argued in a letter sent to Dell’s board and made public in a filing on Friday that Dell operates a large enterprise-focused computing business in addition to its ailing PC division, with strong ties Microsoft Corp and Intel Corp. Without specifying details, he also said cost savings could be had from merging assembly plants across the world, while there remained opportunities to spin off non-core businesses.

That echoed Michael Dell’s own strategic vision for a company he hopes to transform from a purveyor of low-margin PCs into a global provider of high-margin services for enterprises.

As for Southeastern, past filings show the fund management firm run by Mason Hawkins bought into Dell’s shares at about $16.88, meaning a huge loss were they to accept a buyout.

Icahn told Reuters on Friday he will personally contribute a couple of billion dollars to finance a $5.2 billion bridge loan needed to effect his deal. He added that he had already reached out to several investment bankers. Later, he told CNBC in a TV interview that one of those investment banks included Jefferies, which would contribute $1.6 billion to the loan.

Jefferies & Co declined to comment.

The Icahn and Southeastern challenge comes after Blackstone LP ended its pursuit of Dell in April, and pulled out a month after it teamed up with Icahn to challenge the take-private attempt.

It was “insulting to shareholders’ intelligence for the board to tell them that this board only has the best interests of shareholders at heart,” Icahn and Southeastern said in the letter. “We are often cynical about corporate boards, but this Board has brought that cynicism to new heights.”

Dell said in a statement on Friday that its special committee is reviewing the Southeastern Asset materials and will provide comment in “due course.” A representative for Silver Lake declined to comment.

“I don’t think Icahn and Southeastern have enough sway over the shareholders,” Raymond James analyst Brian Alexander said. “As Dell has a lot of cash, (the latest deal) is basically like a leveraged private equity deal, without the company going private.”

Both Icahn and Southeastern said they would take shares rather than cash. They would finance the proposal from existing cash and about $5.2 billion in new debt.

Icahn and Southeastern together hold about 13 percent of Dell stock. The billionaire investor previously proposed paying $15 per share for 58 percent of Dell.

“As a shareholder, what I’m most pleased about is that the pot continues to be stirred,” said Robert Willis, president and CEO of Willis Investment Counsel in Gainesville, Georgia, which owns about 350,000 shares of Dell. “I like the fact that those who oppose this aren’t going to lie down.”

(Additional reporting by Jennifer Saba in New York, Aaron Pressman in Boston, and Sakthi Prasad and Supantha Mukherjee in Bangalore; writing by Edwin Chan, editing by Edwina Gibbs, Saumyadeb Chakrabarty, Jeffrey Benkoe and Andre Grenon)

(VIA. Reuters)

WHAT’S CLEAN


Impact Engine – Part 6

John Jonelis

~ VERBATIM from a special correspondent ~

PortaPure WaterChildLoop 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 Chicago Clean Energy Alliance logodone. 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.

.GCCA

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.

Impact EngineAfter 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:

.

Portapure

Portapure George PageGeorge 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:

.

Pocket Pure

Picture this: Say yer goin’ into the jungles of Haiti to do disaster relief. Yer gonna be

Dirty water
Dirty water

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.

Gathering water in a swamp

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:

.

Pure Lives

Purtapure Purelives
Purtapure Purelives

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.

Muddy waters
Muddy waters

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Da Business

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.

.PortaPure WaterChild

Da Awards

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.

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LOOK FOR PART 7 – COMING SOON
Go back to Part 1

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Meanwhile, here’s a video that explains the whole international competition:

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Da Contacts

Portapurewww.portapure.com

Contact – Info@PortAPure.com – 773 251 5779

1507 E 53rd. St, Suite 218PortaPure logo

Chicago, IL. 60615

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Portapure on 5 NBC Chicago

PortAPure’s George Page is Saving the World

http://www.nbcchicago.com/blogs/inc-well/Portapures-George-Page-is-Saving-the-World-132243943.html

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Portapure on Crain’s Chicago Business

http://www.chicagobusiness.com/article/20120823/BLOGS06/120829905/seeing-promise-in-water-purification

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Impact EngineImpact Engine

www.theimpactengine.com

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Chicago Clean Energy Alliance

www.theccea.org

.Chicago Clean Energy Alliance logo

GCCA—Global Cleantech Cluster Association

Their ten 2011 winners raised $462 Million.GCCA

www.globalcleantech.org/

Images and video courtesy Portapure, CCEA, GCCA, Impact Engine, and AP.

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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

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SIX REASONS WHY TECH BELONGS TO THE YOUNG


entrepreneur@nuWhy are young entrepreneurs taking over the tech world? Who gets these kids charged with the kind of passion that induces investors to open their tightly held wallets? They lick their chops like old men lusting after eager young virgins. We’re going to take a closer look at this phenonemon.

I’m at Northwestern’s all-day conference put on by “entrepreneur@nu,” their in-house accelerator for student startups. This session is called “Tech for Non-Techies.” I asked Bill Blaire to cover the keynote address. I want to be here, at this session. I want to hear Mert Iseri who’s on the panel. I’ve seen him present at the Levi mastermind group with his parner Yuri Malina and I already visited their skunkworks on the Northwestern campus for a closer look. These guys are recent grads, young and untested. But I’d be pleased to work with them no matter what the venture. (Well, almost.) Right now, they have something exciting by the tail. But if it morphs in an entirely new direction, it’s a good bet they’ll succeed just as well at whatever that is. Consultants are gathering like wolves but Mert and Yuri don’t need them–not yet, as you will see.

So here I am to hear Mert but I’m in for a surprise. I see what looks like an entire panel of Merts. Yes, every one of them is as electric as my favorite young entrepreneur. They each come from a different background, a different expertise, a different culture. But the reckless abandon is there in all five of them—and it’s addictive. I love it. Truly I do. So do the investors.

THE JOCKEY OR THE HORSE?

My belief in two young entrepreneurs begs a familiar question. Which is more important—the jockey or the horse? I’m backing the jockey this time. Am I right?

I mention this to David Culver of Extraordinary Success – www.extraordinary-success.com. He responds with an interesting comment: “Last time I checked,” he says, “nobody won the Triple Crown, finishing without a horse.” He goes on to say he’s seen plenty of enthusiastic entrepreneurs flame out. But I’m rooting for these two jockeys anyway.

Mert

I believe the entrepreneur is more important than the product or service at the very early stages. I believe this to be true especially if the leader is young. There’s no doubt these young entrepreneurs are smart–scary smart. But more than that, they’re having a whale of a good time. They think business is a blast–a rush. They’ve found a new drug. Instead of greed, they’re driven by joy. Look into their eyes and tell me you want to compete with them. I believe that the young have earned a number of advantages over those who call themselves “seasoned.” I can cite a few good reasons for these beliefs:

1—An early stage product and an early-stage business model will go through multiple iterations during the maturation process. I’m talking huge changes happening fast. Seasoning doesn’t prepare you to handle that kind of rapid change—quite the reverse. But the young seem wired for it—especially students who have no responsibility outside of their class work, their venture.

2—These kids bootstrap on the shoulders of a university-provided ecosystem. Free labs. Free PhD-level advisors. Free prototypes. Plenty of collaboration. We’re talking about a new kind of accelerator. As lean startups and with modern technology they can get up and going quickly. It no longer takes 20 years and millions of dollars to get a company on track. Old folks are financially responsible. These kids have little to lose.

3—They live in a Bohemian community of highly intelligent and creative people, wild new ideas, and a spirit of shared innovation. They feed on each other’s ideas and enthusiasm. They multiply each other’s output. Avaricious old men don’t do that. We chain ourselves to our desks. If we ever come up with a new idea, we immediately build fences. And how many of us want to go back to our college-day living standards? University students don’t live under such burdens. Hey, they finally got out of Mom and Dad’s clutches—that’s enough for the time being, right?

4—The university now teaches them an important lesson: Permit yourself to fail. Failure merely affords the opportunity to change direction. It’s called “pivot.” Under circumstances like those, the process isn’t that scary. Philosophically, it’s a paradigm shift. I was never told to fail anywhere between kindergarten and grad school. Were you ever told such a thing?

5—These kids are untamed and impulsive. They learn a lot and learn it fast. But it’s what they don’t know that makes them fearless. Old farts know better. Knowledge breeds risk-aversion. That’s why we don’t start companies such as Google, Facebook, Apple, or Microsoft.

6—Do any of you recall the malaise of the ‘70s? No gas–no jobs? Cottage industries sprang up all over. It was a practical way to earn the money to buy peanut butter. That phenomenon is happening again. Unlike computer games and other labor-intensive projects, mobile apps and web-based services are a kind of cottage industry. So this isn’t really new—it’s just different. And it’s a whole lot more exciting than selling macramé at an art fair.

A NEW CLASS OF ENTREPRENEURS

These kids are wildly enthused—their creativity is launched by the fuel of an adrenaline rush. Sparks fly around them. Fireworks. One commented that he’ll probably live only another 15 years because he never sleeps. Is this sounding like a recipe for a new class of successful entrepreneurs? I think so. I’ll ask again: Do you expect to compete with them? Think again.

NorthwesternHas Northwestern found a way to teach the joy of creative drive? Sure looks that way. And why shouldn’t these kids be enthusiastic? They don’t know any better. They’re fresh. Untried. No tire tracks across their backs. For the most part, they have yet to get knocked around by the world. And here they are—at one of the most prestigious schools on the planet, and they’re learning the entrepreneur game from professionals with every possible resource at their fingertips.

When I attended this school they taught venture capitalism. I remember the day they brought in a couple VCs. Those guys had a peculiar message. It was their job to steer us away from venture capital and point us in safer directions. The LBO was the big thing back then. Debt was cheap and easy. Times change. It’s not so simple to borrow any more. I’m convinced that the lousy economy is stirring up the recent explosion of new ventures. And it’s plenty lousy right here in Chicago. Adversity breeds creativity. Northwestern is nurturing it.

If youth is winning out over age and experience in this one arena, I cheer them on. What they’re doing was unthinkable when I was their age. And you have to admire them—they’re doing it so well. This is a highly creative response to tragic circumstances. Jobs are scarce. For many, entrepreneurship is the only career path open after graduation.

OUT OF THE MOUTHS OF BABES

I’ll give you the takeaways from what was a wildly dynamic session:

1 – BUILD A GOOD TEAM—You don’t have to be a tech wizard to work for a tech startup. The purpose of being technical is to build a scalable product that works. A good initial team is made up of three elements: a developer, a designer, and a “Husla” (the business end). These are complimentary skill sets. Each personality type is actively seeking the others. A world of opportunity opens up when you view the future this way. For example, a pure developer focuses on building a solid product but may not be sensitive to other issues. A startup also needs a designer to translate that code into a good customer experience. It also needs a businessman that can sell product and run the operation. Fill out your team with all three elements. One panelist admitted that he hadn’t taken math since HS. He stayed up all weekend and got help from students and a prof for a math test. He failed utterly. Then he visited a huge conglomerate and found his talent in the marketing process. Where do you fit? You need to discover what value you bring—your CORE competency. Work on that element. Translate it into language that customers and decision makers understand. Find somebody smarter than you are in the other areas you need—people that are passionate about your idea. Friends if possible because co-founding a new company is a close relationship. If you don’t know who to bring onboard, get a team of advisors to help you vet people. The university is a great resource for that.

2 – LEARN AS MUCH AS YOU CAN—One panelist developed a mobile app. But when he started out, he didn’t know anything about coding. So he learned all he could. Lots of listening. Lots of reading. Lots of playing with other apps. Another had to learn about payment processing to be able to empathize with customers. Another needed to learn about the medical industry and spent a lot of time searching on Google. If you know a little about disciplines outside your expertise, you make a good team leader. Don’t despair. Just knowing Java is awesome. Yes, top developers know lots of languages, but new languages come along all the time. Keep learning so you’re ready for the next opportunity. How technical do you really want to be? Learn the foundation. That understanding helps you find the tech people you need.

3 – GET A TECHNICAL CO-FOUNDER—You don’t need to be the company tech guru. Find a technical co-founder. Outsourcing all the development just doesn’t work. You need a CORE capability to do itty-bitty things and reduce the need to hire outsiders. Outsourcing everything uses up seed money too fast and isn’t the most efficient way to make small changes. It’s especially not a practical way to create a winning unified design. In-house technical competency allows you to put out fires on the spot. You can orchestrate your outsource money more intelligently. You stand a fighting chance of building an end product that isn’t a hodgepodge of aimless code. Also, a co-founder can hear ALL of your ideas–every one of them.

4 – DON’T KEEP SECRETS—Inventors are typically afraid to tell anybody their idea. These kids believe that’s the wrong way to think. They say, there are ten people already working on your idea and they’re smarter than you. If your idea is so simple that it’s easily stolen, then it’s already been invented. These kids believe you should tell everybody your idea and get as much help and feedback as you can. In their world, entrepreneurs love helping each other. Any one of them may have 63 ideas here and 64 ideas there. Impossible to work on them all. They actually need to filter their ideas. What kind of company do YOU want? Are you passionate about solving THAT problem? Get yourself involved in the crazy growth of the Chicago tech community. If you have an idea, go for it. Here’s how far they’ve carried this philosophy: They say, “It’s better to grow the pie as a whole than to fight over individual slices. Instead of taking a fighting stance, gather a community and be the hub. Keep your friends close and your enemies closer. Make your competitors your friends.”

5 – HAVE A LARGER PURPOSE—Out of all the insights, this one startles me the most. It goes like this: It’s easier to get people excited about saving 100,000 lives than to get them to believe in a device. Be committed to the PURPOSE not the SOLUTION. Otherwise, when you fail you’ll give up. I’m talking about a cause—something you believe in passionately—a larger purpose that keeps you trying when others fail. It’s crucial to hold strong beliefs, loosely held. Go to the customer. Show what you have. If the response is, “I won’t pay for that.” go back and find another solution that serves the PURPOSE. Before working on an idea, ask: “Am I solving an important problem?” The problems that you have in your own life are probably the same ones other people experience. Learn from your personal pain and passion. If you’re working on a larger PURPOSE, other people have the right to work on it too. You will actually welcome it.

6 – TELL A GOOD STORY—Somebody at Northwestern is teaching these kids to tell to do that. They’re poised. They’re concise. They’re on message. I will add to that, “WRITE a good story.” In consulting, I use a complex mindmap that asks one embarrassing question after another. If a client can answer all the questions, I know it’s a real business. One question in particularly seems extraordinarily difficult for entrepreneurs and nobody had ever answered it to my satisfaction. Then Mert did, and got it right—an immediate and strong response—just as if he’d rehearsed it. Amazing.

CLOSING QUOTES

“My entire life, I wanted to solve problems.” – “A lot of people don’t want to be consultants—do what you love.” – “When you’re a student you can take big risks and try new things without knowing what you’re doing.” – “Are you scared? JUST BUILD IT. You’ll be depressed for a little while because you’ll fail, but when you finally succeed, there’s no feeling like it.”

My thanks to Northwestern’s entrepreneur@nu entrepreneur.northwestern.edu for a brilliantly organized event, all the way from advance parking to orange-vested staff that pointed me in the right direction to a conference sparkling with excellent planning and execution.

And special thanks to the young panelists of this session—a group of people who can teach us all:

Elizabeth McCarthy, Moderator

Jeremiah Serapine of GrooveBuggroovebug.com

Stella Fayman of Entrepreneurs Unpluggd and Fee Fightersentrepreneursunpluggd.com and feefighters.com

Zach Johnson of Syndio Socialwww.syndiosocial.com

Mike McGee of Codeacadamywww.codecademy.com

Mert Iseri of SwipeSenseswipesense.com

Check out their sites carefully. They’re just as polished as big money but kids on a shoestring built these.

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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