Category Archives: Startup 101

Techstars Director Expects Future Growth in San Antonio

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After the recent TechStars program in San Antonio was finished, Matt Scherer, our San Antonio correspondent, got to speak to Jason Seats, the managing director of the TechStars Cloud program. Here’s his interview with Seats, the co-founder of Slice Hosting.

Question: How did San Antonio become the home for the Techstars program?
Rackspace has been a fantastic national sponsor for TechStars for some time, supplying free hosting as a ‘perk’ for TechStars companies. Via that relationship, David Cohen, the CEO of TechStars got to know Graham Weston, chairman of Rackspace and the two of them hatched the idea for expanding in TechStars with a ‘thematic’ programaround cloud technologies. Because of the eager pool of mentors and investors around Cloud and infrastructure both within and around Rackspace, San Antonio seemed like a natural fit for launching the initiative.

Question: You and others mentored 11 companies in this program. What did you learn from this experience?
I learned how much I have to learn! Seriously, I’m certain I got as much out of the program as our 11 companies did. The hallmark of a good mentor relationship is bi-directional learning and I got that in spades. Every company and every situation is full of opportunity. Being highly technical companies, we had lots of companies using the latest and greatest software technologies, which is great to see, but I also got to learn
plenty helping them position and message their businesses both for technical and non-technical audiences.

Question: Your program was the first to focus on cloud computing issues. Will the next program also focus on this or will it expand to other areas?
We will continue into 2013 as a thematic program. Expect big things from TechStars Cloud 2013.

Question: What can San Antonio do to continue funding programs like these, especially ones that bring together investors from other Texas communities such as Austin, Houston and Dallas?
Show up. The most important thing San Antonio can do to foster TechStars and startups in San Antonio is to be visible, be accessible and put your money to work. A startup ecosystem is a living creature and it has to be fed and cared for to survive. In fact I’ll go a step beyond that and say it has to be loved in order to thrive. The other TechStarslocations (Boulder, Boston, Seattle and NY) are a model for us to emulate. The
engagement and interest in the local investors in supporting the program is off the charts. I believe we have the ingredients we need to be just like them, we just have to do it.

The Start-up Sprint to $25m in Annual Revenue

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This post originally appeared in Kip McClanahan’s (Twitter @kipmcc) blog Re-Overthinking, and with his permission we’re re-posting the first part of it here.

Entrepreneurs should have a framework for thinking about how to achieve the sort of scale that justifies a $100m+ exit – and that’s what this post is about.  It’s also a result of a number of recent discussions and other posts:

  • active planning cycles in many of Silverton’s portfolio companies
  • growth targets and revenue scale discussions in those same companies
  • reading Fred Wilson’s post on the dearth of start-up exits above $100m http://kipm.cc/qtwwas
  • thinking about the details & drivers of past acquisitions of my companies (for example).

We need more companies that have a vision for building real businesses that scale to produce more $100m+ exits (not just $100m+ valuations).  As an investor, I’m generally less interested in the sort of pre-product or talent-based acquisitions that have become popular at places like Google, Twitter and Facebook because it takes the team out of the game and keeps their vision — the one that I invested in — from being realized. I believe that a $25m-$30m annual run-rate means that the company has a long-term perspective and executed well enough to have options:  stay independent and (likely) profitable, be an attractive acquisition target or even consider an IPO.

But let’s talk about acquisitions. For acquisition targets with revenue, acquirers tend to value acquisitions as a multiple of revenue that increases based on how strategic the business is to the acquirer and the potential leverage of the business model for the acquirer.

For example, for a business with lower strategic value to the acquirer, multiples tend to be 1x – 3x forward 12-month revenue.  For businesses that have less business model leverage (such as low-margin, services-based company that requires a significant human component to scale), the multiple could even be less than 1x forward 12-month revenue or, where possible, simply valued as a multiple of EBITDA.

Read the full post here.

ActonMBA Application Deadline Coming Soon

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We all have many reasons to be thankful for living in Austin, and grateful for so many awesome things we have in our city. One of them is a top-notch, progressive, forward-leaning MBA program at Acton. Recently they announced the launch of their newly condensed MBA in Entrepreneurship program, which allows students to complete the first portion of the program from anywhere in the world prior to spending five months on-location in Austin, Texas to complete their MBA. The new model begins this fall with the Class of 2013 and will allow students to take less time out of the workforce and maximize their educational investment.

The application deadline is April 4th, 2012.

The updated Acton model requires the same hourly commitment as in years past and a portion of the learning will be completed before reporting to the Acton School of Business campus. Acton’s unrivaled roster of Master Teachers, proven entrepreneurs with real-world success, will continue to instruct students using the Socratic method for which Acton is known.

“We’re continually modifying the curriculum based on student and alumni feedback,” says Acton co-founder and Master Teacher Jeff Sandefer. “By minimally reducing the case-load, we were able to shift a portion of the learning experience to our innovative, experiential online platform, MyEJ (My Entrepreneurial Journey). Overall, students should expect the exact same amount of work, or more, but this will allow motivated entrepreneurs from around the world to take less time away from their lives and receive the same one-of-a-kind education from Acton.”

From Hugo Diaz, class of 2009:

“I needed more preparation in order to take my business to the next level. After going to Acton I realized a lot of mistakes I had made in the past. In fact, I had lost probably 300,000 dollars in mistakes. That’s a lot of money compared to what the program costs.”

Acton could’ve saved Hugo hundreds of thousands of dollars in mistakes—and it can really do the same for you and your business.

The Acton MBA in Entrepreneurship program begins in September with Pre- Matriculation, which prepares scholars through a series of interactive learning experiences and online courses taught by Acton’s world class faculty. Acton Scholars then report to campus in Austin, Texas in January, when they will begin the intense 100-hour-per-week curriculum that delivers the tools, skills and judgment they need to thrive as entrepreneurial leaders after graduation.

“Acton has always been on the leading edge of business education—embracing change for the benefit of the students and providing them with the tools to change the world,” says Phil Siegel, Acton Master Teacher and General Partner at Austin Ventures. “I’m proud to provide students with the same comprehensive learning experience that is so essential at Acton, but in a way that is increasingly accessible to more prospective students.”

The Acton MBA in Entrepreneurship draws a diverse pool of scholars from different educational and business backgrounds; many students have previously earned master’s degrees or worked for years in the business world, but come to Acton to take their careers to the next level.

“I founded four companies before coming to Acton. I needed to learn what I was doing wrong and how I could do things better,” says Bryan Daigle, Acton graduate and founder and CEO of Long Tail Products. “Acton didn’t just teach me how to be an entrepreneur—it gave me the tools to think like an entrepreneur. It gave me the skills to bridge sales and operations—things I couldn’t have learned in any other MBA program.”

“I already had an MBA before applying to Acton, but I still was not adequately prepared to build the type of company I truly wanted to run” says Jamie Matthews, Acton alumnus, Master Teacher, and founder of the non-profit organization Explore Austin. “At Acton, I gained the skills to run my real estate business plus the freedom to start my non-profit and live a life of meaning—and now, as a teacher at Acton, I’m able to pass those lessons on to future entrepreneurs.”

Acton is now accepting applications for the class of 2013. Visit www.ActonMBA.org/apply.

Capital Factory Aligns Schedule with SXSW

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Historically, SXSW is the peak season for applications to Austin’s technology accelerator program Capital Factory. The program has run during the Summer for the past 3 years. Capital Factory is announcing that the program schedule going forward is going to align with the SXSW Interactive Festival and Conference.

There are several reasons for the shift including:

  • Companies in the program enjoying the mild winters in Texas
  • Mentors and supporters typically taking vacations in the summer
  • Huge increase in the number of investors that can participate in our Demo Day
  • Culminating the end of our program in coordination with SXSW

During the summer you can look forward to events like “Meet the Mentors” and “Startup Speed Dating” in preparation for accepting applications in September of 2012.

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Is It Possible To Crack The Code To Startup Success?

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Fail_Road I’ve pulled back on the use of infographics lately, but I spotted one over the weekend that warranted a second look. It visualizes data from the Startup Genome, a project that takes a scientific approach to cracking the “innovation code.”

Teaming up with educators from Berkeley and Stanford, they looked at more than 3000 companies, analyzing the customer, product, team, business model and financials.

One of the big findings amongst the data was that almost 7 out of 10 companies failed due to premature scaling or inconsistency. Peeling back the data, the lessons seem really simple: don’t act like a big company. In a recent post, the project team described what they deem the ‘inconsistency’ element.

“One driving factor for inconsistency is too much capital, teams that are too large, bad team compositions, too little testing, etc. – pretty much everything a large company does, anticipating high certainty in their planning.”

And If you’re wondering how your team stacks up, take a look at their benchmarking tool, the Compass.

 

An Update on Austin Tech Accelerators

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mobileTech Tuesday, by Steve Guengerich

A couple of items that recently crossed my desk inspired today’s post. The first item was a wonderful list of incubator/accelerator programs, sorted by their respective deadline dates for participation, from the team at Launch.

My own firm, Appconomy, had the opportunity to work with the Launch team and conference in February as we readied our first commercial app, Grouped{in}.  It was a good process and while we got both negative and positive reviews, as one should expect, the overall experience definitely made us stronger.

The second item was the well-deserved write-up on TechRanch in Monday’s print edition of the Austin American-Statesman by Lori Hawkins.  Many of you know Kevin, Jonas, and Graham, as well as the mentors, sponsors, and other key participants in the Tech Ranch solar system – fine people all.

So, with those two items to spur me on, I began to make a list of the similar organized resources. Mind you, these aren’t just for mobile firms. But, many of them have tended to attract a healthy number of mobile deals in recent years. So, without further adieu:

Tech-focused incubators/accelerators

Austin Technology Incubator: http://ati.utexas.edu/ – the “grand old man” of the Austin tech scene, ATI’s affiliation with UT-Austin and IC2 give it staying power. Member companies get mentorship, low cost office space, and assistance

Capital Factory: http://www.capitalfactory.com/ – founded by Josh Baer and partners, Cap Factory has been going strong with its 10 week accelerator program for several years, with participating companies pitching at the capstone Demo Day. Hurricane Party, among notable app-making alumni, was the sleeper hit of SXSWi 2011.

Tech Ranch: http://techranchaustin.com/ – read the Statesman article above…they are great.

Venture Labs: http://www.mootcorp.org/ – Venture Labs and the Venture Labs Investment Competition are the producer and event program, respectively, of what many refer to as the “superbowl” of MBA investment competitions. In recent years, Venture Labs has expanded beyond mentoring just competition winners to providing services to other promising entrepreneurial ventures as well

Event-related programs

SXSW Accelerators: Interactive (http://sxsw.com/interactive/accelerator) and Music (http://sxsw.com/music/accelerator) – if you’ve paid any attention to Southby in recent years – especially Interactive – I don’t need to tell you that this isn’t an Austin event, it’s an international event that is held in Austin. Thus, it’s not surprising that there was a lone Austin company (Portalarium) qualifying as an Accelerator finalist among a sea of California firms

InnoTech Beta Summit: http://www.innotechconferences.com/austin/ – the Beta Summit is a classic pitch program that has become a favorite of this mainstay regional IT conference. There’s no money at risk, per se’, but the bragging rights and opportunity to be mentored and ‘discovered’ by a sophisticated audience of buyers, purchase influencers, and occasional investors are definitely worth the application

There are a couple of other events that have had a unique accelerator twist to them in the past – Startup Weekend (http://Austin.startupweekend.org) and ArtSpark Festival (http://www.hbmgfoundation.org/) – but they both seem to be on hiatus currently and somewhat episodic, depending on sponsor and participant interest.

Entrepreneurial/Niche programs

If what you are looking for is of a more general entrepreneurial nature , then there are a range of groups to help, including:

These are the tip of the iceberg, with more on this handy Austin entrepreneurship scene mindmap.  There are also specialty incubator/accelerator groups to lend a hand. Two noteworthy ones are:

Technology Business Accelerator: http://www.ic2.utexas.edu/global/innovative-products-solutions/technology-business-accelerator-te-2.html – a crazy-long URL with a very practical intent… to provide business acceleration services to Mexican companies desiring to launch entrepreneurial efforts in the US, especially leveraging the Austin tech scene

Creative Media Center, managed by the Austin Music Foundation (AMF): http://www.facebook.com/austinmusicfoundation#!/cmcamf?sk=info – the follow-through by the City of Austin, the AMF, and a host of other key stakeholders on a long-time commitment to eventually provide a space where creative types could go to get mentoring, studio time, and business assistance.

Co-working

Speaking of “providing a space,” I’d be remiss if I didn’t put in at least a quick plug for a handful of the co-working, co-space locations that are available around town, including:

While the menu of business assistance services and formal mentorship range from place to place, many of them have fans who swear by the collegial, informal network of smart, experienced people with whom they are able to discuss ideas and problem solve.

That’s a wrap, for now. I know I’ve left a bunch of options off of the list, from venture associates programs at AV or CTAN, to company-sponsored internal incubators, and more.

If you have an Austin area program that is noteworthy or that you especially favor, please tell us about it in the comments – in particular if it specializes in app development or other mobile tech.

Mobile-palooza!

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mobileTech Tuesday, by Steve Guengerich

Yes, I know it’s mid-July. Summertime is in full swing. The heat is hot and the rain is not in Austin. The next “official” US holiday, Labor Day, is a nearly seven weeks away on September 5 – an eternity in mobi time.

But, my friend, there’s no time like the present to (urgently) plan for an onslaught of events that provide opportunities to learn, sell, and network with people from across the mobile app world. Below is our list of noteworthy conferences.

Some of these events are in greater Austin and some aren’t. And, no doubt, depending on your wireless and/or app focus, you may have other mobile events in your plans that we don’t mention here.

If so, then please let us know about them and why you think they are important in the Comments below. I may also have them posted to the Events calendar in The Appconomy, which you can always find here: http://the.appconomy.com/events/

First: the big local, mobile events. The major Austin-area mobile Fall events are bunched up into a “murderer’s row” in October. They include:

  • InnoTech, October 20 – now in its 8th year in Austin
  • SenchaCon, October 23-26 – the annual developer’s conference for one of the emerging contenders for mobile cross-platform development tools
  • Texas Wireless Summit, October 25 – the “grand daddy” of all things mobile, produced by the Wireless Incubator at ATI and still heavily-oriented around core hardware and software technologies that power the industry, but more inclusive of app-related topics than ever before

There are a couple of key opportunities at InnoTech 2011, in particular, for mobile/apps companies to strongly consider. First, the Beta Summit will be returning, which is a high-visibility chance to get your new product in front of a key group of influencers. Although it’s open to more than mobile-related products, the Beta Summit is a great chance to take a product that is ready (or nearly so) to go-to-market and show it off.

AustinStartup.com’s publisher, Bryan Menell, is chairing the Beta Summit again and encourages any team that wants to be a candidate for pitching to start “getting their act together” because the bar will be set high for this premier chance to show what you’ve got on-stage.

The second InnoTech opportunity is an offer from Conference Producer, Sean Lowery. Sean has always been especially tuned-in to the needs of emerging tech sectors and, thus, has been generous in years past in providing ways for new companies to join the conference Exhibit.

For 2011, Sean is taking inquiries from companies that would like to be featured in a Mobile and Apps Pavilion on the InnoTech Exhibit floor, providing them some additional visibility at an attractive rate. If you are interested, please let Sean and his team know ASAP, contacting them through the InnoTech website.

Of course, Austin is far from the only region to consider when mapping your mobile events for the Fall. A few others worth note (for which info and registration links may be found on this Events page) include:

  • Mobilize, September 26-27 (San Francisco) – arguably, the flagship mobile event for the industry, produced by GigaOM
  • App Developers Conference, October 26-27 (Santa Clara) – a promising-looking 1st year event, produced by Austinite Chris Sherman, who founded the Austin-hosted Game Developer’s Conference
  • AppsWorld North America, November 1-2 (New York City) – a robust East-coast program that has a heavy hitter line-up of speakers, programs, and exhibitors

Lastly, no listing of big conference would be complete without a few of the general startup-oriented tech-fests that tend to dominate all of the attention when they are in season. These events aren’t exclusively focused on apps or mobile technologies, but you can bet they will be deeply influenced by them. They include:

So, there you have it. The local, the mobile, and the global of Fall 2011 events. We look forward to seeing a bevy of our fellow ATXers at a number of these shows, demonstrating how our mobile scene rocks.

[Correction: Chris Sherman, producer of the App Developer Conference, is an Austin area resident, not a 'former' Austinite, as referred to in an earlier version of this post - even better!]

Q&A :: Eric Freedman of Mass Relevance

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A few weeks ago Mass Relevance announced that design veteran Eric Freedman had left Frog Design in order to join the company. We decided to ask him a few questions about design, the change, and what he’ll be doing.

After 12 years at one of the most respected agencies in the world, why did you decide to join Mass Relevance?
I really enjoyed my time at frog. I think that for a designer to stay somewhere for that long of a time says a lot about the company and the work. I really enjoyed the variety and complexity of the design challenges. I was always learning about new subjects areas, technologies and approaches to design. As a service company, everything was client and project driven. Ultimately, after 12 years, I decided that I wanted to use my experience on the product side. Clients will still be part of my world, but just in a different capacity.

What are some of the interesting challenges you’re excited to face in this new role?
I am looking forward to being able to focus on our core product, evolving and adapting it to include our growing set of features and to meet the needs of the industry and our clients. I am excited to be able to take short-term (tactical) and long-term (strategic) approaches to the user experience of our product and what it can produce. I am also looking forward to working with the current Mass Relevance entertainment and media related client base. The subject matter is interesting and always changing.

As Mass Relevance grows and evolves, I think it will be an interesting challenge to manage our brand and all of our customer touch points. As a social curation company, I think we are in a good position to use the social web to help communicate who we are and what we do.

What are some of the things you’ve learned over the years in the agency world that will apply to a tech startup?
Flexibility is extremely valuable. At frog, each client was different. Each had a different problem to solve and unique corporate cultures. I have learned over the years how to stay true to good design while meeting the individual needs of our clients. Each design solution has many factors to determine if it is successful or not. Good design finds the right balance between Ease of Use, Aesthetics, Functionality, Practicality, and Novelty. Because Mass Relevance is a start-up and the product is evolving and growing quickly, a designer needs a flexible approach to design.

How have attitudes about design changed over the last 5 years, and why?
In the past, design-centric companies were a specific and separate breed usually associated only with luxury brands. It wasn’t until the last 5-10 years that great design and exceptional user experiences became buzz words and ideals most companies to strive for. Some companies embraced design as a way to differentiate itself from its competitors while others made it a key tenet of its brand. But at this point, good design is expected across the board. It has become a necessity… a baseline. Consumers are more informed and opinionated. With so many venues for consumers to voice their opinions, many products don’t get a second chance. Because of this, design is more valuable than ever before… and current attitudes reflect this. People understand that design has a seat at the table.

People understand that good design can…

  • simplify something complex
  • appropriately communicate messages
  • make painful tasks more enjoyable
  • make products more accessible
  • adapt to different user expectations and needs
  • convince users to change behaviors
  • enhance an existing experience
  • differentiate a company from its competitors
  • help establish a loyal customer base
  • attract attention (so can bad design)
  • save/make money while reinforcing a brand

What advice would you give a young designer who one day wants to be in your shoes?
Good design starts with understanding the problem. Spend the time to learn what will make it successful. Use that knowledge to shape the process. Keep your eyes and ears open. Be accepting and flexible, but all the while understanding that design is a core component of value.

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Why Capital Factory?

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The application deadline for Austin-based Capital Factory‘s 2011 program is Sunday, and momentum for tech startups and entrepreneurship in general are riding high as the SXSW Interactive festival wraps up. Signs of the frenzy include an increase in Startup Buses from one to six this year, a busload of MBA students from Michigan who are out to networks with startups, and recent tech investor Ashton Kutcher making an appearance at the Foursquare party. With the number of technology accelerators on the rise, the most frequent question I get asked is how Capital Factory is different from other programs. I posed this question to FamigoGames co-founder Q Beck. “One difference we found very important is the fact that the program mentors are also the investors in the fund, and they’re active practitioners themselves,” Q told us. “With only 5 companies in the program, and 20 mentors you get some very hands-on advice and a lot of attention compared to other programs we looked at.”

In some ways the answer to this question lies less in comparisons to other programs, and more in the value of the startup ecosystem in Austin, and the role that Capital Factory plays in it. In the selection process, I get the chance to meet with founders with varying motivations. In today’s bubble-like environment, many think they are going to emerge from a summer program with a fist-full of term sheets. Some of them will. Is that an indicator of success? Maybe. I look for founders with somewhat of a “built to last” attitude because starting a company, and indeed even being an entrepreneur is not a destination but a journey. Austin is a great place to support that journey.

Let’s talk about a real-world example of the path that I think is going to be more common in the future. In our inaugural year, we supported one of those long weekend programs where startups were formed in three days. We agreed to fast track the winner into our top ten list. That company, FamigoGames, was indeed selected for our very first program in 2009. They received $20,000 in cash, lots of free services (including their logo and branding), and mentorship from our twenty mentors. After our summer program, the company went into the Austin Technology Incubator where they continued to learn, iterate, and grow. Today the company has successfully raised angel financing, and they are investing in faster growth and adoption of their family gaming platform.

The timing of this growth path — 3 days, 3 months, 12 months — is going to be more common in startups that are going to run lean, be nimble, and be successful in the long term. Austin is one of the few cities in the country that has the ecosystem to support the full lifecycle of this journey. The side benefit is that these young 20-something entrepreneurs are going to carry this experience into the next companies they start in Austin.

For five days every spring, thousands of people come to Austin to experience a small taste of our community, and maybe even catch a little spark for themselves. In the end, that is what makes Capital Factory different. I find myself selling the Austin lifestyle and ecosystem, rather than the program itself. For tech startups, I think the decision process is simple; experience Austin and if it resonates with you, you’ll know it right away.

Style and Substance at Launch 2011

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launchSpecial Thursday edition of mobileTech Tuesday, by Steve Guengerich

I’m in San Francisco this week with a couple colleagues from Appconomy at the Launch conference for the official announcement of our first app, Group{in}.

Other Austin companies here include Deed or Greed – deals & coupons site where users earn cash-back from purchases they and their friends make and then decide whether to keep that cash for themselves or donate it to their favorite cause – and LifeProof Cases, whose founders are announcing their products for phones and tablets today. You can watch them live on the Launch conference uStream feed, later today.

Speaking for Appconomy, it was gratifying to see people ‘get’ our pitch: that Group{in} is the first mobile app that really allows you to organize your work and personal life into the groups and people that matter to you most, i.e., your ‘strongest ties,’ while using the channels that you already use.

By simplifying group communications across these channels, including private in-app messaging, e-mail, SMS, phone Facebook, Twitter, LinkedIn and more, we’re hoping that the typical busy professional will see how Group{in} makes working in groups *way* easier, instead of the time suck and chaos that currently exists, hopping in and out of multiple apps to communicate.

Like many other investor-related events, Launch has a panel of judges and brief Q&A session that accompanies its format. The judges’ comments have tended to widely range (with Appconomy’s pitch being a representative example of many others) from the substantive, about the product and size of market opportunity, to the stylistic, about pacing and other pitch basics, with a side dose of celebrity – actor Kevin Pollak was one of our panelists!

Personally, I think the judging quality and overall substance of remarks from the events I’ve attended in Austin – whether an ATI-produced event, like the Clean Energy Summit, or one by teams like the Capital Factory’s Demo Day – have been every bit as strong, if not more valuable, only because the insights and attention I observed those judges provide the entrepreneurs seemed so much more focused.

But, that’s not to take away anything from Calacanis and his core team. You can tell they have completely poured their guts into the Launch, making good on the commitment written into the presenter’s contracts that, among other terms and conditions, literally stipulated that “Jason Calacanis will personally loan you his masterful PR brain if you call him on his mobile phone at 2 AM on a Saturday. That number is …[left out for Jason's benefit, but you can reach him via LinkedIn].  Seriously, Jason will do anything for you.”

From here, on to South-by-Southwest and what is sure to be an epic year for mobile apps – see you back in Austin!