Tag Archives: Funding

CHICAGO—THE BEST INCUBATOR IN AMERICA?

by Denny O’Malley

Recently, Inc.com published an article about the best cities for early-stage companies. The premise: Chicago is the surprise winner.

Why would that be? San Francisco and New York are both beautiful, thriving cities that dramatically represent the diversity of American ideas. San Fran—younger, more venture-oriented, with beautiful natural vistas. New York—the classic, bustling private and public equity concrete jungle.

What do they have in common? It costs a kidney to pay rent for a closet. Continue reading

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7 TIPS FROM A WINNER

Funding Feeding Frenzy – Part 5

VERBATIM by Loop Lonagan – Investor and man about town,

as told to John Jonelis

FFF LogoLoop Lonagan here. I’m gonna go full circle at dis Funding Feeding Frenzy.

No, I ain’t drunk—well maybe I am by now—but what I mean is, I’m goin’ back to the start o’ this event. After all that stuff I already talked about, I’m finally gettin’ ‘round to the first speaker at the FFF—Palette App—the company that won last time.

Like I said, I seen the pitch before. I also seen them at BNC Venture Capital and later at their corporate offices. Research. A guy’s gotta check stuff out fer himself.  Anyhow, here I am at the FFF in the Chopin Theater to hear what he has to say.  And as it turns out, I’m very glad I to be here.

Chopin Theater Lobby

Lobby – courtesy Chopin Theater

The speaker is Jerry Freeman, founder of Palette App, and the guy’s real smart. He’s doin’ his pitch fer us as a demo—to break the ice before all the poor slobs face the judges.

So I’m sittin’ here next to Jay Kinzie, a colleague o’ mine from Mastermind Advisory Board in this cushy seat in the Chopin Theater. Rong Mayhem ain’t gonna wheel up behind me and start yellin’ like he did at that car barn they held this thing at last time. And the noisy crowd is banished to the trough downstairs.

Feeding Trough

Feeding Trough

That means I’m free. Free to concentrate on findin’ the companies I wanna follow up on. But first comes Jerry Freeman. He starts by giving his own pitch. I know it by heart so I’ll paraphrase:

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Da Pitch

Palette App logoPalette App helps architects and designers do their job better, faster, cheaper. (Jerry doesn’t actually say better, faster, cheaper, but that’s what it amounts to.)

They take away them old-fashioned sample binders that designers and architects been blowin’ their money on for 150 years. They hand ‘em this beautiful digital palette. It’s easier to put together, better organized and more efficient to use. You can make changes fer free! That’s a big deal in this industry.

Palette App

Palette App

It saves a designer about 30 business days a year. That’s alotta man hours. And that kinda time’s worth a few bucks. The digital palette’s better for the client too. That’s why I been excited ‘bout this company right from the first.

Palette

Palette

The software usta be just on iPad ‘cause that’s what designers and them kinda people use. But now it’s on Android too. There’s a version for architectural design schools, which turns out to be a big deal. You can read all about it at https://chicagoventuremagazine.com/2012/07/16/150-years-of-waste-meets-technology/

The company is up-and-running and generating revenue. They already got 35,000 products loaded in their system. They got multiple profit centers. They make money whenever a designer orders a sample. And they make money through subscriptions.

Far as capital goes, they already raised $700K and the first round is gonna close pretty quick. 70% of that came from the last FFF. You can read about that at https://chicagoventuremagazine.com/2012/11/23/shark-tank-meets-the-apprentice/

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Da Interview

So after his sample pitch which I kinda butchered—but hey—how ya gonna spoil something as good as that? Anyhow, Jerry sits down with David Culver and does an interview about what it’s like to run a startup. This is good stuff and I learn something.

Jerry Freeman and David Culver

Jerry Freeman interviewed by David Culver

Raising Money

This seems to be the biggest question on ever’body’s minds. Jerry says, keep pitching at every event you can ‘cause it’s the best way to get connections to lotsa investors. Raising money is a full time job. As CEO, raising capital turns out to be his #1 job.

Then there’s cold calling. You start by pitching on the phone to some junior-level gatekeeper. Then to the next one up, then the next. Then maybe you gets a face-to-face with a decision-maker, fly way out somewheres and run up the old expense account.

All that takes months. Then maybe you get a commitment. Whoa—the money ain’t in the bank yet, fella. Gotta go thru due diligence. Paperwork. It takes six months to get the check, if it comes at all. People drop out. Meanwhile, how you gonna pay yer staff? So you gotta watch yer cash flow real close.

So he says to keep entertaining small investors till the big checks come through—just to pay the bills. The little guys come through quicker.

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Crowd Funding

Glenn Gottfried

Glenn Gottfried

Let’s talk about the new self-directed IRA. Lotsa baby boomers got millions stashed in their IRAs. All those add up fast. There’s five trillion in investment dollars hidden away in these accounts. That’s right—I said five TRILLION dollars—almost a third as big as the national debt! It dwarfs private capital. Blows it away! And deals like that close in thirty days—not six months like with VCs and Angels.

This is a form o’ crowd funding. Usta be only charities raised money that way. Now there’s brand-new laws that open it up to investors. So far it’s only for accredited types—people with a million bucks plus. That’s gonna change but the government is draggin’ its toes—nothin’ new about that.

So fer now, friends ‘n’ family ‘n’ Kick Starter is still the best way for small cash, then

Loren Minkus with Jay Kinzie

Loren Minkus with Jay Kinzie

millionairs with self-directed IRAs. Pretty soon we might see the dam burst on crowdfunding and money’ll flow all over the place.

Jerry gives 7 more tips on how to run a startup:

7 Tips

  1. “The shorter your pitch, the better,” says Jerry. If you think yer gonna get through it in eight minutes, cut it back ‘cause it’ll always take longer. “Practice 21 times,” he says, “so you’re not nervous.”
  2. “Simplify. If you’ve got twenty ideas, narrow it down to three,” he says. When Steve Jobs came back to Apple, he cut down their product line to about five. Now they’re huge.
  3. “Challenge is important.” He asks himself why he ain’t tripling his users every month. You gotta find creative ways to reach that target.
  4. “The dot bomb era is over.” Start raising revenue ASAP. That helps attract investors way better than flashing yer goofy projections on PowerPoint. “When you can say, We already started generating revenue, it puts you in a different pile from the rest.”
  5. “Crank up sales fast because sales sell. Get to risk mitigation ASAP.” That’s important ‘cause investors is more risk-averse than dey ever was before. And the banks ain’t lending. Actual sales sounds a lot less risky.
  6. “Keep your people motivated.” Use every success to get your people rejuvenated. Tell ‘em stories from the road. Celebrate small successes.
  7. An entrepreneur is somebody who goes from failure to failure to failure without getting discouraged.” It’s good to come from a sales background so yer already used to rejection. “If you’re a wallflower, get over it,” he says. Then David Culver follows that with, “The fortune is in the follow-up.”
Chopin Theater

Stage – courtesy Chopin Theater

Gotta Go

I gotta catch a cab to another meeting, so after plenty o’ good food ‘n’ drink, I say g’bye to the FFF kinda early. Two guys tag along to share the ride. One’s an investment banker, the other a VC.

And wouldn’t you know it—I trip on another pothole, right there on the sidewalk. Now my suit’s slashed in both knees. Neither o’ these guys helps me up like the bums did.

And when I drop ‘em off, neither offers to share the cab fare.

Happy New Year to all o’ youse out there.  Cheers from da merry land of Shark Tank Meets the Apprentice.  

NOTE TO JOHN – I seen your articles on a buncha sites.  One o’ dem usta be a real good tech jounal run by the Huffington Post.  It went through a buncha changes.  Now it’s runnin’ third-rate soft porn right along with da articles.  Don’t know what’s with that but thought you’d wanna know.

NOTE TO LOOP – Thanks for the heads-up.  I’ll check it out and maybe put a stop to it.

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Continue to WHAT’S GOOD?

Go back to Part 1

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Da Contacts

Palette App – www.paletteapp.com

Funding Feeding Frenzy – www.facebook.com/FundingFeedingFrenzy

The Chopin Theater – www.chopintheatre.com/event.php?id=2275&pageId=soon

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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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THE YOUNG ENTREPRENEURS

An evening with legendary international investor, Loren Bukkett

by John Jonelis

Technori PitchI’m at the Technori Pitch event in Chicago standing beside the iconic figure of Loren Bukkett–the Prophet of Pekin.  Everybody’s seen him on the news but this guy blends into to any crowd. Unassuming. Cheap rumpled suit. A hundred percent Midwestern. I knew his wife before they got hitched—she almost posed for one of my paintings but somebody stopped her—probably Bukkett himself. He shakes my hand absentmindedly and tells me not to call him “mister” as he scans the milling crowd in the lobby of the Chase Auditorium.

“I don’t see anybody over 30 here,” he says. Then his famous grin. “Except for you, John.” He grins some more.

I shake off the fact that he still knows my name. Total recall, I guess. “What brings you here, Loren? I didn’t think you invested in new ventures.”

“The ticket’s only ten dollars and the pizza’s free.”

“You flew to Chicago for free pizza?” In what, his private jet? I know this guy’s frugal, but c’mon.

He stops scanning and looks me square in the face. I feel the power of intelligence behind that casual persona. There’s a reason people hang on this guy’s every word. You don’t make that kind of money getting lucky at the racetrack, so I’m all ears when he answers my question:  “Think about it,” he says, “Did you notice something unusual about the last two stock market corrections?”

“Yeah. Everything tanked. Fast and hard.”

He looks at me from beneath his bushy brows. “Do you recognize the importance of what you just said? Markets drop all the time. In the long run it doesn’t even matter. Tell me about the recent correlations with commodities and derivatives.” He waves a hand. “Of course, the big exchanges are right here in Chicago, so you know all about that. What do you see happening?”

The crowd gets loud and thick as I try to recall what I once knew about correlation coefficients. Finally, I blurt out an answer. “Just about everything dropped the same time, even the Futures.”

“You’ve put your finger on it. Correlations are all very close to one right now. That’s what’s so significant. Now look at all these kids. Do you suppose their startup companies move with the broader markets?  What’s their correlation?”

“So you’re shopping diversification.”

“For public consumption, I’m just enjoying myself. Have you tried this pizza?”

I’m doing zero carb so I look around the room to distract myself from the food. I hear this place holds 500. Looks like they’ll fill it. The crowd presses around us. Buckkett’s been recognized. A 20 something asks for his autograph, which he grants. Some people form a line. I gesture to him and push my way through the bodies. He follows me through a door and up some stairs to the projection room. “Thought it’d be quieter up here,” I say.

Bukkett looks around at the equipment. “This is nice. Any chairs?”

I push a couple to a place where we can see the stage then decide to prod him for inside information. “Listen Loren, some of these startups are only asking for a quarter million. Isn’t that kinda small for you?”

He glances at me—a look bordering on pity. “You actually mean to say you don’t get it?” He pauses but I have no answer. “Don’t ever forget what I’m about to tell you: These kids are the future of capitalism in this country. If I see something worthwhile, I’m glad to fund it. The good ones always go through several rounds. When we’re in one of those, we’re with it all the way to IPO or buyout, or we adjust the management team and fold it into the portfolio.”

“A 100% stake? What’s that come to?”

“You figure it out.”

Looks to me like he’s talking millions,  then the stage introductions start. I was right—every seat taken. Last month was standing-room-only so they moved to this beautiful auditorium. Clay Neighbor is onstage priming the audience, saying what a special place Chicago is to do business. We all know that. He gets a round of applause.

John Paski gets in a plug for the next Chicago TechWeek. At least half the audience raises their hands when he asks who’ll attend in June. That one will be on two floors of the Merchandise Mart. Cripes. 500+ speakers, 200+ sessions. Website www.techweek.com

Seth Kravitz—Tech guro and driving force behind Technori is speaking. He’s set up a Q&A method using text messaging. The audience gets to vote on what questions get asked.

Time for the presentations. Fifteen minutes each. I ask Loren for his take on what he hears.

LockBoxer

Jennifer Morehead – jmorehead@lockboxer.com

The company helps people create a home inventory and price their possessions. Type in your items, upload photos, and prices automatically post to your list from the company database. That’s valuable for insurance, for sales, and for the taxman who audits your giving. It places a hard valuation that stands scrutiny.

We hear about the recent WSJ profile of the company and the monetization plan. Their site links to the Salvation Army and Google. Major insurance agents are signing up for a pilot project to launch in January. Lockboxer is secure like a safety deposit box—that’s where they got their name.

I poke Bukkett. “Loren. Loren.  What do you think?”

He leans over to me. “This gal is comfortable, even though the tech booth people fouled up her video. I like the idea. Home inventories are a terrible nuisance. Have you ever done one? There’s competition out there but that just proves how good the idea might be.”

BankBadger

Brian Busche

Want to teach your kids to understand money? Want to make banking fun? Want a simple way to do it? In this online bank, the parents are the bankers and control all aspects of the experience.

They use Badges instead of dollars and each badge can represent any amount the parents choose. The format avoids legal restrictions so kids under 13 can participate. Wow, I wish this was around when my kids were small.

It’s is a freemium model. They source parent’s names through Facebook. When one million users sign on, they’ll launch a premium service, perhaps with a stock market.

Bukkett: “Look at this one. He’s bootstrapping so far. It’s is a minimally viable project that’s already up and running. He’s letting it evolve. That’s how these kids are beating the big companies.”

Utellit

rishi@utell.it

Text and social media are dominating communications and they’re here to stay. Utellit enhances text messaging with voice. “Shoutouts” take the place of “Tweets.” Not only that, the system converts voice to text and posts it on Facebook. Other features make the app fun, including full-motion cartoons.

So I’m thinking, hey, I can text and I don’t need to fool around with that tiny virtual keyboard. Sounds good to me.

Bukkett makes no comment. I don’t know if that means he’s not interested or already in.

jumprope

www.jumpropetheapp.com

Loren sends me out for pizza and when I get back, he’s smiling.

Bukkett: “Look how fast these kids move. They’re launching this thing tonight. Great pitch—Don’t you get sick of waiting in lines? These guys make it possible to cut in line and the price depends on the length of the line. It’s mobile, social, local, and free to download. It interfaces with Facebook, Twitter, and email. Think this one might go?”

I can’t believe Loren Bukkett asked me a question like that. “You just like it ‘cause it’s free.” That raises a laugh out of him.

Berst

Matt & Kaleb Foster. Email: team@berstapp.com  Website: http://berstapp.com/

Where are your friends? Want to know? Want to text your group and share photos from your phone? Imagine a social media site that’s mobile and aggregates Twitter and Facebook with GPS. With Berst, you STAR members to your private group or use the search function to form an elastic group on the fly. At a sporting event, text chat becomes group chat. This one’s both Android and iPhone ready with Windows and Blackberry coming. It’s already in the App Store.

Bukkett: “This falls into the category known asl the creepy app because it keeps track of where you are. Young people don’t seem to mind it but the old folks do. They don’t like to be hunted.”

WizOra

Dan Devias, founder.

This company started at the recent Chicago TechWeek. The winner of the Bloomberg tech competition, it already has thousands of followers. It asks you five basic questions and pulls personal info from your social media sites, then feeds you recommendations for food, fun, savings and more. You rate the restaurants and see ratings posted by others. Over time, the software learns everything about you and gives highly targeted recommendations. It’s web based, with mobile on the horizon.

Loren taps me on the shoulder. “See how creepy it gets? Their asset is the knowledge of everything about you.”

“So you don’t like it?”

“I wouldn’t put it that way. Never let personal bias stifle dollars.”

Junto

Marcy Capron, Joe Poeschi, Matt Wanske, founders@thejun.to

Junto is the everyman incubator. It helps non-techs apply, fund and build their venture. Is your idea any good? Are eager users waiting? Can you build it? Can you get funding? What do you do next?

Junto helps you identify a minimally viable product then connects you with a community to crowdsource R&D, testing, mentorship, and funding. The community votes on ventures and funds them. It takes the risk out of a startup.

Most applicants are MBAs with good business plans. Junto helps these not-technical clients round out their offering. This company launched just nine hours before the presentation. They already have three startups. Junto doesn’t take equity from users, but rather a 5% share of the profits.

Speechless, I turn to Bukkett.

He nods and gives me a knowing look. “You help companies write plans and get funded, don’t you? This could run you out of business.”

We slip out into the pleasant evening air. Loren invites me for a hamburger. We wind up at Uno for a deep dish and beer.

The next Technori Pitch is Nov 29, 2011, 6:00 PM – 8:45 PM, Chase Auditorium. Sign up early—it’s bound to sell out. http://www.technori.com/

That’s what I heard. What did you hear? Comments welcome.

John Jonelis

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.

© 2011 John Jonelis – All Rights Reserved.

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