Tag Archives: New companies

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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BILLION DOLLAR UNICORNS

Kenneth M. Freeman

The world seems captivated by the growing number of unicorns – private companies theoretically worth more than $1 billion based on their latest round of funding. There are now more than 100 unicorns, led by Uber with a valuation of $66 billion.

unicorn-from-ms-office

If you were an early investor in any of these $billion+ gems, you’re winning big!  But what about investors who got in on the latest fundraising rounds?  Are the bragging rights of an expensive unicorn deal worth losing money on your investment?

The traditional venture capital investment formula is to select promising ventures early, while valuations are still low. Selecting several young businesses adds diversification and improves the likelihood that one or more will become a success.

While many unicorns have achieved notable marketplace success and will undoubtedly survive and thrive, their current valuations strain credulity, leaving late-round investors vulnerable to substantial losses. How likely is a big win when the venture is already valued at $10 or $20 or even $50 billion?

Uber’s annual revenue run rate is expected to exceed $10 billion by year-end. They retain 20% or $2 billion, which, with many markets left to conquer, is impressive.  But do these numbers justify a valuation of $66 billion? Remember, a future value of less than $66 billion for Uber will mean a financial loss for their latest investors.

Airbnb’s 2015 revenues are estimated at $675 million and projected to reach $2 billion by 2020.  Their latest investment round puts their worth at $30 billion. 2014 revenues were estimated at $900 million for Square and $600 million for Palantir. These companies aren’t likely to go away. But do these numbers justify valuations of $5 billion for Square and $25 billion for Palantir?  Is Snapchat (with still negligible revenues) really worth $22 billion?

Many venture capital investors say traditional valuation methodology – the net present value of projected future discounted cash flows – is impractical for venture capital.  They suggest that venture capital valuations rely on perceived potential along with passionate commitment and a dose of hope.

But valuations at early stages appear to implicitly reflect traditional valuation logic.  They recognize the riches of potential success, albeit impossible to quantify precisely, while discounting those values sharply to reflect low success odds and inherent risk.

The problem with unicorns’ soaring valuations is that they seem to assume the stars are perfectly aligned and everything will go right.  That rarely happens.  Yes, it largely did for Microsoft, Google and Facebook, three huge winners over the past 40 years.  But how many of those are there?  Even Apple had to survive near disaster before its remarkable success.

What if governmental regulations block portions of Uber’s or Airbnb’s planned expansion?  What if Uber drivers are ultimately ruled to be employees rather than independent contractors, changing the company’s fundamental economics?  The risks are even greater for unicorns with more limited revenues today (and most with large losses).

We at VCapital, are not interested in ventures already valued at $1 billion+, where a return of 10 or 20 times investment is far too unlikely.  Gambling in Las Vegas might be a better bet.

We believe in the historical venture capital success formula, focusing on early fundraising rounds – after venture potential is qualified through angel/seed funding but before valuations escalate wildly.  For early stage investments in ventures valued at $5 or $10 or $20 million, while most fail, success could mean an exit valuation in the tens or even hundreds of millions of dollars.  A few of the ventures we’ve supported over 30 years have even exceeded valuations of $1 billion, but you can’t count on that.

This has worked well for our team over three decades.  While the VC industry’s average venture success rate (i.e. achieving any positive return on investment) is about 20%, through rigorous due diligence our success rate has averaged 37%, and our investors’ annualized returns have averaged well above industry norms.  Delivering an attractive return to investors requires a few exits at 10, 20 or more times the initial investment to offset the 63% that come in as modest winners or complete loses.

So why are later-stage valuations soaring to stratospheric heights?  We think it’s due to FOMO—Fear of Missing Out.  Getting in on a unicorn round is great for bragging rights, but for late-stage investors, getting out with a profit may be tough. We’re betting FOMO results in lots of loudly bursting unicorn bubbles.

We’re not concerned about a repeat of 2000’s broad dotcom bubble, which devastated the finances of millions of Americans, since today’s soaring valuations belong to companies that are still private. Their investors are primarily institutions and ultra-wealthy individuals who can weather the risk, so impact will be contained.

We are concerned, though, that a series of loud unicorn bubble bursts could cool the flow of investment dollars feeding life-changing innovation.  That would be unfortunate, since conditions for tech-enabled start-ups have never been better. It would also be unfortunate for the 8 million+ accredited investors (defined by the SEC as having net worth of $1 million+ excluding primary residence or ongoing annual income over $200,000), who finally – thanks to the JOBS Act – have access to professionally managed venture capital investing.

We believe that following the historical venture capital success formula will continue to generate attractive returns for investors who stay focused on pursuing strong ROI. In contrast, late-stage investors in pursuit of bragging rights to unicorn deals will increasingly find themselves under water.

Kenneth M. Freeman is the Strategic Marketing Advisor and Member of the Board at VCapital, LLC   http://www.vcapital.com/

This article appeared in NEWS FROM HEARTLAND

Image from MS Office

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 © 2017 John Jonelis – All Rights Reserved

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WHIZ KIDS

You Don't Want to Compete with this Kidby John Jonelis

You don’t want to compete with this kid.  Believe me.  Just watch his intensity as he pitches his business to some of the private equity luminaries in the city.  I’m a judge at this event and try not to show my feelings of awe as he answers all the tough questions in a pressure-cooker environment without so much as a flinch.  There’s an intimidating team behind him too.  They’re all in middle school.  Middle school!

These guys offer a new white-label web browser that’s secure from hackers at WiFi hotspots.  It’s up-and-running and they’ve got the moxie to ask $100K for 15% of their company!  These are potential recruits for IMSA – the vigorous live-in statewide high school for the best and the brightest.

You don't want to compete with this kid 2

And that kid over there—the one quietly sitting in the background?  The IT department at IMSA is afraid of that one.  “Some IMSA students try to hack the system,” says Carl Heine of TALENT, “but if this kid comes to the academy, we’ll have to keep him close.  He’s the real deal.”

SecuritumFive other teams like this one pitch today and they’re all wonderful.  I’ve seen IMSA students put adults to shame but hey—this is way over the top!  Once again, the TALENT program proves that children can outperform adults in one of the toughest games in town—a grueling pursuit that demands everything you can put out and then asks for more.

I ask you—can you imagine doing that when you were in 7th or 8th grade?  At that age, a pop quiz seemed like a big deal.  I certainly had no dream of running a business back then.  What we have here is a roomful of truly extraordinary individuals coached by wonderful teachers.  I’d like to hire them to create and build the next big company.  Problem is they’re still minors.

PitchThis event is part of an intensive one-week immersion camp held at 1871—a program geared to teach what an entrepreneur goes through by personal experience.  These kids pitch real companies only 3 days into the program.  Three days to form a group, put together a business plan and prepare the pitches we hear today.  Three days!  When I look at the quality of the output, it seems impossible.  But I’m here watching it happen.  Give credit to IMSA’s selection process.  Give credit to Carl Heine, Jim Gerry, and a brilliant TALENT organization with their finely crafted template.

It’s our job as judges to challenge these kids with real business questions.  And we do.  All of them respond well.  We’re asked to rate them on specific categories, and yes, TALENT provides us with an organized matrix to keep score.  Here’s their Pitch Rubric:Judges

  • Pain Point – Do they understand and describe it clearly? Yup.
  • Market Research – Is it clear and complete? Looks that way to me.
  • Competition – Have they identified and clearly expressed their competitive advantage? Yes sir.
  • Product – Do they have a compelling prototype? A prototype? After 3 days! Hey, these kids already have working products! This ain’t your science fair back home, Chumley!
  • Business Model – What’s the go-to-market strategy? What is the likelihood it will be profitable? Chances look pretty good from here.
  • Presentation – Does it convincingly cover all the bases? Yeah. That it does.
  • Questions – Do the answers make you want to invest?

Yes, yes, and yes!  The event ends and we meet everybody.  In a moment of irrational exuberance, I hand my card to a boy and say I’d like to see him pitch to my angel group.  Forgive me.  I sometimes forget myself.  First school, then the business world.  Gotta keep those two straight.  ♦

 

Photo credits IMSA.

To contact IMSA TALENT:  Britta McKenna, Chief Innovation Officer bmckenna@imsa.edu

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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 © 2014 John Jonelis – All Rights Reserved

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THE ANGEL EDGE

PB&J T-JAJAdapted from the Journal of the Heartland Angels

Part 1 – by John Jonelis

Is an Angel a fool?

In the world of private equity investing, the order of funding is supposed to go like this:

  • Seed Round—that’s friends, family, and fools.
  • Angel Round—that’s funding the big initial spurt of growth.
  • Venture Round—that’s big funding for massive scaling.

Compare that stack-of-three (above) to a peanut butter and jelly sandwich. Notice that Angels make up the good stuff in the middle. And yes—according to studies by the Kauffman Foundation—Angels make the best money.

But sometimes Angels step in early—right next to friends and family. Sometimes they get in late—right next to VCs. That’s the PB&J squeezing out the sides of the bread.

We all know the friends and family round is the most likely to fail and we shoulda oughta shy away from it. But if we wait too long we ain’t makin’ no money. According to research by the Kauffman Foundation, investors in VC funds on average make a NEGATIVE return. That’s right—average negative. Angels do a whole lot better. So maybe it’s wise to avoid the sloppy edges. Make sense so far?

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The Basic Question

In investing, the exercise always boils down to this: Here’s the environment—how do we make money in it? Investors always look for an edge—some slight advantage over the masses. And there definitely is an Angel Edge. Let’s examine:

  • Angel investing is entirely non-correlated to the broader security markets. (Hey, if you got a stock portfolio to protect, that’s a big deal.)
  • An Angel’s potential return—on average—knocks the stuffing out of traditional securities. (Again, that’s according to research from Kauffman.)
  • Then there’s the intellectual exercise. (Let’s face it, that’s a reward in itself. Otherwise we’d all turn our money over to some manager or mutual fund.)
  • Then you sometimes get to roll up your sleeves and sit on the board of one or more companies, which can be a real blast. (Beats sucking on an umbrella drink on some tropical beach. At least I feel that way. I sunburn so easily.)

So the Angel route makes for an enticing package. But it’s not for everybody. Then there’s my general attitude: I’m always suspicious of enticing packages. So let’s take a peek at the risks and rewards.

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Risk

It is well known that private equity investing carries with it a high risk compared to stodgy investments like stocks or treasuries. (Treasuries pay close to zero these days). Rather than buying regulated marketable securities in all-too-efficient markets, an Angel negotiates terms and makes private deals. Anything can happen. Let’s identify a few of the risks:

  • No liquidity
  • No stop loss
  • Little diversification (That is, if you’re a lone wolf. More on that below.)
  • Long time horizon

An Angel typically waits 3-5 years or more to cash out. Hey, I come from the world of 1-7 days and out—MAX. To me, anything measured in years is a real long time. But 3-5 is a short time compared to Venture Capital. It’s short compared to starting your own venture. It’s real short compared to real estate.

PB&J 500-JAJ

Reward

There are a number of advantages that attract money to this model:

  • Larger average payoffs compared to investing in securities. (More on this in the next issue.)
  • The chance to buy a future Industry Giant at a very early stage. (If you do enough deals and perform your due diligence, that might actually happen.)
  • As mentioned, private equity is non-correlated to the broad markets, like stamp collections or antique cars. (That means you might make money, even when the broad markets tank.)

Let me explore that last bullet a bit deeper: This is an Alternative Investment Vehicle. Alternative investments tend to be high-risk. But as part of a larger portfolio they can—(and this is non-intuitive)—can INCREASE return and REDUCE overall risk. Nice combination, don’t you think?

This strange phenomenon is mathematically demonstrated on a graph called The Efficient Frontier. It takes some thought to set up the strategy, and don’t overdo it. Conventional wisdom is to limit alternative investment to less than 10-15% of a total portfolio.

 

Risk Mitigation

How do you raise your returns above the averages, yet control risk? Skill, knowledge, and raw instinct? Personally, I don’t harbor such fantasies—I believe that it’s better to belong to a group. As a member of an Angel group, you enjoy a number of advantages that reduce risk:

  • Diversification – To throw all your capital into just a couple ventures is clearly dangerous. Members of a group can spread their deals across a large number of companies.
  • Industry Knowledge – A strong Angel group includes experts, in various industries. What single individual can boast deep knowledge of more than one or two industries?
  • Expertise – Members come from various disciplines—Finance, Accounting, Marketing, Operations, Science, Engineering. Who holds diplomas in all those areas?
  • Workflow – Many hands make for light work.
  • Control – When you play the stock market, you exercise HOPE. In contrast, an Angel group may have a member sitting on the Board of Directors.

Let’s Review

  • This is an Alternative Investment. Keep it small compared to the overall portfolio.
  • Join a strong Angel group and use it as your research team.
  • Spread your resources across as many diverse companies as you can.
  • Be patient. It may be a long wait for that first winner.

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MORE TO COME ON THIS TOPIC

READ THE FULL JOURNAL [PDF]

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NEWS FROM HEARTLAND – the Journal of the Heartland Angels, is published quarterly as an information service to its members. Articles may be reproduced in full with attribution for educational purposes.

Copyright © 2014 Heartland Angels – John Jonelis, Editor – John@HeartlandAngels.com
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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 © 2014 John Jonelis – All Rights Reserved

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TAKING IT APART

clockwork TMichael Pollack of Rocket Fuel Labs

Verbatim, Part 3 – John Jonelis

I’m continuing a conversation with Michael Pollack, CEO of Rocket Fuel Labs at the huge 1871 space here in Chicago. We’ve covered a lot of ground and I think it’s time to get down to the business itself.

John—How do you find customers?

Mike—Entrepreneurs come to us. The most common thing we hear is, “Hey, would you be

Michael Pollack

Michael Pollack

my interim CEO?” or, “Could you be a consultative CEO?” Our long-term goal is to be able to help incubate those startups ourselves. As we build our brand, that’s something we think is a tremendous opportunity. But that’s long term. I’m a big believer that focus is not about saying, “Yes,” it’s about saying, “No.”

John—Are your transactions cash or equity?

Mike—Right now, our clients are paying cash. In the future, we may shift that to equity but I’d much rather own 50% of my business than 25% of someone else’s business. Even if the idea’s great, in the startup space, it comes down to execution. There were fifty face books before there was Facebook and they were all good ideas, but Mark Zuckerburg out-executed them all.

When we look at that and think about it, we say, man, you can be an entrepreneur and have this brilliant idea, but if you can’t execute it, what does it matter? So as the chief fiduciary officer of this business, I’d love to play a role in helping some of these awesome ideas execute effectively.

John—In private capital, you need one winner out of ten just to break even. The best investors may get three out of ten.

Mike—Exactly. There are a couple legs to this business. We’re a service provider, and our margins as a service provider are good.

John—So you’ve found a way to close transactions with startups?

Mike—We’ve found a way with startups and more so with established businesses. We think there’s an opportunity with established businesses that need innovation. We enjoy creating products, which are really just solutions to problems that people haven’t identified yet. And we think we can productize that. We think we can work with established businesses, startups, and a full range of people to give them the technology they need to visualize their solution.

Rocket Fuel Labs logo - Large

Startups are interesting. But to take money from entrepreneurs, particularly starving ones is a gut-wrenching thing because I’ve been there. It’s always hard to part with that cash. And when we look at them we say, “How can I be a better partner? Is it to offer a lower price? Is it to take equity in exchange?” I don’t necessarily know the answer to that question.

Having been in the vortex. Having had twelve million dollars in venture capital. I was there on day one when we were four guys in a room with a white board. And I was there on the last day when we were forty-five people and we signed the papers. And our baby was being handed to somebody else. And I’m thinking, these elephants are going to trample our baby. It’s an amazing experience. I wouldn’t trade it for the world. I would do it again in a heartbeat.

And what we’re saying now is, hey look—how can we do that at higher velocity? How can we see more startups? Touch more startups? And we want to be engaged even deeper with this community. Because there’s upside. We want to be a partner that helps startups succeed.

We see models out there and our opinion is—never knock the competition because I’m sure they’re doing a great job—I just think that competition helps and I see a market and I see some inefficiency and I’d love to challenge it and see if we can do it better.

John—Sounds like you’re a natural arbitrager.

Mike—I can’t help it. I love a good deal. I want to find markets that are inefficient and I want to share it. My career has really been about finding large markets, identifying inefficiency, fragmentation, then disrupting it and driving value for all the stakeholders at the table. And that’s what I enjoy doing and that’s what we’re trying to do here.

John—Okay, let’s make this more concrete. Let’s say I walk in the door. I’m your model customer. Describe me.

Mike—Sure. Right now our model customer is somebody who says, “I’ve got an online presence. I’ve got an existing business. I’m revenue positive. I have a problem and a budget that I’m prepared to allocate to solve it.”

I learned in management consulting that people have a hard time separating cause and effect. You can’t fix effects. You can treat causes. You have to parse them out.

We would come to you and say, “Where’s the pain in your business? Is revenue not growing? Are you not getting enough customers, or is web traffic down?” Once we do the whole inventory, we say, “Let’s go through those pieces.” And then it’s just like taking something apart. What’s working and what’s not working?

clockwork

“Take It Apart” – Michael Pollack

So my model customer? Somewhere past the seed round, looking for a technology project—they may not know exactly what it is. What you see in this board behind us is the group thinking through a problem. We take you through the discovery phase, the development phase, the website management, offering the design piece, thinking through the online marketing—but basically making sure your technological infrastructure works and thrives.

[I tell Mike a story about the Levi Mastermind Group here in Chicago and that moves us down another path.]

Mike—My favorite thing about Open Mile—the last startup I was at was this: In every meeting I was the dumbest person in the room. Any time I found that I was the smartest person in the room I knew I was in the wrong place. Real smart customers force us to get better. If you’re the dumbest person in the room, you work harder, you have to think harder, you need to be prepared for every question. And you have to do your homework even deeper before going to that meeting, so you can over-deliver.

John—It takes a special kind of CEO to seek out people who are more expert or intelligent than himself.

Mike—I think you have to. If I knew all the answers to everything, we might not be having this meeting—I don’t know what would be happening—and the world would be a pretty boring place. I like going into things and not understanding. I’ve been fortunate to have worked with really smart people and I listened to them and I questioned them and they questioned me. And where we ended at was far superior to where we started. And the process of getting there added value along the way.

John—You get really jazzed up about brainstorming and product development.

Mike—I’d love to say, long term, we want to be a startup on demand. ‘Cause that’s the kind of people we want to work with—really smart people who get excited looking at a problem and say, “Let’s come up with a different way to solve this that we never thought of.” We are building a product organization that can think outside the box and an engineering organization that can deliver on it.

Thinking long term, I’d like to work with medium and large corporations. At a big company it’s hard to maintain those pockets of innovation.

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GO TO PART 4 – THE LEAN STARTUP

BACK TO PART 1

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.Photo credits – Rocket Fuel Labs, LinkedIn

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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FASCINATION OF A THOUGHT LEADER

rocket-fuel-labs-launches 2Michael Pollack of Rocket Fuel Labs

Verbatim – John Jonelis

I always enjoy the scenic water taxi ride to the Chicago Merchandise Mart where the huge high-tech incubator known as 1871 lives and breathes like a sleeping dragon in a cave full of gold.

Michael Pollack, CEO of Rocket Fuel Labs is waiting for me. His firm provides the technology to launch new companies.

Turns out, I’m in for a treat—a conversation with a genuine thought leader. Mike is a highly intelligent man exploding with enthusiasm. I get the preliminaries out of the way, then sit back and simply say:

“Tell me about Rocket Fuel Labs.”

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Rocket Fuel Labs logo - Large

Mike – Let me take a step back and give you some background on myself and Lance Ennen, then how Rocket Fuel came together.

In my career, I’ve lived at the intersection of sales and technology. I started my first business when I was 12 or 13—I was building and selling computers. I used my mom’s credit card and bought a tremendous amount of individual pieces of hardware. This is in the early 90’s, at a time when a desktop computer is about $4,000 to $5,000.

Michael Pollack LinkedIn2

Michael Pollack

Note – Not only does Pollack organize his thoughts, they burst forth at a phenomenal rate of speed.

John I personally bought a computer for $5,000 about that time. And it seemed real pricey a year later.

Mike – Okay, so there you go. My competition, Gateway, was charging $5,000. I, as the kid down the street, was charging about $4,500. I was making great money on that. The margins were phenomenal. I was 12 years old and that was more money than I knew existed in the world, right? That was such a tremendous sum.

And I learned a fascinating lesson in my life and my career as well. I was buying all this equipment and keeping it in my room. Stacks of motherboards, processors, video cards, cases, and all the pieces. I’d say, hey, you want a new computer? I’ll build it for you and be your free tech support. It was great. It was a very good business.

But it was right around that summer when Dell said, “We’re gonna do a back-to-school special and cut the price down from $5,000 to $3,000.” My margins went completely upside down and I learned a very important lesson about managing your inventory properly. I had all this stuff that was bought at the wrong price. My prices couldn’t sustain a market, and that was the first lesson I learned about keeping as lean as possible. All those profits I made on the first five or six computers I lost on the following nine or ten. At that point I said, “Wow, this is a tough business. Michael Dell is killing me.” As a twelve-year-old, I just couldn’t compete with what he was doing in Texas and so it was an important lesson.

From there I did programming for a bit. As a kid I took things apart. Vacuum cleaners, VCRs, anything I could find. I had great parents. They gave me a tremendous amount of opportunity and I probably took advantage of it a little too much when I was younger. Maturity is recognizing your mistakes and operating within those bounds.

John – Just like Richard Feynman. As a kid, he made a business of taking apart radios and fixing them. I used to read his books to my son as bedtime stories.

MikeRichard Feynman is a personal hero! I think he’s an absolutely fascinating man. An important physicist of enormous stature. His books, Surely You’re Joking Mr. Feynman and What Do You Care What Other People Think both make for great reading.

Note – It seems that Pollack is not only brilliant, but well-read.

Surely You're Joking Mr. Feynman

See it on Amazon

Mike – I started a number of businesses and my personality pulled me in the direction of sales but I could also understand technology. As a kid, I did everything from sell Cutco knives door-to-door to being a PC tech at Best Buy.

But my career moved into an interesting avenue. A very good family friend started a freight brokerage. If you know people that work at C. H. Robinson or Echo Global Logistics—these companies that manage the trucks that you see on the road—it’s a really big business, and it’s a business that most people don’t think about.

Consider this room. Everything gets here by truck, right? In America, the domestic trucking industry is $300 Billion.

$60 Billion—with a “B”—of that goes to domestic truckload brokers. To walk you through that world, there are about 3-4 Million full truckload shippers. These are the manufacturers who put stuff inside of trucks. Take the company that manufactures this couch, for instance.

On the other end of the equation, there’s a hundred thousand trucking companies. Ninety six percent of those companies operate 10 or less trucks. A lot of mom-and-pop outfits. There’s those big orange trucks you see on the road from Schneider or J. B. Hunt or Werner or Swift, but those big companies are actually in the minority. Only about a hundred of them.

In the middle, there’s fourteen and a half thousand brokers. Those brokers consume that $60B and effectively, those brokers are like glorified travel agents.

John – They’re routing all the trucks. Are they making all the money?

Mike – Not all of it, but a lot of it. Very little overhead. They’re doing this mostly over phones. It’s an old-fashioned travel agency model.

I started as a salesman and realized our tracking software just wasn’t very good. You need to make sure you assign the right truck and get the best price. Then when the truck is actually moving, make sure it gets from Point A to Point B. If the truck encounters an issue, it needs some way to facilitate that.

So we designed a software platform called Autobahn, which was a freight brokerage trading system. The name invoked something sexy, like a Mercedes Benz cruising down the highway at high speed when in reality we’re moving trucks around the country.

John – Did you know that the German Autobahn helped us win WWII?

Mike – Yes, it’s interesting. When you read Eisenhower’s memoirs, one of the things he’s most proud of is the Eisenhower interstate highway system, which is a direct replica—a rip-off—of what he saw in the Autobahn.

NoteOnce again, I’m taken aback by Pollack’s intellect and enthusiasm. 

JohnHe did that?

Mike – That’s correct. He saw the Autobahn and said, “Wow, the ease in which we could move through the country—the effectiveness of their mass transit system was so eye-opening…One of my first initiatives when I come back to America will be the Interstate Highway System.”

I worked on logistics for a long time and know a couple facts about the highway system that will blow your mind.

1.) The reason bridge heights are set at thirteen and a half feet, is that at the time, in the 50’s, the United States had nuclear mobile-launched missiles. That was the height at which they had to be to get under the bridge and that’s where bridge heights come from to this day in America.

2.) The other thing that was mandated was for every ten-mile stretch of highway, there had to be a one-mile strip of straight highway so in the event that airfields all got destroyed by nuclear war, we could land airplanes on the highway.

Pretty clever, actually, how they did it. It’s a really well thought out bit of technology. It’s a fascinatingly cutting-edge technology for the 50’s. It’s infrastructure. Like a platform. Like we do software now.

Think about that. What I find fascinating about logistics in particular is that good infrastructure is, effectively, a platform. And you can build on it. If you think about the highway system in this country, it provided the platform on which McDonalds could provide roadside dining. Hilton and Marriot could build massive hotel chains.

When I think about that infrastructure, I think about our business; I think about Rocket Fuel Labs.  It’s about providing technology infrastructure to allow businesses to build on. That’s where I get really excited about what we’re doing here.

rocket-fuel-labs-launches

Note – I don’t know how you readers feel about it, but I find this conversation fascinating and don’t want to shred a single paragraph. I’ll pick up where we left off in a future article. Verbatim.

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Contacts

Rocket Fuel Labs

  • Specialties – Startups
  • Industry – Computer Software
  • Type – Privately Held
  • Company Size – 1-10 employees
  • Founded 2013
  • Expertise – Web Development & Deployment, UI/UX, Online Marketing, Product architecture, E-Commerce.
  • Headquarters – 222 W Merchandise Mart Plaza #1212 Chicago, IL 60654 United States
  • Website – RocketFuelLabs.com
  • Email – Info@RocketFuelLabs.com
  • Phone – 855-4FR-LABS
  • Fax – 312-620-9655

Photos courtesy Rocket Fuel Labs, NASA, LinkedIn, Amazon.com

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GO TO PART 2

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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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Filed under 1871, angel, angel capital, angel investor, big money, Chicago Ventures, Consulting, Entrepreneur, Entrepreneurship, Innovation, Innovation and Culture, Internet, Internet Marketing, Invention, investor, jobs, Marketing, new companies, Software, vc, venture capital

THE BUM IN ME

Funding Feeding Frenzy – Part 2

VERBATIM by Loop Lonagan—investor and man about town,

as told to John Jonelis

FFF LogoLoop Lonagan here. I’m headin’ out to this year’s Funding Feeding Frenzy. It’s the big event if ya wanna see all o’ Chicago’s best startups in one place. This time the FFF is happenin’ at a place called the Chopin Theater northwest o’ downtown and I wanna see how that’s gonna work out. Will there be a string quartet? They yusta hold it at a huge automobile showroom which seems weird but worked out. It had about half the floor space of McCormick Place and plenty o’ room fer hordes o’ people to roam. But this is gonna be a lot different.

One thing I wanna impress on your readers, John, is about Chicago itself. You know I love this place but face it—it’s a city with all the usual warts ‘n’ barnacles. And every neighborhood is different, so yer either at home here or yer not. Nobody never gave me no trouble. Maybe I’m no pushover, so I got an advantage. But if I’m gonna tell this story, I gotta give you the whole picture. And I’m gonna give it my best shot.

Clybourn

The Street

I’m comin’ in by train and can’t resist gettin’ off at the old Clybourn Station. From here, it’s only a mile walk to where I’m goin’. That looks real good on a map. But my advice to you is don’t do it. Get off all the way downtown and take a nice comfy cab to the event. This ain’t a bad part o’ town. Nothin’ like that. Just take my advice.

Once I’m on the Clybourn platform I draw in a lungful o’ cold air. It’s feelin’ like the Christmas season just gettin’ started up here and I got a wad o’ money in my pocket. I get my choice o’ passages down to street level. That always feels like descending into the bowels of hell. Mincing little concrete steps winding through grimy concrete tunnels. Once-yellow paint peeling off the walls. And the best part is you get yer choice o’ tunnels! They’s all the same!

It’s still early and the usual crowd is layin’ about the sidewalk. I step over Old Man Percy, ‘cause I don’t wanna disturb his sleep, but the others is startin’ to rise’n’ shine. I give a hearty good morning to Fred and Big Bubba and ignore Merry ‘n’ Pippin huddled in a corner—those two give me the creeps. Summa these people are new to me but you can’t never know ‘em all. Familiar faces go missing but still, there’s never no shortage. I got it on good authority that the poor will always be among us.

People tell me these guys makes Fifty Gs just panhandling. I say it’s a buncha hooey. The idea got invented in that Sherlock Holmes story, The Man With the Twisted Lip, ‘n people been repeatin’ it ever since. If it was true these guys’d find a warm place to sleep. Ever try an icy Bridgesidewalk ‘round about Christmastime? And there’s more ‘o these people hangin’ ‘round than ever. That means more competition. That means harder times fer all o’ them. Sure, any profession’s got it’s elite that strike it rich, but that leaves the multitudes, scrablin’ fer crumbs.

The Professionals

I always say there’s a lot to bein’ a good bum. You feel so warm inside when you drop a buck in his hat. ‘Specially near Christmas. Makes your whole day. Some ‘o these derelicts play musical instruments and summa them is pretty good at it too. Come to think of it, these guys fill an important role in society. They’re public servants. Maybe the city should fit ‘em into their patronage system. It’d mean more votes for The Chicago Machine. After all, The Machine is politicians.  And politicians is people paid to be bums.

Hell, when you get down to it, there ain’t much difference between these guys ‘n’ me. Maybe I invest alota money, drink good liquor, sleep in a warm bed. But whadda I really do for the world? I been givin’ that some thought lately and all I comes up with is this—I provide liquidity. Sounds pretty shallow, don’t it? Let’s just imagine some day I make a big mistake and lose it all. They throw me on the street. In no time, I’m part o’ this crowd. Makes a guy think. Maybe I got a talent for it, though—who knows? But it’s a profession without nobility.

Of course there’s gangs and outright criminals in the mix. Then there’s a lotta homeless people with no hope. Alcoholics, drug addicts, and whack jobs. Minds gone over the edge. They say Old Man Percy’s got millions stuffed in the bank but he’s sleepin’ here on the pavement whenever they shove him outa the loony bin. You think you can change him? Think again.

The Scholar

Everybody’s awake now. I always ask if one of ‘em can recite a famous quotation. Gotta keep up the level o’ education here. So I calls for somethin’ Christmassy. I give ‘em a choice—Isaiah 7:14 or Matthew 1:23, whatever their preference—theys exactly the same text. And Fred rattles it right off while Big Bubba stares him in the face, mouth hangin’ open. Fred’s a real intelligent guy. He’d be a good addition to my team.

Note to John – Why not make him a reporter?

Note to Loop – Bring him around for an interview.

Anyway, Fred’s recitation earns a C-Note for every one of ‘em that’s present—even Old Man Percy and the two Hobbits. Except I peel off ten fer Fred. Hell, it really is almost Christmas. I know most of ‘em is gonna waste it but I ain’t tellin’ these guys what to do with their own money.

Then Big Bubba rumbles to himself in a deep bass, “Emanuel—I thought dat was da name o’ da mayor.” Whadaya gonna do with guys like that?

Note to John— I ain’t had no coffee yet this mornin’ after a real rough night. Too much booze and no sleep, so maybe you oughta clean up my copy. I think I’m runnin’ on like the old days—I mean before I got some college. Understand what I’m sayin’?

Note to Loop— I find your account lucid and concise. I’ll publish it as is. And a graduate degree in finance at the University of Chicago is more than “some” college.

Overpass

Stumbling over the Truth 

Fred and Big Bubba take me up on my offer of breakfast. There’s a good old diner along the way. That’s the real reason I picked this station. But before you get to the gentry part o’ town, you gotta walk under the overpasses. The Kennedy Expressway bridges make natural roofs fer the homeless and the piles o’ rubble at the sides reek somethin’ horrible. Yeah it’s raw but so is any city.

Another thing about cities is potholes. In good times there was always holes in the street. Now, with this economic depression it’s worse than ever. So we’re walkin’ down Ashland Avenue at a brisk clip, enjoyin’ each other’s company and I’m scannin’ around like any careful city dweller when the next thing I knows I’m on my face. Lousy pothole—right in the sidewalk of all places.

Fred and Big Bubba haul me back to my feet and brush me off and I check for damage. Maybe a guy can get away with slashed knees and filth on his rumpled blue jeans but it don’t look right on a $2,000 suit. In an instant I go from Mr. Bigshot to a reject from the Salvation Army. But now I fit in with my companions, so I shrug it off. And I got a mile ahead o’ me to walk off the sprained ankle. But in a couple blocks we reach the nice section and the diner I told you about.

The Private Room

The cashier at the restaurant tries to push us out the door like we’re the Blues Brothers or somethin’. Probably thinks we’ll drive off the clientele. Phooey. Maybe this is a classier joint than Julio’s House of Jalapeños but hey—it’s still a diner, not the Chez Paul. So I ask for Lonny, the owner, and he leads us to a back room stacked with boxes. They lay a nice table for us and the room is perfect for planning out crimes and runnin’ poker games.

Big Bubba orders three stacks o’ pancakes. He butters every one of ‘em and drowns ‘em all in maple syrup. Fred sticks with a piece o’ pecan pie. But I dig into steak ‘n eggs with toast and A-1 Sauce ‘n’ bacon. And more important—a big pot o’ coffee for each of us. Round about the fifth cup I’m feelin’ a whole lot better. Fred smokes a cigarette. We talk. Lotsa stimulating conversation. It cheers me up. Now I’m ready—ready to meet with big money at the FFF.

Back on the street, Big Bubba and Fred part ways with a wave and a Merry Christmas. When I suck in the brisk air, I feel more coherent and alert—ready to pick winners, negotiate terms. Less than a mile left to walk off this sprained ankle. I think about them that puts their heads down on a frozen sidewalk and the ankle don’t seem so bad no more.

Note to John—Do I sound more coherent and alert now that I had my coffee?

Note to Loop—You’re always alert.

The Gentrification

Here’s another thing I find interesting about the city. Here in these gentrified sections you can never tell what’s inside a building. Alotta these are new construction or complete makeovers with big-time brands on their signs. Those buildings are nice inside—most o’ the time. But the others can surprise you. The outside of the Chopin Theater looks like a dump that’s been a dump for the last hundred years. Turns out completely different once you walk in the door. This place is gorgeous. A great spot for the FFF.

Chopin Theater

Chopin Theater

A beautiful lady greets me like royalty. I check the layout. Nice lobby. Nice coffee bar. Nice theater space for the companies to present. Steep stadium seating so everybody can see. Doors and windows floating around the stage give it a class look. I figure them’s props for some production but it’s a bonus for us.

Chopin Theater Lobby

Chopin Theater Lobby – photo courtesy of theater

I take in the morning’s presentations. Then I go bummin’ downstairs. Wow! A huge room with a great spread of food and drink. This is way better than the old place. People can talk and strike deals while they feed at the trough and make all the racket they want. Meanwhile, the presentations go on in the kinda setting they deserve—quiet and focused. Kudos to David Culver and company for finding this spot and nailing it down.

Chopin Theater Stage

Chopin Theater Stage – photo courtesy theater

So what’s the FFF all about? One o’ the most important things in the world—starting brand new companies! That means keepin’ as many people off the streets as we can! So here I am wolfing down food, crackin’ jokes, and talkin’ to intelligent company. Lotsa stimulating conversation. It cheers me up. Just like breakfast with the bums. Now I’m ready—ready fer the rest o’ the day.

Chopin Theater

Chopin Theater – photo courtesy theater

Listen John, I went off on a tangent and didn’t even cover the event yet. Now my batteries is gettin’ kinda low. I’ll buy some fresh ones and get back to ya later. Fer now, have a joyous Christmas.

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Continue to Part 3

Go back to Part 1

Links

Chopin Theater

http://www.chopintheatre.com/event.php?id=2275&pageId=soon

Funding Feeding Frenzy

https://www.facebook.com/FundingFeedingFrenzy

Find Chicago Venture Magazine at www.ChicagoVentureMagazine.com Comments and re-posts in full or in part are welcomed and encouraged if accompanied by attribution and a web link. This is not investment advice. I do not guarantee accuracy. It’s not my fault if you lose money.

.Copyright © 2012 John Jonelis – All Rights Reserved

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9 Comments

Filed under Characters, Chicago Venture Magazine, Chicago Ventures, Entrepreneur, Entrepreneurship, Entrepreneurship and Politics, Events, FFF, Funding Feeding Frenzy, Innovation, Innovation and Culture, jobs, The City