Monday, 27th March 2017

Two small words — Hub. Dot

Posted on 06. Aug, 2015 by in Entrepreneur

Two small words — Hub. Dot

hubdot

Two small words — Hub. Dot. Separately they don’t mean much, but put together they’re electric. Hub Dot is the latest British invasion to make it across the pond. Chances are, if you have a friend or relative in Europe they already know about this women’s networking organization.

Hub Dot launched in the United States the fall of 2014. Houston and Portland were the first cities to host events. Born from the mind of Londoner Simona Barbieri, a native of Italy, Hub Dot was created to provide an environment where women could meet and make meaningful connections. Over 200 women attended the first Hub Dot DC meeting, hosted by Anthropologie at the Reston Town Center in Reston, Virginia.
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Upon arrival the attendees, or “Dotties,” as they’re affectionately termed, are greeted by a group of smiling faces and tempted with shopping as they’re tasked with grouping themselves by the dot they feel most closely identifies them. It’s all about the dots, ladies! Each colored dot sticker represents the purpose of an individual’s attendance.

THE MEANING OF DOTS:

RED: I am established (in my career/ business/motherhood).

YELLOW: I have an idea, can anyone help?

GREEN (the most frequently chosen dot): I’m here to be inspired.

BLUE: I’m here to socialize and shop.

PURPLE: I want to tell you about my story, my work, my charity.

Simona, along with Hub Dot’s COO Aurelia Hull, hosted a pre-event luncheon for the DC team to get better acquainted with the Hub Dot approach. Simona spoke about how she came up with the dot concept at her kitchen table, referring to it as “dot alchemy.” In this low-pressure, ultra-friendly environment, women who may otherwise pass each other on the street now chat together, and thus connections are made. Some of these connections are life changing. The global relevancy of the Hub Dot movement is evident during lunch when Simona exclaimed, “Luxembourg’s event has begun!”
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Each event features speakers, but these are not the “stand at a lectern and present your PowerPoint slides” type of speakers. These are real women sharing their stories in just one-minute timeframes. Our event had ten speakers, myself included. Speakers told of struggles with alcoholism, disease and its effects on a family, and about numerous charities that have been started. Getting to hear all of the different stories and learning about our similarities felt like it was connecting us all.

One of my favorite parts of the night was meeting women who have attended other Hub Dot events around the world. Two women, one from Barcelona and another from England (both speakers), were there to help us launch and each shared her story. Another woman attended an event in Europe and has since moved to Miami, so she attended our event in an effort to learn more about launching a Hub Dot Miami.
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Winding my way through the gathering of women, I ran into a girlfriend expressing how much she was enjoying the night. She made the distinction that she considers herself an introvert, but that even she was opening up and having fun. The feeling that all are welcome permeated the evening.

As the night drew to a close, the local team leader, or “Ville Leader,” Kristen Staples wrapped up the evening. Shoppers shopped, hashtags were live-tweeted, Dotties mingled and connected. I trust that many special connections have begun as a result of real women stripping off their labels and sticking on their dots.

Michael Grass

Posted on 24. Aug, 2012 by in Entrepreneur

Michael Grass
Michael Grass

Michael Grass

Modern DC Business interviews Michael Grass, Editor of The Huffington Post’s DC edition, to get his take on online media and some of DC’s idiosyncrasies and unique delights.

Michael Grass is the founding editor of The Huffington Post’s local DC edition, covering local news, arts and events in the nation’s capital and surrounding suburbs. He’s worked for Roll Call newspaper on Capitol Hill, The Washington Post’s Express, The New York Observer, and Washington City Paper among other media organizations. In 2004, he co-founded DCist.com, bringing together the original group of volunteer contributors for what’s grown into one of the DC’s area top local news destinations. In a town that is known for its ephemeral culture, Michael’s roots run deep. His family has been in DC since the 1860s, giving him a unique perspective to the city. We sat down with Michael to talk about online media and some of DC’s own idiosyncrasies and unique delights.

Tell us a bit about yourself. Your ties to D.C. go back quite a bit, don’t they?
I move 1’s an 0’s across the digital ethos for The Huffington Post, where I edit the local DC, Maryland and Virginia homepage.

I’ve worked for most of the past decade at established and start-up media properties in the DC area. I’ve worked on developing some really great online news projects over the years. I co-founded DCist.com in 2004 when DC’s blogging community was very small. I’ve held editing positions at Roll Call, The Washington Post Express and Washington City Paper. And I always have some sort of side project going, too.

Although I grew up in Michigan, my father’s family has been in the District of Columbia since the 1860s. DC had always been a second home to me growing up because of my family roots here. When I moved to DC after college a decade ago, it already felt like home. HuffPost’s DC bureau is on Pennsylvania Avenue near the White House, just down the street from the house my grandfather grew up in. Today, Kinkead’s restaurant is there. If you know the Brewmaster’s Castle near Dupont Circle, my great-great grandfather did much of the interior woodcarving in that mansion, which is open to the public. My ancestors carved wood, I help carve the Internet.

What sets Huffington Post apart from other media outlets? What is the secret to its success?
The Huffington Post is an incredibly socially engaged community. It’s not really a secret, but one key to HuffPost’s success has been the ability to adapt how it delivers news and commentary to different readers who sometimes consume information in very different ways. HuffPost isn’t just a news website, it’s a platform to discuss, discover and drive the conversation. Now there are international editions of HuffPost in Spain, France, Canada and Great Britain. But HuffPost can also be incredibly local. And in the DC area, that’s where I’ve been able to help out. The success of HuffPost has been its ability to change and be a driving force.

What do you love about our fair city? What about D.C. still surprises you?
I use ZipCar occasionally, so I live mostly a car-free diet. And I like it that DC is a place where I don’t need to spend money on a car payment, parking citations or gas. For all the bellyaching about Metro, we’re incredibly fortunate to have a good rail and bus network.

Neighborhoods are largely walkable. Transit connects the places that matter. For all the planning and foresight that went into our transportation infrastructure, I’m still surprised by what was left out or unconnected. And I’m still surprised that some people refuse to ride the bus. Technology has removed much of the guesswork that sometimes comes with public transit.

The last decade has seen so much change in DC. Where do you see us headed in the next decade?
There’s certainly been a lot of change in DC. Just look at how places like 14th Street, U Street, and H Street have developed in the previous ten years. Neighborhoods have been transformed in the city and in the suburbs. Plenty of new people have settled in the nation’s capital. There’s so much new energy and so many new ideas. We’ve really shattered the image that we’re a one-company town.

But much of our success is still tied to the federal government and the business of government. With tighter federal purse strings in the years ahead, we’re being pushed to diversify our economy more. We have no choice in the matter. In the next 10 years, the big question will be whether the success we’ve achieved can be maintained and evolve. I think we can continue to transform and innovate.

The DC area has built some solid foundations, a place where new ideas, concepts, businesses and enterprises can experiment and thrive. D.C.’s local politics may just be the most entertaining in the country.

HUFFPOST ISN’T JUST A NEWS WEBSITE, IT’S A PLATFORM TO DISCUSS, DISCOVER AND DRIVE THE CONVERSATION.

We are the city of Marion Barry after all. Why do you think that this is the case?
Entertaining, yes. But much of what’s been going on in the DC government isn’t funny. But DC isn’t the only place that’s had corrupt elements. (I’m looking at you, Chicago.) What does make DC unique is that we’re not a city and not a state. DC’s local elected politicians can’t climb very high because we’re not a state. It’s not like they can run for U.S. Senate or governor. This has created a local political structure dominated by established players who have few options for growth or advancement. Local DC political culture can stew way too long in its own juices. This particular setup can prevent a healthy political climate from forming. But it can be fun to observe, for sure.

Will DC ever become a state? And what are some of the benefits of becoming a state?
Many people dream of statehood. Will we get it? I’m not sure, but I’m hopeful that we’ll someday achieve full and equal representation in Congress like other Americans. Maybe it won’t be traditional statehood, but it would be an arrangement that gives DC residents more control over their local affairs and a voice in Congress. And that would be something that benefits both DC residents and Congress.

We are known as a city of lawyers and government contractors. What else is there that people should know about DC?
We should be known as a place that attracts highly educated people. That’s a trait that is found across many professions in the DC area. But we’re much more than just a place for government. Our creative and knowledge sector is diverse, energetic, innovative, and international. Yes, we’re the nation’s capital. But we’re also much more than that.

DC is also known as a transient place. People come, they work and then they leave. Why is that and what can be done to ensure people stay in the city?
That’s been a dynamic that’s been going on for generations. Capitals of nations can be like that. But other places are like that, too. We’re just especially good at hosting a transient culture. We’ve come off a decade of incredible growth and change across the region. Overall, more people are moving to the DC area. We have to plan for that growth and make that growth sustainable.

DC can be a very expensive place. It can be incredibly expensive for young professionals, new families, and those who have been here for generations. Across the region, we have to diversify the local economy and create a place where people have the ability to stay long term. Fortunately, the DC area already offers many compelling reasons to stay and grow.

It’s been noted that we may be the only city in America with a surplus of jobs. Why is it hard for us to attract talent?
It depends on what industry you’re talking about. DC certainly excels in attracting top talent in many areas. But just because there are jobs doesn’t mean we’re drawing the right kind of talent in all areas. DC has a reputation of being an all-work-all-the-time type of town, but a lot of people are starting to want a better work-life balance. There are certain professions and some businesses that tend to thrive in a more relaxed setting and I think DC is slowly chipping away at its obsession with work. It’s okay to relax and recharge.

If you had the power to do so, what one thing would you fix in D.C.
If I could snap my fingers, I would have a new crosstown Metro line built to untangle the Orange and Blue lines through downtown. While that would help connect places like Georgetown Union Station and H Street in DC, it would also help the entire region.

Business Transparency

Posted on 23. Aug, 2012 by in Entrepreneur

Melanie Herman and Chris Croll
Melanie Herman and Chris Croll -Photography by Ray Ally

Melanie Herman and Chris Croll -Photography by Ray Ally

We sit down with Melanie Herman and Chris Croll of The Social Risk Institute, a consulting firm that teaches businesses how to embrace online transparency.

Melanie Herman and Chris Croll are an unlikely team. Melanie is an attorney who is a nationally recognized expert in risk management. For over fifteen years Melanie has been helping executives from mission-focused nonprofit organizations to become savvy about risk. Chris Croll holds two degrees in communications and has spent the past decade and a half helping companies to engage in an unmediated dialogue with audiences online. Melanie and Chris recently joined forces to form the Social Risk Institute, a consultancy that coaches leaders of businesses, nonprofit organizations and government agencies on how to balance risk and reward through the effective use of social and other online media.

How do you define “transparency” in the context of senior leaders using social media to achieve transparency?
Melanie: When I use the term transparency, I’m referring to the generous sharing of information. This includes sharing within an organization, as well as between the organization and interested stakeholders like investors, funders, customers, partners and the public. The demand for greater transparency is unprecedented; today’s leaders must use every tool at their disposal to meet and exceed stakeholder expectations. Chris: I would define online transparency as honest and open communication. On social media channels like Facebook and Twitter, transparency is about conveying information in a straightforward and truthful way, with absolutely no hidden agenda. For individuals in a leadership position, transparency is about being truthful, but it is also about being real and human, and hopefully, likeable.

THE GOAL IS TO SHOW THE HUMAN SIDE. WE ALL LIKE TO DO BUSINESS WITH HUMAN BEINGS, NOT ENTITIES.


What are the biggest risks of having company leaders engage directly with constituents?

Melanie: Lack of transparency is a risk to every business today, but open communication intended to foster transparency also carries downside risks. Information disclosed by senior leaders can impact everything from interest in the company’s products and services to board confidence. Unlike compliance, transparency is a choice that today’s leaders must make every day.

Chris: With the proliferation of online communications channels as part of standard business practice, the lines are blurring between what constitutes personal and professional information. If you are tweeting from work about a project you’re working on to your twitterverse, which consists mainly of your friends but also a few colleagues and customers—is that a professional or a personal tweet? Another risk is when companies and agencies are unclear about employee use guidelines. Even Board members need a very clear understanding of what is and what is not permissible information-sharing.

Can there be too much transparency?
Melanie: Possibly, but sometimes the perception of “too much” transparency is actually a result of changing norms within an organization. Some senior leaders are reluctant to change or abandon the communications protocol of yesteryear—running all communications up the proverbial flag pole or following a carefully scripted communications protocol. The downside risk of using a deliberate and time-consuming filter for news is that today’s stakeholders have many sources from which to gather information. When leaders are slow to respond to requests for information, informal media fills the void. By the time an official announcement hassles its way through the traditional internal channels, the story or focus has shifted and the company’s scripted announcement comes across as irrelevant.

Chris: I don’t think you can have too much transparency. To me, that’s like asking if it’s possible to be too authentic. As long as you are following your company guidelines, I advise senior leaders to be as real and as open as they can be. I even suggest that they occasionally post about their hobbies and interests and give their audiences behind the scenes looks at their companies. The goal is to show the human side. We all like to do business with human beings, not entities.

How can a leader assess the risks of transparency in their organization?
Melanie: Evaluating the risks along the opaque-translucent spectrum begins with understanding an organization’s stakeholders. Who are they and what do they want and need to know? For example, in the nonprofit sector there is growing interest in areas like executive compensation, how an organization raises funds to support mission-fulfillment and how funds are spent to deliver that mission. Stakeholders in these organizations expect a very high level of transparency.

Chris: When we talk to businesses about transparency, we spend a lot of time assessing where a particular organization is on the risk continuum. If a company works in cyber security on government contracts, for example, transparency means something very different than it does to, say, a chain of regional pizzerias trying to build its brand online. It’s different for government agencies too. They have mandates from the top to harness the power of new channels – such as social media – to communicate with constituents, garner support and engage volunteers so transparency for them is paramount.

What types of internal checks and balances can protect a company?
Melanie: Clear guidelines about who may speak for the organization and appropriate tone are key to managing social media risk, rather than overly complicated, prescriptive policies that require a significant commitment of time to digest and enforce. Chris: A good social media use policy will address 85% of a company’s concerns. The other 15% requires basic common sense like making sure you are logged into the right account when you post content and not responding in anger to something negative said about you online. No policy can protect against human error or poor judgment.

What are the key elements that should be included a social media use policy?
Melanie: In my experience, the most effective social media policies include clearly stated do’s and don’ts, such as:

  • Do strive to affirm our mission/commitment to quality/customer focus, etc. in your tweets, blog posts, etc.
  • Do pause before clicking send when posting to a social media site.
  • Do try to offer the clearest-possible answers to questions from customers.
  • Do remember that restraint is often the best response to a negative post.
  • Don’t attack or demean a customer, client or donor.
  • Don’t speculate about matters beyond your reach.

Chris: Each policy is unique because each company’s culture is unique. In general, we recommend that you include sections on privacy, trade secrets, security, disclosure, content creation, legal issues and general online decorum. Some companies outline specific policies for each social media network. Others, have more generic policies that apply to any customer communications whether online or offline. Zappos has a social media use policy that is probably the most succinct one I’ve seen. It’s “Be yourself and don’t be stupid.”

For more information about achieving transparency via online media, please visit www.socialriskinstitute.com to download a free White Paper called, “Mapping Your Organization on the Social Media Risk Continuum.”

Kevin Greene

Posted on 23. Aug, 2012 by in Entrepreneur

Kevin Greene
Kevin Greene

Kevin Greene

Modern DC Business sits down with Venture Capitalist Kevin Greene of Valhalla Partners to discuss the risks and rewards of investing in and building tomorrow’s companies.

Kevin Greene is a Partner at Valhalla Partners. He has over twelve years of operating, banking, and investment experience with both early and late stage enterprise software, healthcare and media companies. Prior to joining Valhalla Partners, Kevin was a principal at Flagship Ventures, a $600 million early-stage venture capital firm in Cambridge, Massachusetts, where he served as a member of the investment team and worked closely with a number of Flagship’s portfolio companies. Before Flagship, Kevin worked for IBM out of its Research Triangle Park, North Carolina campus, where he was responsible for establishing, retaining and growing relationships with IBM business partners across the globe. He also held a variety of product marketing positions at IBM, including managing the WebSphere Application Server product portfolio. Prior to IBM, Kevin worked for several years at Goldman Sachs in its New York and Hong Kong offices, where he executed over $30 billion in equity, equity-linked, and M&A financing transactions for technology, healthcare, media and energy-related clients.

Can you tell us what an average day is like for a Venture Capitalist?
An average day for a Venture Capitalist (if there is such a thing) represents a challenging sprint across three priorities – building companies, investing capital, and developing sector knowledge. Every day is a portfolio company building day. If we serve our entrepreneurs well, our own success will follow. If one of our CEO calls, we drop everything to help. The entrepreneur comes first.

Second, we seek to be the first to indentify and win attractive investment opportunities. We aggressively invest in creating, nurturing, and expanding our relationships and networks in an effort to partner with the very best sources of innovation. New deal flow is the lifeblood of any venture firm.

Lastly, effective company building and investing requires staying abreast of changing markets and sector opportunities. We must constantly strive to anticipate and adapt. It’s a constant balancing act and it requires strict time management, which isn’t always popular.

EVERY DAY IS A PORTFOLIO COMPANY BUILDING DAY. IF WE SERVE OUR ENTREPRENEURS WELL, OUR OWN SUCCESS WILL FOLLOW.

What is the best way to get a VC’ s attention? Will a simple email work?
Email is tyranny. Venture firms receive thousands of external emails a week. Therefore, most VCs tend to filter projects through people and relationships.

The best way to gain a VC’s attention is through other people. Ask for an introduction from someone connected to the venture capital firm.

Can you briefly explain why it’s best to get a small valuation when getting an investment?
Low valuations relative to other projects in the same sector and at the same stage are generally not a good thing for a company. Valuations represent the price the market is willing to pay to own a piece of a company. A low relative valuation says something about how the market views the company and, depending on the amount of capital raised, could significantly dilute the existing shareholders.

That said, companies that attract high relative valuations face a different challenge. These companies must grow revenue and profits to meet or exceed these valuation expectations. If the company fails to do so, perhaps because past valuation expectations were unreasonable, it could enter a tail spin.

Building a successful company takes a long time. Maintaining alignment of investor, senior management, and employee interests along the way is critical to building great companies and achieving superior returns. Ideally, everyone involved is incented to achieve success. At any given financing event, unreasonably low or high valuation levels can haunt a company down the road. It’s best to think long term.

Do you invest in family teams? Are there any kinds of businesses or management arraignments that you immediately turn away?
Indeed, the best sources of innovation sometimes run in the family. Locally, brothers Scott and John Ferber are two of the most innovative forces in the ad tech industry. “Ferber class” entrepreneurs are hard to find and are always a privilege to work with. All companies run into challenges when decisions are optimized for reasons that are not in the absolute best interests of the company or its shareholders.

Family teams are no different. Building a great company is tough enough. There is simply no room for those who put their personal interests ahead of the interests of the company or its shareholders.

Are there a mentorship programs conducted and organized by VC’s that coach entrepreneurs?
A seed accelerator (or incubator) mentorship industry is rapidly surfacing across the world. Some are national in scope.

Others are regional in scope. Most accelerators receive venture capital funding and/or participation. A recent Kauffman Fellows Program field study highlighted that three incubators (Techstars, Ycombinators, and Seedcamp) accounted for over 50% of the startups generated to-date by the 30 U.S. seed incubators with one out of six participating start-ups achieving qualified financing events. These accelerators typically provide coaching and handson support through an intense multimonth formal program. In exchange for small equity positions, the support often comes with office space, access to venture capital through demo days and a small amount of cash to cover living expenses.

While entrepreneurial mentorship programs are not new, the institutionalization of these programs is a powerful phenomenon that is positively changing the innovation landscape. These programs will foster the creation of more competitive and therefore successful start-up companies. They may also further democratize the venture capital fund raising process, which ultimately, may fuel further consolidation in the venture capital industry as the origination of deal flow lends itself less to regional advantages.

What happens when a company you invested in fails?
My late mentor, Prof. Jeffry Timmons of Babson, liked to differentiate good ideas from real market opportunities. Successful entrepreneurs and investors know good ideas do not always represent sustainable, real, or, most importantly, timely market opportunities. However, sometimes we assess the market opportunity wrong, or worse, fail to capture a real and attractive market opportunity.

If a company we invest in fails, we generally hope it fails fast–in a capital efficient manner and for the right reasons. If we’re lucky, we learn something early in the company building process that enables the company to pivot to success. In some cases, management succeeds in finding a new home for the company’s employees and technology, while returning as much shareholder capital as possible. And in other cases, the company is shut down and we are left holding a multi-million coffee cup with a cool company logo. Failure is a key part of the innovation business. If you fear failure, you do not belong in this business. We must be free to fail in order to take the calculated risks required to pursue great opportunities.

What are some practical words of advice you can give to the entrepreneur about to be interviewed by a VC?
Clearly articulate the customer problem and market opportunity. Know and tell your story. If you’ve attracted “glow in the dark” talent to your team, talk about them. Do not spin.

Non-fiction is preferred. “I don’t know” is a perfectly acceptable answer. Tolerate interruptions. VCs are notoriously impatient. All the VC likely wants is simple acknowledgement that they have been heard. You may learn something new, but then again, you may not. Keep your head up. Maintain that quiet confidence that enabled you to quit your job, take the risk, and pursue the American dream. You are an entrepreneur and you deserve our respect.

Do good entrepreneurs make good venture capitalists?

Changing the world and building a new company, from invention to innovation, is replete with challenges. Successful entrepreneurs require a unique mix of optimism, paranoia and courage. It also helps if entrepreneurs’ venture capital Board members are great coaches. Some great coaches are former star athletes. Some terrible coaches are former star athletes. Entrepreneurship and venture capital are no different from the ball field.

Fortify.vc

Posted on 23. Aug, 2012 by in Entrepreneur

fortify

“Founders Funding Founders” is the motto that drives Fortify.vc, an early stage venture fund that loves entrepreneurs and understands what it means to take an idea and turn it into a product…

With 18 years of experience as a serial entrepreneur, Jonathon Perrelli founded Fortify.vc to provide seed and early stage capital to startups based in the DC region. As a MindShare CEO, Jonathon understands the value of the network and active participation by mentors. He and his team have spent the past year building up and closing their first venture capital fund, creating pitch events where they give away cash with no strings attached, and opening an accelerator in DC. We were fortunate enough to speak to Jonathon and his Fortify.vc General Partner and co-founder of TheFort.vc, Carla Valdes and asked them a few questions about their model and the DC ecosystem.

Tell us about Fortify. What makes you unique?
Jonathon: Fortify.vc is unique because our team is comprised of serial entrepreneurs and experienced angel investors. When we started investing in the Spring of 2011, I was asked what the goal was for Fortify.vc and to this day it is the same; to have significant deal flow of early stage investments that are distilled through our pitch competition format, and to help evolve the startup ecosystem in the DC region by making hundreds of investments over the next 10+ years.

Carla: At a time when founders and entrepreneurs were desperately in need of earlystage seed capital, we were able to write checks to fund them. Startups are in need of more than just capital and our team has been there to assist and guide our portfolio companies wherever needed.

Jonathon: While building our portfolio over the past year, and during our first six months running an accelerator, we have found that it is the strategic and operational advice that some companies need more than capital.

Carla: Being funded by Fortify.vc has become validation for many local stage companies. In many ways, receiving startup capital adds a level of assurance internally to a founding team and signals to angels and VC’s that a company is growing and worthy of capital. Founders like to know that we are going to be there to support them during the rollercoaster ride in startupland.

Jonathon: What makes Fortify.vc unique is what we have accomplished over the past year. We have; 1) started and closed our first venture capital fund, 2) created Distilled Intelligence, our pitch competition, and 3) founded and operated TheFort.vc, DC’s first tech accelerator.

Carla: We hope to see more early stage funds and are glad to be seeing more pitch events, and a few more accelerators. However, I would not recommend trying to create all three within one year. We survived it, but don’t try this at home.

THERE IS A VERY FINE LINE BETWEEN BEING FOCUSED AND CONFIDENT VS SEEMING UNWILLING TO TAKE FEEDBACK.

What is Distilled Intelligence?
Jonathon: Distilled Intelligence is a pitch competition designed to energize startups and investors. In October of 2011, we held DI 1.0 and hundreds of companies applied to a one day event, where over 50 companies pitched for a cash prize of $25,000. There was no cost to apply and no cost to attend for the selected companies. Investors and entrepreneurs were welcome to attend and tickets were priced appropriately for students and investors. A select group of service providers that add value to the startup ecosystem were also invited to sponsor and attend the event.

Carla: DI is our way of giving back to the community and is also our way of further distilling companies that we will invest in and invite to participate in The Fort (our accelerator) or invest in directly. DI 2.0 will have a cash bounty of $100,000 and will take place on October 11–12, 2012 in DC. We hope to make DI 2.0 a celebration of entrepreneurship for our region. Applications can be submitted at distilledintelligence.com

How much has Fortify invested so far?
Jonathon: In our first year we’ve made 25 investments. Although we can’t disclose the details of our investments, on average our initial investment range is $25,000–$250,000. As part of our investment thesis, we maintain rights to make follow–on investments in subsequent funding rounds. To date, we have invested in several companies in the round following the initial seed investment that was either led by Fortify.vc or that we participated in.

WE WORK SIDE-BY-SIDE WITH FOUNDERS SO WE PREFER TO GET ALONG WITH THEM


What are some of the biggest mistakes entrepreneurs make when pitching you their ideas?

Carla: There is a very fine line between being focused and confident vs. seeming unwilling to take feedback. Entrepreneurs should be receptive to feedback regardless of the source. Based on the fact that we invest in early-stage companies, we like to know that an entrepreneur is willing to pivot and explore other models and be agile when needed, while still driving towards their vision. Flexibility is essential early on and feedback from mentors and investors has proven to be useful for many of the companies in our portfolio.

Another mistake that we have seen entrepreneurs make is exaggerating the status of their business. Having the vision for an incredible product is quite different than stating that there is a working product in the hands of customers. Having an accomplished team and committed investors is not the same as potential cofounders that will join once the investors commit.

Jonathon: We have only seen a handful of companies that spin their story in ways that don’t compute and I doubt that we will meet with those folks again. Having seen pitches from over 1,250 companies, we have found ways to quickly notice the real opportunities from those that have not yet written a line of code. Our process for distilling companies is quite unique and we can identify which startups have the most promise based on simple data points that they provide for us. Our goal is to be fair and reasonable in order to start out a relationship on the right foot. Tell us what you have, what you hope to become, and where you are in the process. Honesty goes a lot further than most entrepreneurs may realize.

THE DC REGION WILL CONTINUE TO DEVELOP AS A HIGHTECH CENTER FOR INNOVATION AND CREATIVITY

When making a decision on a company, what are the top three things you look for?
Jonathon: Team, product, and market. In real estate it is all about location, location, location. The equivalent in early stage investing is team, team, team. Ideally, we like to see a focused founding team made up of one hacker that writes code, a hustler that drives the business, and a designer that creates an elegant and easy to use product interface. The team should be established and knowledgeable in their industry, passionate and dedicated to their company, and completely committed to fulfilling their vision.

Carla: It’s one thing to tell us what we want to hear, which is that you want to change the world. However, it’s entirely different and more appropriate to tell us that you will change the world and show us how you will do it.

Jonathon: Second to the team that will change the world, we need to see a market that is huge and growing and that the team truly understands. Relationships in the market as well as a path for the business and the ability to execute are critical. This is where the Fortify.vc team has and will continue to add value to our portfolio. Not only have we picked up the phone to make calls on behalf of our companies, we pack our bags and travel with them to customer, partner, and investor meetings.

Carla: One more thing to mention is that we require a company to have a working prototype at a minimum. The vast majority of our investments are made in product companies with traction and we like to see revenue.

What are some of the risks of backing early stage firms?
Jonathon: As investors in enterprise software, mobile commerce, cyber security, and consumer internet platforms, there are risks that vary by industry, while some risks are common across the board. In addition to helping founders work through common issues associated with all startups, such as product risk, partnership risks, and the risk of future financing, It is also our goal to assist founders by addressing risks that are less frequently discussed, such as personnel and strategic risks. Startups at the early stage depend mostly on the success of their team and as the earliest investors in most of our deals, we focus on finding and nourishing the right individuals and teams. Personnel risks are really the most impactful to a small company, so we do our best to support and provide assistance in selecting team members and fostering the development and growth of the team. We have also provided support leading up to and during the challenging yet essential times when team members exit.

Carla: It is our preference to fund reasonable individuals that communicate well with one another and show mutual respect. We have passed on deals where founders didn’t even get along during their pitch meetings to us. We have also passed on deals where the founders did not treat their employees respectfully. Our philosophy is centered on our motto, ‘Founders Funding Founders’ and we work side-by-side with founders, so we prefer to get along with them and want to make sure that they are good leaders who care about their teams.

Jonathon: Sometimes risks are mostly within the control of founders, such as cash flow, hiring, financing and, in many ways, technology risks. Market and timing risks are most often outside of the control of founders.

Although capital is a critical component for startups and most will not achieve their product-market fit without funding, it is the face-to-face time with investors, mentors, and advisors that can often be more critical than the investment. It is amazing how involved folks (specifically advisors) will become once they have actually written checks to fund a startup.

What are some of the trends you see in D.C. How does this city compare to what’s going on in Silicon Valley?
Jonathon: Every market has variables that make it unique. There are incredible startup markets and entrepreneurs thriving in places such as Austin, Indianapolis, Denver, Boulder, Philadelphia and, in our region, places like Richmond, Raleigh-Durham, and Blacksburg.

Dozens of markets around the country and the world are evolving their startup ecosystems because we have entered the Age of Innovation. Similar to teaching a farmer how to use tools during the Agricultural Age, we need to teach more entrepreneurs to write software today.

DC will never be Silicon Valley, but the valley will never be DC. We need not compare why one is better than the other, rather, we need to support and learn from each region. We are seeing a significant increase in innovative and creative startups and some of the most advanced technologies in the world are being developed right here in our region, by some of the most energetic and brilliant entrepreneurs.

Carla: We are seeing more and more new faces in startupland every week. One critical success factor for the DC region is that jurisdictions and organizations supporting startups must work together to foster entrepreneurship. One of the greatest joys for us since starting Fortify.vc and The Fort is the overwhelming and positive response from the community in support of these efforts.

Why D.C.? What makes this city a good place for what you do?
Carla: First and foremost, because this is home for our families. The DC region has a truly unique set of characteristics that make it a great place for early stage, innovative companies. Jonathon: DC has an incredibly talented and diverse workforce. The ingredients needed to create the highest chances for startup success are: easily accessible technical training, a skilled workforce, collaborative workspaces, capital, and an ecosystem that supports risk takers. We are starting to see the right combination of these attributes regionally and that makes our area an ideal place to launch a startup. More affordable office space that is convenient for commuters, along with a more active angel investment community are also critical.

Where do you see DC in the next decade?
Jonathon: The DC region will continue to develop as a high-tech center for innovation and creativity. Our area is very family friendly, and the economy has been fairly well insulated, thanks in large part to federal spending. In the months and years to come however, Uncle Sam will not be growing in the same manner and a reduction in defense and federal spending may force more hackers, hustlers, and designers into startupland. We welcome these folks and we are confident that the ecosystem will be ready for them.

Carla: The DC area is and will continue to be an attractive place for people to move and is a wonderfully diverse community for folks to settle in and stay. Although Fortify.vc does have plans to expand to other markets, we plan for this to be home to our core team and our headquarters.

Tell us a little about the companies operating out of the Fort.

Jonathon: As challenging as operating an accelerator has been, I would not trade the past six months, as the experiences were priceless.

Lemur winning the NVTC Hottest Startup award was exciting, but watching them work as hard the next day as any other day was just as awesome as their winning. Lemur plans to disrupt retail and they’ve built an incredible team from just two individuals in January to over twelve people. Speaking of growth, Social Tables, recently featured on CNN, has grown from a single founder six months ago, to several employees working together to disrupt the event management industry. Hinge is making matches through friend of friends via the Facebook platform and their approach to social question gaming is truly addictive. Speaking of matching, CoFoundersLab is the online platform for matching founders of startups together. They also have real world events in a number of cities and CoFoundersLab has already acquired two of their largest competitors!

Carla: Some of The Fort companies have technology with a lot more to offer than what is visible to the outside world. Slowly but surely, they continue to grow their client and user statistics and are now well–recognized brands in their respective industries. Feastie offers a recipe search engine for blogs. Klaggle has a resonance platform that powers large content and media resources. NextGame helps people connect and participate in their favorite activities. HugeFan provides a medium for fans to meet celebrities over unique experiences. Saylo offers a platform for local search and chat. Uppidy helps users store, search and manage text messages.

Jonathon: Forensic Innovations has a unique cyber security product for high tech investigators, prosecutors, and national security agencies and is leading the revenue charge at The Fort. Venga has experienced the most amazing pivot that we have seen and they are increasing revenues daily with their restaurant loyalty and analytics platform.

What have been your biggest surprises and disappointments since starting Fortify?
Jonathon: When we opened the accelerator program and invited the first dozen companies to participate, we envisioned it as a 12–month program. A few months in we were pleasantly surprised to see that several of the companies were getting so much traction so quickly that they were ready to move out. So, at the six month mark, we actually had some of our companies “graduate.” At the end of June we held our first Investor Day, (DC’s first ever Accelerator Demo Day), where The Fort companies pitched investors for follow-on funding. We are proud to report that going into Investor Day, over $2,750,000 had been raised and it looks like over $5 Million will be raised in the Fort’s Inaugural Class. As challenges go, it’s actually the other side of that same coin. When a company moves out, we miss seeing them every day, but at the same time we are really excited to see their progress. Not all companies succeed and hopefully those that do not will have the nerves and knowledge to try again someday.

Carla: One of the greatest outcomes is the founder network that has been created and the assistance that the Fort companies provide to one another. It must be obvious that we are indeed proud of the companies and their accomplishments. We are just as proud of the relationships that have developed between the founders that will last well beyond their time that was spent together at The Fort.

Shannon Kennedy

Posted on 01. May, 2012 by in Entrepreneur

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Shannon Kennedy, Pong Research CEO

Smart phones have become central to our lives, getting smarter and smarter with each passing generation. However, with progress, comes great danger.  ese sophisticated devices resting in our pockets and being held against our cheeks are emitting potentially harmful waves of electromagnetic radiation that penetrate into our body, possibly doing untold amounts of harm. Pong Research has developed a simple solution that has the potential to save lives. Operating out of Leesburg, Virginia, a team of physicists and entrepreneurs led by Shannon Kennedy, have developed the Pong case for smart phones and iPads. We spoke to Shannon about Pong Research and how his revolutionary cases redirect electromagnetic radiation away from user without limiting your device’s signal strength.

Tell us about Pong Research.
We organized Pong in January 2011 with the mission of becoming the global leader in science-based solutions that protect users of cell phones and other mobile devices from potentially harmful electromagnetic radiation (“EMR”). Pong received four granted patents and has seven patents pending, and hired an international team of scientists who collectively possess unique expertise in the fields of physics, nuclear and radiation science, electrical engineering, antenna design, cell biology and health sciences. Pong initially released the world’s first and only external cell phone case that’s scientifically proven to dramatically reduce exposure to cell phone radiation while optimizing the device’s performance. Our cases have been laboratory-proven to reduce exposure by up to 95% below the FCC’s limit while also protecting the mobile device’s signal strength.

How did you become involved with Pong?
After successfully pursuing careers in other businesses, my two partners and I formed an investment fund and advisory practice in 2006. In April of 2010, Pong’s founders engaged us as consultants to the company and, ultimately, we invested in it. In addition to Pong’s unique intellectual property, we saw great potential value in the fact that, while we were approaching five billion cell phone users worldwide − many of whom were quite concerned about radiation exposure − consumers overall lacked any credible means to address their concerns. Once we built consensus around Pong’s future direction, the founders asked me to serve as Pong’s CEO, which I agreed to do in January 2011 when we ultimately formed the company.

There seems to be a lot of inconclusive data about cell phone radiation. What studies can we turn to?
First and foremost, people need to know that last May (2011), the World Health Organization (WHO) classified cell phone radiation as being possibly carcinogenic to humans. This classification is based on a tenyear, $25 million study spanning more than a dozen countries that began in 2000. The data from this very large study suggested that certain factors, such as using the cell phone for about 30 minutes a day for ten years on the same side of the head could double the risk of a glioma, a form of brain cancer that is rarely curable and often fatal.

Also, last year, Dr. Nora Volkow from NIH published fi ndings in the Journal of the American Medical Association that showed a significant increase in brain glucose metabolism in the area of the brain near the cell phone antenna after just 50 minutes of use. This clearly demonstrates that the human brain is sensitive to the electromagnetic radiation emitted from cell phones.

CARRYING THE DEVICE NEXT TO THE BODY MAY INCREASE THE RISK OF CANCER, ESPECIALLY AMONG CHILDREN

For those who wish to look further into the issue, I would suggest the Bio-Initiative Report, which provides a summary of findings up to 2007 and is written by a terrific group of scientists. Also, Dr. Ronald Herberman, formerly of the University of Pittsburgh Cancer Institute, gave a thorough overview of the issue in his testimony to the Oversight and Government Reform Committee in 2008. Just last month, Environment and Human Health, Inc., led by Professor John Wargo from Yale University, published a comprehensive report on cell phones and health effects. Beyond that, if you read any of the works of Dr. Martin Blank, Dr. Om Ghandi, Dr. Henry Lai, Dr. Olle Johansson, Dr. Lennart Hardell or Dr. Dimitris Panagopoulusas, you will quickly see what a credible and global issue this is.

How much danger are cell phone users really facing? How much radiation are we getting from a tenminute phone call, for example?
Unfortunately, it’s very difficult to quantify how much danger consumers are facing since cell phones and other mobile devices are still a relatively new technology. Further complicating the issue is that the use patterns for consumers have dramatically increased only in the past few years. However, this does not mean there is no evidence for concern. There is already a growing body of evidence that suggests real risks associated with long-term and heavy usage. And the health concerns aren’t limited to cancer. There are also studies showing possible links between cell phone radiation and DNA strand breaks, blood-brain barrier leakage, headaches, sleep interruption, cognitive and memory impairment, and fertility and pregnancy concerns among others.

Based upon current findings, many governments, such as Canada, Finland, France, India, Israel, the U.K., Russia, and Switzerland, are already proposing laws to limit advertising, suggesting usage guidelines and advising consumers to take precaution. Just two months ago, Israel’s parliament passed new legislation requiring labels on cell phones which caution that heavy use and carrying the device next to the body may increase the risk of cancer, especially among children. Your readers should know that, here in the U.S., manufacturers also expressly warn users not use their cell phones against their heads and bodies. Unfortunately these warnings are typically buried in fine print, so the majority of people are unaware and do not use their cell phones in the advised mannerr.

To briefly address your second question, let me again say that the majority of studies focus upon longer-term use and not short durations such as ten minutes. However, in 2011, an important study was published in the Journal of the American Medical Association that demonstrated just 50 minutes of use affected the brain in the area nearest the cell phone. So this shows that even shorter duration calls are likely having some eff ect on our brains. Once again, these results suggest that taking precaution is warranted.

SHANNON KENNEDY

How do Pong cases actually redirect radiation? Does this hurt the signal strength?
Those are two great questions. Let’s take the issue of redirection first. Your cell phone antenna emits microwave radiation in all directions. Studies have shown that over 50% of that radiation can be absorbed into your head and body when you’re on a call. Please remember this for the question on signal strength. For every mobile device we decide to support, our scientists design and custom build what we call a Coupled Antenna System. Each antenna system contains a flexible Printed Circuit Board (fPCB) consisting of an array of conductive elements on a polyamide substrate.

The antenna system is precisely engineered in size, shape and relative position unique to the characteristics of your specific mobile device’s internal cellular and Wi-Fi antennas. We embed our antenna system into a formfitting, lightweight case made of Lexan brand polycarbonate which provides outstanding mechanical strength and durability. Once a Pong case is placed on the mobile device, the Pong antenna system’s superior conductive property and its proximity to the mobile device’s internal antenna redirects the device’s near-field radiation toward our antenna system and away from your head and body. As a result, your exposure to the emitted radiation is reduced by as much as 95% below the FCC limit as measured by the Specific Absorption Rate or SAR.

Now this takes us to the second question. Remember that when using a cell phone without a Pong case, the absorption of radiation by the user can be over 50% of the emitted radiation which is measured as Total Radiated Power (TRP). The absorbed radiation, which can no longer be used for communications, creates a signal “dead zone” on the side of the head opposite the phone. When Pong’s antenna system redirects the radiation away from your head and body, that radiation is also redistributed to create a more diffusive signal pattern that can better propagate around the head. The result is a more uniform radiation pattern in the far field, which enables better communication with the nearest cell tower. This is what makes our technology so unique. In addition to the user, Pong cases also protect the cell phone signal.

Historically, most attempts at protecting people from radiation have focused on blocking or shielding the radiation. This is the last thing you should do to your phone. Unfortunately, even standard cell phone cases can have this effect. Depending upon the materials they’re made of, they can both reduce the phone’s signal, and actually increase the radiation exposure to the user.

Also worth noting, Pong cell phone and iPad cases are independently tested in FCC certified labs. Pong is also recommended by respected third-party (i.e., Wired.com) review organizations that have tested and proven the efficacy of our patented technology.

Once radiation is directed away from a person’s head, where does it go?
This is also a great question since people struggle to visualize how radiation moves. Cell phone microwaves are radio frequency (RF) waves which travel out from the transmission source or antenna. When Pong technology redirects and redistributes the cell phone’s near-field electromagnetic field, the primary goal is to get this more intense “near-field” radiation away from the head of the user.

Some consumers may be concerned that this “redirected radiation” might increase exposure to people nearby. While this concern is understandable, it is not warranted. First of all, Pong does not “beam” the radiation away from the user and toward the opposite direction as some people would imagine. Instead, the radiation forms or propagates around the user’s head in a more uniform pattern. Furthermore, cell phone radiation intensity diminishes rapidly with the distance away from the antenna, following what is called the inverse square law, where the intensity of radiation is inversely proportional to the square of the distance from the source, which is the antenna in this case. So radiation that is ten inches from the antenna is 100 times less intense that the radiation which is one inch from the antenna. Our lab testing shows that even on the side of the phone opposite the head, the redistributed radiation from a Pong case is less intense than a phone without a Pong case at a distance of only a half an inch away from the case.

50 MINUTES OF CELL PHONE USE AFFECTS THE METABOLISM OF THE BRAIN IN THE AREA CLOSEST TO THE PHONE INCREASE THE RISK OF CANCER, ESPECIALLY AMONG CHILDREN

Are smart phones more dangerous than other cell phones?
The amount of radiation emitted by your phone depends upon a number of factors including the type of phone you have, your distance to the cell tower and, as I said, even what kind of case you use. Smart phones transmit more data than the typical phone and are usually equipped with Wi-Fi, so you are exposed to more sources of radiation. People often compare cell phones to microwave ovens, which are more powerful than cell phones, just to show how safe cell phones are. However, they’re forgetting that microwave ovens contain most of their radiation while cell phones don’t try to contain radiation at all. In reality, the average oven does leak some radiation. Interestingly, the California Council on Science and Technology compared microwave emissions to cell phones just last year. They found that talking on the cell phone equates to standing one foot away from more than six operating microwaves. We also found a study on radiation leakage from microwave ovens and compared that to a cell phone and found that talking on your cell phone in an area with poor reception is the equivalent of holding your head 1.26 inches away from the average microwave while it is cooking. I somehow think most of us would not be comfortable doing that for 30 minutes at a time. Yet we often do the equivalent when talk on our cell phones.

It’s really important to note that the current safety standard on cell phone radiation exposure only deals with the heating − or thermal – effects of the cell phone. That’s really all that Specific Absorption Rate (SAR) measures. While that’s important, most scientists we speak to are much more concerned about the nonthermal effects of exposure which have been shown to occur at a much lower radiation level than the current safety limit. For years detractors have been saying that there was no proof of non-thermal effects from lowpower devices. Yet, as I mentioned earlier, the groundbreaking study published last year in the Journal of the American Medical Association, which confirmed that just 50 minutes of cell phone use affects the metabolism of the brain in the area closest to the phone, could not necessarily be explained by thermal effects. Many scientists are now calling for the U.S. government to reconsider the current methods of measuring and monitoring cell phone radiation.

Pong Research is based in LA and Virginia. What made Pong decide that this was a good place to be?
Pong did maintain a laboratory in Los Angeles prior to this year. However, once we organized, the decision was immediately made to consolidate that lab with our headquarters in Leesburg, Virginia. The move was completed by the end of 2011 as planned.

I’ve operated a west coast business before, as well as a bi-coastal operation, and I’m not a fan of the time-zone challenges, added travel requirements, and lack of face-to-face interaction between management. When we were assessing location for Pong Research, we first created a short list of possible locations for the company and obviously included California since we were already established there. However, the Northern Virginia/D.C. area ultimately proved to be an obvious choice for a number of reasons, including the favorable business and tax climate versus California; better housing, schools, and cost of- living dynamics for employees; proximity to potential customers who also tend to be on the east coast; and the rich talent pool along the Dulles corridor. Admittedly, I was concerned that we might lose some key people once we announced the move as I know how committed some Californians are to their lifestyles. Fortunately, every full time employee in our west coast office agreed to locate once they visited the area. Th at not only says a lot about how committed our employees are to the company, it also speaks favorably to this region as a business location and place to live.

With Pong’s newest influx of investments, what does the future hold for Pong Research? Any new products we should look out for?
We recently launched a new Pong case for the iPad and iPad 2 3G in December 2011 and created quite a stir. These innovative new products solve the transmission problem created by other cases, including Apple’s own, which caused a proximity sensor in the device to reduce the transmission power by up to 75%. Our case design not only resolves this problem, but also reduces exposure to the 3G radiation by up to 82% below the FCC limit. Something else new for us is that we’re also addressing Wi-Fi radiation, so our iPad and iPhone cases now reduce exposure from Wi-Fi, as well as the 3G cellular signal.

Pong’s global reception has also been quite positive. We’ve sold cases in more than 50 countries outside the U.S., even though we only support a domestic website at this time. Since around 20% of our sales are already international, we’ll be using part of our funding to continue expanding our international presence in the near future.

Andrew Lustig

Posted on 01. May, 2012 by in Entrepreneur

Andrew Lustig of Cooley

Andrew Lustig of Cooley

Andrew Lustig of Cooley, Photo by Ray Ally

Andrew Lustig is a partner at the Cooley Business department, and heads the Mid Atlantic Business Technology Group. Andrew specializes in mergers and acquisitions, private equity investments and is responsible for the representation of high growth technology  companies operating in both the public and private sectors. He is also the founder and board member of MissionLink, an exclusive, CEO-only organization that fosters collaboration, promotes access and opportunities for companies that focus on defense and national security missions. Andrew recently sat down with us to discuss his exceptional career, a meteoric rise that has garnered him regional and national attention, the major challenges that the public sector is currently facing, and what is being done to remedy the hurdles that face our government

Tell us bit about yourself. When did you realize you wanted to be a lawyer? How long have you been with Cooley?
I am married and have three great kids − Luke (8), Haley (6) and Faith (5). My father worked for the State Department, so I spent a good portion of my childhood living in Latin America. We permanently moved back to Virginia right before I entered middle school. I went to the University of Virginia for undergrad and William & Mary for law school. I joined Cooley’s Reston office in February 2000. I am a corporate partner and currently head up our business and technology group for the mid-Atlantic region. I specialize in helping high-growth companies achieve successful exits. From a practice standpoint, I specialize in seed financings, venture capital, private equity and mergers and acquisitions transactions, and my clients range from start-ups to middle market and later-stage multinational companies. From an industry standpoint, I have a particular expertise in working with national security focused technology companies that sell to both the commercial and federal markets.

Did you have a mentor, or someone you looked to for guidance or inspiration?
I have had−and continue to have−some terrific mentors at Cooley. Th e two guys that have mentored me from the time I first joined Cooley, and who continue to be great resources for me today, are Joe Conroy and Mike Lincoln. Joe and Mike founded our Reston office. Joe is now the CEO of the firm, and Mike has built an amazing practice and has become a titan in the local technology market. Th ey both have taught me a lot about the dedication that it takes to build a successful practice.

What are some of the biggest tech challenges the government is facing?
One of the biggest tech challenges the government is facing involves cyber security and figuring out how to best protect against cyber attacks that seek to either exploit our data or disrupt the functionality of our technology systems (i.e., a denial of service attack). The number, frequency and sophistication of cyber attacks have increased dramatically in the last few years.

THERE IS GROWING TECHNOLOGY COMMUNITY HERE THAT IS FUELED BY A POOL OF TALENTED ENTREPRENEURS

Meanwhile, we have become more and more dependent on placing our data in the cloud, automating our infrastructure and using mobile devices to communicate and to access our mission critical data, which makes us much more vulnerable to cyber attacks. One of the key challenges for the government will be to find the right balance between the need for convenience, speed and mobility when it comes to accessing our data and communicating versus the need to secure and protect our networks and information.

Another challenge our government is working hard to solve relates to big-data analytics. There are almost unfathomable amounts of data that are now accessible to the government through the Internet, social media and video. The challenge for the government is not only to collect, decipher and analyze that data but also to find ways to turn that data into information that the government can actually act upon to make us safer. In many ways, the government is trying to prevent the next 9/11 by finding a needle in a haystack, but the haystack is exponentially larger than it ever has been before and is growing by the second.


Andrew Lustig of Cooley

Andrew Lustig of Cooley

Government contracting has sustained the region during the economic downturn. It’s no big secret that the federal government will be cutting back on spending soon. How will that affect the opportunities that we have here in the Metropolitan area?
There is no question that the cutbacks will have an impact on some of the less mission-critical programs and that many local government contractors will lose work and revenues as a result of the cutbacks. However, I also firmly believe that there will always be a need and a market for businesses that have the capabilities to help support the government’s missioncritical priorities. Many of these priorities involve capitalizing on innovative technologies that are equally valuable to the commercial sector (i.e., data analytics, secure mobility, network security, cloud computing, etc.).

This is important because companies with the ability to cross-sell their technologies into both the federal and commercial markets have more viable pathways to success and typically trend towards higher valuations as a result.

Consequently, these kinds of companies have the potential to attract a lot of financing and acquisition related activity. The D.C. metro area is very well-positioned to support these kinds of companies because there is a vibrant and growing technology community here that is fueled by a pool of talented entrepreneurs, technologists and software engineers (many of whom come from the government labs and have a deep understanding of those mission-critical technology needs). We continue to see positive trends in the technology marketplace that bear this out. For example, we have seen a significant increase in the number of local technology startups that have entered the market in the last six months offering innovative solutions to these federal priorities. We are also seeing more financing activity this quarter than we did at this time last year and a lot of activity in the local mergers and acquisitions marketplace.

Scott Frederick

Posted on 01. May, 2012 by in Entrepreneur

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Scott Frederick, Photography by Michael Vonal

Scott Frederick is the Chief Operating Officer of Automated Insights, Inc., a revolutionary new technology company that transforms raw data into surprisingly compelling narrative content, visual displays and interactive applications. Prior to joining Automated Insights, Scott was a venture capitalist, most recently co-founding Valhalla Partners, a company that has over $400 million under management. Scott was also a partner at FBR Technology Group, where he played a key role in the creation and management of one of the Mid-Atlantic’s most prolic venture groups. We spoke to Scott about Automated Insights, his past ventures and what his plans are for the future.

You went from being a very successful venture capitalist at Valhalla to being an entrepreneur. How has the transition been?
The transition has been great. It has been a lot of fun to roll up my sleeves and help build a business from the ground up. As a VC, I got to be involved in the creation of a number of great companies, but I always felt one step removed from the action. As a VC and board member, you get a front-row seat (and good VCs get to play an important role in helping to assemble the teams and get involved in the strategic play calling), but that is still different from playing the game itself. Th e thrill of actually getting to execute the plays as part of a team is quite different. And there is something special about the esprit decorps of a startup that can only be experienced from the inside.

What are some of the benefits of having a background such as yours when running a business?
There are a number of benefits to having a venture capital background when running a business, but the most important is probably the sheer breadth and depth of experience that one acquires when reviewing thousands of business plans and serving on multiple boards – in doing so, you get to learn where a lot of the most common entrepreneurial mistakes are made. There is an old saying, “If you know where all the stumps are, you can walk on water.” Well, I certainly can’t walk on water, but hopefully I can help keep us out of some of the deepest and roughest entrepreneurial waters.

WE WANT TO PROVIDE A TECHNOLOGY THAT CAN ALLOW WRITERS TO SPEND TIME ON THE STORIES THEY WANT TO SPEND TIME ON

Scott Frederick

What made you decide it was time to move on from venture capital?
It really wasn’t as much a move away from venture capital, as a move toward Automated Insights. Automated Insights was a company that I seed-financed while at Valhalla Partners. And while at Valhalla, I was able to invest in Automated Insights when it was just a one person company. Over the course of about nine months, I got to witness just how special the Founder and CEO (Robbie Allen) was and how broadly applicable and powerful the technology he had built could become. As a VC, I always counseled entrepreneurs that their job can either give them energy, or it can draw it out of them – and over the course of that first nine months, it became clear that being a part of Automated Insights was giving me tremendous energy.

What does Automated Insights offer the sports fan? What does it give the user that wasn’t already available through traditional sports media?
I think the depth and breadth of our coverage sets our content apart. We currently have over 400 web sites and over 450 team-centric mobile applications that provide everything from Game Previews and Game Recaps with individual grades assigned to every player for every game, as well as tools for fans to interact with our database of over three billion statistics in meaningful ways. So in many respects, by leveraging next generation technology, we are able to more fully democratize the coverage of sports. We can provide the same level of in-depth coverage to schools with smaller athletic programs like Towson (currently 1-31 and ranked #341 in our power rankings) as we provide to athletic powerhouses like Kentucky (currently 30-1 and ranked #1 in our power rankings). And what is particularly exciting about our technology is that there is no reason we need to stop there.

If we can get the data, we can provide similar coverage of women’s college athletics, high school athletics or even youth sports. The opportunities to scale out and democratize the coverage of sports are very exciting.

In addition, with some of our upcoming products, I think we can change the way sports fans consume sports. There is already a lot of discussion about the “Second Screen” opportunity in sports – more than 80% of sports fans are reportedly utilizing a second screen while watching sports on TV – but to make that experience compelling requires live, hyper-relevant, team-centric content that can be produced at scale. Th at plays into the strengths of our technology, and it is one of the reasons why we are in the process of building out what we believe will be the world’s first automated sports trivia engine (where we will be mining our database and leveraging our technology to create over 10,000 questions for every team in every league that we cover). I think the implications and use cases are exciting.

What’s next for the company?
It seems like there are limitless applications for this technology. The biggest recent change for the company was our re-branding from StatSheet to Automated Insights. Th is was done to underscore the broad applicability of our technology and drive our push into new markets like finance and real estate. Our technology is applicable anywhere there is a structured data. An article recently ran in a major publication that highlighted the author’s anxiety about being replaced by a computer program that does his job cheaper and quicker.

Is your service really going to put writers out of work?
We certainly have no interest in putting writers out of work but, instead, want to provide a technology that can allow writers to spend time on the stories they want to spend time on (e.g., opinion stories or those that are less quantitatively focused). No human wants to write a report every week about the changes in the real estate market for all 42,000 zip codes in the United States or about every change in institutional ownership for the more than 5,000 publicly traded companies – but those are the types of stories that our platform can automate. And we can do a better job with those types of stories because drawing out the relevant knowledge and insight requires the ability to identify patterns and trends across incredibly large − and sometimes diverse − data sets.

How does Automated Insights make money?
We have a hybrid model where we own and operate a network of content that we monetize with advertising and sponsorships.But we are moving aggressively into more of a B2B model where we license our existing content to others and/or produce original content for clients on a subscription basis. Our ideal client is someone who owns an enormous, but under-leveraged, proprietary data set. We can work with them to create new content and data assets that they can monetize in ways that would have previously been impossible.

Tell us more about the Twitter Fantasy Tracker. It seems very interesting for those of us obsessed with Fantasy Sports.

It is a fun product that leverages our ability to handle real-time data and automatically generate hyper-relevant content. We basically create fully automated Twitter feeds that allow fans to track teams and individual players so that they can get performance updates and insightful statistical analysis in real time. We already have over 1,000 of these accounts fully automated.

A related product that I love is our Upset Tracker that automatically creates Twitter alerts when upsets are underway. As a sports fan, I’ve found it has changed my TV watching behavior – which is a really powerful concept.

What’s next for Scott Frederick?
Right now I am focused on trying to bring a powerful new technology to market and maximize shareholder value for Automated Insights. And fortunately, I am having a lot of fun doing it – so that is plenty for me to focus on.

Gene Riechers

Posted on 01. May, 2012 by in Entrepreneur

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Gene Riechers

Gene Riechers, Photo by Ray Ally

With over 25 years of experience in venture capital, Gene Riechers has a wealth of knowledge for entrepreneurs to draw on. Gene was one of the founders of the Valhalla Partners, where he remains as a Senior Advisor. Prior to co-founding Valhalla Partners, Gene was co-founder and managing director at FBR Technology Partners, where he helped to foster a culture of success, overseeing the initial public offering of webMethods, the most successful IPO in history. Gene has spent years working in a variety of senior operating roles at technology companies and is the co-founder of the MindShare program, an invitation only development program for CEOs in the greater Washington D.C. region. We were fortunate to speak to Gene and ask him a few questions about venture capital and entrepreneurship.

Tell us a bit about your background and how you became a venture capitalist.
I was fortunate to be a part of some of the leading high growth technology companies in the D.C. area. Over the course of my corporate career, I joined four start-ups, and they all went public. In the 90s, I knew the region had great potential but not enough local capital, so I joined forces with Friedman Billings Ramsey to start a venture fund aimed at building technology companies. We provided early funding for seven more IPO’s, plus a number of other successful companies. In 2002, I was a co-founder of Valhalla Partners, a leading venture fund in the region.

When is it most wise to seek venture capital? Should early-stage companies seek other avenues for funding?
I always tell entrepreneurs to focus on raising capital that is congruent with their business and, most importantly, their personal style and goals. It’s difficult to build a successful, high-growth technology business under any circumstances. Don’t make it even harder by working with investors that don’t correspond with your style.

VENTURE CAPITAL FIRMS CAN HELP YOU BUILD A GREAT BUSINESS, BUT THEY ARE NOT THE ONLY ROUTE TO DOING SO

More specifically, if you raise capital from VC’s, they are going to be engaged in your business and looking for a significant exit. Venture capital firms can help you build a great business, but they are not the only route to doing so. Th e angel investor market is growing rapidly, and they can be great partners for entrepreneurs. Again, it depends on what you are looking for, your goals and your approach. It’s fine if you don’t want an active VC investor partner in your business and/or you want to pursue a more modest exit. Just don’t raise money from a venture capital firm then, or you will find yourself at odds with your investor partner, and life will be hell. The wrong answer is to do something inconsistent with your values and goals.

Lastly, recognize that some businesses need a great deal of capital to succeed, such as data storage. And, some businesses can be built to scale on little capital, such as government contracting. Don’t start a capital intensive business with an attitude that your capital sources aren’t going to have an influence on your business.

What are the top things you look at when looking at a business plan?
Most venture capital investors are very focused on the team. In the early stages, that can mean just one or two people.

Do they have relevant experience? Do they know how to adjust to changes in their market, or are they set in their ways? Do they know that they don’t know everything? Are their plans and goals in line with the venture fund’s goals?

The idea matters a lot, too. For some investors, they want to see great new groundbreaking technology. For others, it’s to see a large potential market. I was generally focused on the potential market size and dynamics, even if it was a nascent market at the time of investment. Something is going to go awry, and a big market gives you room to maneuver when faced with unexpected challenges.

When a company has a brilliant idea behind it, but has a poor management team, what can the venture group do about it?
Venture funds are generally good at helping companies build management teams if an entrepreneur has a big idea and knows they need help in building a team that can work out well. Th e mistake I see, on rare occasions, is that an entrepreneur has listened to too many VCs emphasizing teams, teams, teams. So they go off and build the wrong team before meeting with VCs. When a VC meets a good idea and a large, weak team, the VC is likely to just move onto the next opportunity instead of trying to fix that one. Most VCs feel that may be too hard to fix and is a poor use of their time.

When should an entrepreneur seek an out-of-town venture firm?
I think it’s often wise to have local and out of- town VCs as investors. Each can provide complementary skills. As one example, maybe the local one will help you build a management team, and the out-of-town firm might have a different set of contacts in the market.

What piece of advice do you have for the entrepreneur who is seeking an early exit?
First, I think all companies should be built towards being sustainable in the long run as an independent business. Aiming narrowly for a specific exit (“I plan to sell in 24 months or to this particular acquirer”) usually doesn’t work out. Having said that, it is reasonable for an entrepreneur to view an earlier, smaller exit as a big win for them personally. Just don’t bring in an investor partner who has a very different view. Life’s too short to be out of sync with your investor.

We all like a sure thing, and venture capitalists are no different. How much risk were you comfortable with?

It’s good that venture investors differ a lot on risk and risk/reward tradeoffs. They gravitate to the stage and industries that are best for them, which creates choices for entrepreneurs. If you look to raise venture capital, understand each firm’s areas of focus and risk management. If you are looking for early-stage capital, talking to a later-stage firm is a waste of time. You aren’t going to change them.

You have had over 25 years of experience in venture capital and in the technology sector. What, so far, has been the biggest challenge of your career?
The biggest challenge is to help leaders and companies through times of adversity. The oral histories of successful companies usually don’t include the near-death experiences they suffered regularly in their early days. I was an executive in one company where in the early days I felt like I learned two reasons each day why we would fail and two reasons each day why we would succeed. It was an intense roller coaster experience, but you couldn’t let the emotions of the moment overwhelm you in either direction. (We ended up with 60% market share, so it worked out fine.)

What are some of the big mistakes that inexperienced entrepreneurs commit most often?
A common mistake is to expect market growth or market adoption rates that are too aggressive. This leads to spending too much on marketing and sales early. Another mistake is to focus on getting the first product “perfect” versus getting something useable in the market so that you get feedback. Some entrepreneurs are trying to build release 2.0 at first, even though in their mind it is the 1.0 release. The one they should build and launch is effectively release 0.7.

Do you have any big regrets? Are there any companies that slipped through your fingers?
Every venture investor has missed in both directions. There are the deals you did that you should not have, and the deals you didn’t do that you should have. In the latter category for me is Blackboard. Michael Chasen and his team have done well and taught me there is budget money in education if you know where to look.

What have been the most valuable lessons you have learned being a venture capitalist?
The most important lesson is that in building a company, management will face challenges that could not have been predicted. Do they have the resiliency and trust in each other to work together through the challenging times in order to adapt to those changes?

What do you like most and least about the venture capital industry?

It’s two sides of the same coin – VC’s get to meet with many wonderful entrepreneurs who are dedicated to changing the world for the better. These are bright, energetic, dedicated people. The flip side is that the experience isn’t as intense as it is in a company. As a VC investor, you may be involved with the company, but you aren’t there in the offices sweating the details with a team to launch a product or to get that first key order. I’ve had the very good fortune to be in both places in my career and I really value all of those experiences.

What’s next for Gene Riechers?
About a year ago, I reduced my role with Valhalla Partners following a health scare. I have been fully healthy for some time now and enjoying working with great companies as a board member, advisor and consultant. I’ve worn a few different hats over the years, but it has all been about helping technology entrepreneurs build their dreams. I’m more than a bit addicted to it.

MindShare: Class of 2012

Posted on 01. May, 2012 by in Entrepreneur, LEADERSHIP

troopswap

MindShare is D.C.’s premier invitation only program for CEOs of the most promising companies in the region. Founded in 1997, the program provides CEOs unparalleled access to well established and respected mentors and unrivaled business opportunities. To date there have been more than 550 CEOs who have graduated from MindShare, who have in turn gone on to create a unique and valuable alumni network. Past alums include Tim O’Shaughnessy of LivingSocial; Rick Rudman of Vocus; Hemant Kanakia of Torrent Networking Technologies; and Philip Merrick of webMethods.

MindShare Class of 2012

The MindShare Organizing Board provides a forum exclusively for CEOs to share success stories, as well as some of the biggest challenges that they have faced during their rise to the top. Each session focuses on a differing aspect of nurturing and growing an emerging business.

Two rising stars from this year’s graduating class are Blake Hall of TroopSwap and Hulya Aksu of CriticMania.

HULYA AKSU OF CRITICMANIA
What is CriticMania?
CriticMania is a few things to few groups. CriticMania Expert is a platform where small businesses must qualify and meet criteria set forth by the experts on our staff to have their business information published in a narrative. Most small business owners need support, education and online partners to improve and expand their online identity. That is what we do. CriticMania is a strong ally to the small business community, not another extortionist made to look like a social media platform such as Yelp and the others. This year we will also launch CriticMania Social where users will be able to use a mobile app to check in and post their own reviews with people that matter to them.

Where do you envision CriticMania in five years?
I can’t speculate as technology is constantly shifting and I don’t have a crystal ball. I can only tell you that we will be quick to adapt, adopt the necessary advancements, and improve as quickly as the marketplace demands us to.

From where do you draw your inspiration?

Ive been publishing in print successfully for the last six years. We have won national acclaim, plenty of awards and have met some of the country’s most talented people. Although it’s flattering to be where we are in the community, nothing inspired me the way the small business owners have. Their needs, their passions and their problems have driven me to come up with solutions that are effective and affordable. Our success is measured in the success stories of every single one of my customers.

BLAKE HALL OF TROOPSWAP
What is TroopSwap?
TroopSwap is the first e-commerce platform exclusively for the military and veteran community. Over 23 million living Americans have served in uniform, yet, prior to TroopSwap, there was no efficient way for brands to reach this demographic online because the government doesn’t provide a digital ID for service members and veterans. We are solving this problem by building a fully integrated marketplace where merchants can retail to verified military users via fl ash sales, permanent military discounts and virtual stores. We also plan to give our military members the ability to create their own stores so they can interact with one another inside of a trusted environment. If you can imagine a military marketplace along the lines of an “eBay meets Amazon” then you can see where we are headed.

Where do you envision TroopSwap in five years?
The best brands build an ecosystem that creates value for everyone who interacts with that brand. I love the story of how Vans became a national brand by organizing a world championship for skateboarders. They had no idea that by crowning a champion they were creating an aspirational brand that would position Tony Hawk at the top of the pyramid and young teenagers who wanted to be like him at the bottom. They just decided that the community needed a world championship and that it was the right thing to do. The coolest part of being an entrepreneur is that I have no idea what TroopSwap will be in five years. We simply want to focus on building great products and services that will create tangible value for our community – if those products and services happen to spur massive externalities then so much the better. Ultimately, Matt and I want to create a vibrant community and a platform that will enable the free market to serve the military in ways that the government simply cannot.

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