Brief review of who's got the money
Venture capitalists -- organized as firms, these guys invest in new companies. They tend to focus on certain stages of development, and on certain businesses. They define market segments in which they have expertise and knowledge, and decide who to deal with on those bases. With these guys, there's a formal pitch after due diligence, and investment isn't a done deal until after a formal vote.
Angel investors -- these are wealthy individuals who invest in start-ups. They tend to be loosely organized, if they are organized at all. They may find out about certain investment opportunities through affinity groups/clubs. With these guys, if you get to due diligence, it's likely that they at least PLAN to invest.
Stages -- Early, growth, final (within about a year of IPO) stages, each having fairly hard definitions, from the point of view of those holding the money.
- Early stage/seed capital = initial outside funding.
- Early stage = beyond seed but before full-up sales.
- Growth stage = beginning to develop markets, and you have your first sales (up to $1M or so) in hand. This stage is perhaps the most critical, timing-wise, because windows for expanding markets will only stay open for a limited time.
- Final stage = as indicated above, you're headed for an IPO.
Due diligence -- this is the process by which venture groups or investor organizations will determine for themselves whether what a start-up says about itself is true. The rigor of this process is pretty much a function of the experience of the investors. Groups will pay different levels of attention to such issues as
intellectual property, technical development, etc. Due diligence requires the start-up's participation, because so much must be provided to the investors. There'll be weekly, and almost daily, contact as the process nears completion.
What goes into a due diligence package? Critical elements include a
marketing plan (including what we perceive as marketing opportunities), financial projections, references from folks you've dealt with, the legal standing of the company, its
investment structure, the nature of the company's intellectual property, and its
management. We must confirm what we write in our
business plan. Some
investors and organizations call what they're looking for a "SWOT analysis," where SWOT == "strengths, weaknesses, opportunities, and threats."
Here are notes on "alternative" funding sources for start-ups, as published in US #1, a regional business newspaper.
State loan pools -- organizations exist that provide portions (25% is not unusual) of loans, guaranteeing those portions, for loans ranging from $50K to $1M. The interest rate on such loans varies from 5% to (prime-1)%.
Loan guarantees tied into certain types of businesses -- for outfits that will create lots of jobs, or locate in an economically distressed area, or represent an important economic sector. We have seen in this area guarantees for up to $1M of working capital, limited to 30-50% of the loan amount.
Direct loans -- up to $500K for fixed assets, $250K for working capital, for up to ten years, at interest rates varying from 5% to (prime-1)%.
The weaknesses in these programs (as I see it) are (a) that only a relatively small portion is guaranteed, (b) that the money must be used in certain ways, and (c) that to qualify you may have to be in certain industries or locations. Some entrepreneurs like to be able to make these choices for themselves. And, well, I guess that means they have to find money themselves. :-) :-) :-)
Labels: consulting
An anecdote about testing to failure
Once upon a time, while I was working for GreyPilgrim Inc., a disgruntled employee -- one who didn't agree with certain aspects of component design -- took it upon himself to test a component to failure. He basically tore the component open.
The
EMMA robotic arm had elastic joints, made of polyurethane, connected to metal sections at either end. The polyurethane was intended to supply flexibility; the metal strength and stiffness. (Flexibility and stiffness -- mathematical inverses -- in the same mechanism. What a concept.) The joint was always problematic in design because of our lack of knowledge about
how to properly fasten the two types of component together. And what we did -- long nails and epoxy in this case, though the design evolved later -- didn't set well with the disgruntled guy. He said to me, "I'll prove this thing doesn't work," and even as I said "I don't think you oughta do this," he tore the joint apart in front of my eyes. The cross-section looked a little bit like the picture above: once the tear started, stress increased around the tear, and the whole thing accelerated. It became easier for him to complete the damage once he'd started it.
The problems were that (a) that joint was the only one we had at the time, and it was reserved for another test -- having nothing to do with failure -- that we could not perform until a new joint was built; (b) it took him so much more effort to tear the thing apart that even he was surprised. Even the fasteners seemed to hold, until he got serious in what amounted to an act of sabotage. So if something good came out of this incident, it was that we had much more confidence in the design than we'd had before. We were planning to test one to failure eventually, but not right then. Remember, if you're going to break stuff, you have to make sure "there are many copies."
What happened to the disgruntled guy? Well, he was fired. I didn't stop him doing what he did because he'd been above me on the company totem pole prior to the failure. But he'd become a kind of cancer to the company already and was on the edge of being let go. It got to the point afterwards that he'd threatened the company, wanting a cash payment for his shares, and said
If this offer is not accepted by Monday at 12:00 noon then I will make the destruction of GreyPilgrim my passion.
He did make this his passion, and although he failed in his aim of destroying GreyPilgrim, he made life a pain in the ass for the rest of us for quite a while.
Another lesson you must learn is to make sure anyone who becomes unhappy in your start-up is unable to become a cause of failure, whether of prototypes or anything else.
Labels: consulting
Prototyping: the Lesson of Bob Bastard
Bob Bastard (pictured) was a character, a quality tester, in one episode of the prematurely cancelled, but still in syndication
Dilbert TV cartoon. Dressed more-or-less like the Phantom of the Opera, Bob would play an organ while subjecting Dilbert's Gruntmaster 6000 to the vibration setting of "Armageddon." He then placed the Gruntmaster, designed to survive in temperatures up to 5000F ("enough to boil water," says the Pointy-Haired Boss), in a temperature of 5001F. "How did you become such a sadistic bastard?" Dilbert asked. But my students and I had a different view: you can learn how to do things right from observing how things are done REALLY wrong.
If you want to test a prototype, here's what you must consider:
- First, if you want to test your prototype to failure (and you might for many reasons, most notably to find out how it breaks), then you should be like the Cylon played by Grace Park (pictured) in Battlestar Galactica, and make sure "there are many copies." Not a good idea to break your only copy. I have an anecdote about that, but that's another story.
- You must run the right tests -- something the thing you are trying to build might actually experience, only worse. Not as bad as what Bob Bastard would put you through, but worse than what your users would put you through.
- You should have more than one person weighing in on what tests to prepare. You'd have a committee to develop a manufacturing plan; why not for this?
- You should run multiple trials too, at different times -- that does a lot to remove time-based biases. Good experiment design calls for you to run experiments in such a way as to minimize the effects of other biases as well, but what might cause those other biases you have to figure out for yourself. (Or with your committee. :-))
- Finally, you need to run field tests as well as test-stand tests. That's Brian Holcombe's plan, and it should be yours too.
Did our sadistic friend teach us more than he intended?
Labels: consulting
News briefs from Strap-Mate and IMET
This photo was taken when
Strap-Mate's Lisa Gable (left) appeared on the televised version of "Let's Talk About It" hosted by Denise Pereau (right). Now I am trying to find out how I can see this show, although I have heard an audio copy. It also appears that the show does not have a Web site, but I am looking into that as well.
This photo appeared
with an article in the Bucks County Courier Times about
the IMET Corporation and its firearm lock.
I was surprised and pleased to see it -- I didn't know there was a prototype for this lock. If people would LOOK at it, they would readily see that
Ockham's Razor is being used wisely here. Unlike in the cases of all the people who think a firearm lock must be electronic. (A pox on them.)
IMET and Strap-Mate are now in talks about IMET creating a prototype and/or series of solid models of one or more of the Strap-Mate products. I don't mean to be anything but modest, but I attribute this turn of events to myself. :-)
Labels: young entrepreneurs
Sometimes you win, sometimes you lose, and sometimes it rains
The
Daily Jolt reported that the
TCNJ Web site has a direct link to a porn site. Some would say that's OK; it demonstrates "freedom of speech." But I would bet real money that TCNJ's official position is somewhat different. Let's see how long it takes for them to remove the link, which is found
here and which links to
this site. Congratulations to the TCNJ Daily Jolt for finding treasure others have overlooked. That's something entrepreneurs do.
My contact at the Jolt also had this to say:
oh and good news... we are going to be promoting like crazy soon... hq gave us a lot of money to run our halloween contest... the prize will be very very good this year... the details are being worked out so i don't want to share... but it will be worth over 100 dollars
OK, that was an instance of the student entrepreneurs winning. Here's one where they lost: a former student of mine contacted me yesterday and asked if I still had information about entrepreneurship, because he was doing a paper. I started telling him what I had and found out quickly he'd reached information overload.
Student: What could I write about that would fill five pages, single-spaced?
Dr. Ron: Your biggest problem will be to cut out information. You could write 20!
Student: What should I focus on? My paper is due Friday.
Dr. Ron: [crestfallen] OH. You are starting a little late then.
What I thought was genuine intellectual interest in a subject near and dear to me turned out to be a case of a student who hates his class, forgot about his assignment, and was hoping I would help him make it easier. An honest inquiry woulda brought a tear to me eye; this one just made me kack.
I said "sometimes it rains." Well, it's supposed to rain later today. :-)
Labels: office space
The "Experience the Difference" watch
In a search of the
US Patent and Trademark Office, I found that there are more than 50 incidences of organizations who have trademarked the expression "experience the difference." About half of those trademarks are active, including the one held by
AMC Theaters, which drives me crazy every time I see a movie. (Even a great movie like
Serenity.) AMC puts it up prominently on their home page, and at the end of every set of theatrical trailers.
The issue I have with this is simple: any moron can come up with a slogan like "experience the difference." And judging by its ubiquitousness, some morons have. Here is the list of applicants for trademarks: you tell me if they all represent differences we can experience:
- Tyler Candle Company, LLC
- Shell Oil Company
- W. L. Gore & Associates, Inc. (live)
- GailShay WorldWide, Inc.
- Lamers Bus Lines, Inc. (live)
- Albany International Corp.
- Calzaturificio Zamberlan SRL (live)
- Young & Rubicam Inc. (live)
- Statewide Home Loan Corporation (live)
- National Textiles, LLC (live)
- Landmark Graphics Corp.
- Alcan Packaging Canada (live)
- Labeltronix, LLC (live)
- SOS Staffing Services, Inc. (live)
- St. Edmond's Federal Savings Bank, Philadelphia (live)
- National Dairy Holdings, LP
- Jackson National Life Insurance Company
- Proview Electronics Co., Ltd.
- Olympus Mortgage Co.
- Retina Consultants of Southwest Florida (live)
- Gregory Marketing Communications, Inc.
- CAE Simuflite Inc.
- American Multi-Cinema, Inc. (AMC Theaters -- live)
- H2O International, Inc.
- Texas De Brazil Corp. (live)
- The Culinary Institute of America (live)
- Joma Wild Seafoods (live)
- National Autos, LLC (live)
- BSH Home Appliances Corporation (live)
- Destiny World Church (live)
- LaPrima Shops.com (live)
- Countywide Title Group, Inc. (live)
- Novartis AG Corp.
This slogan is easy to adopt. Many have already done it. It is impossible to separate yourself from this crowd if you adopt it. So why would you do it? Isn't the whole purpose of a slogan to establish a brand for yourself? And why, oh WHY, would you go to the effort of applying for a trademark for a saying that's already in use everywhere you go? Neither you nor the USPTO can protect it. You might as well take your money and throw it in the street. Better yet, use no slogan at all and give a
donation to Katrina relief instead.
There is one organization that uses "experience the difference," for which it's OK with me:
Extreme Championship Wrestling. :-) :-) :-)
Labels: office space
Status of Larry's chassis
As
I have written before,
Holcombe Chassis Works is developing a new chassis (pictured, on a jig) for Brian's friend Larry, also a racer, and a mechanical engineer as well. Here's a description of what's up with this project:
Brian: you could say that i'm starting the rear portion of the frame rails, and that we've made a slight design change
Brian: we've decided to use motor plates
Ron: motor plates?
Brian: which the significance of a motor plate is that it adds all the structural rigidity one could desire for this application
Brian: its a big shear plate that spans the width of the chassis and bolts to the engine
Brian: and there are two of them, one in front and one on the back of the engine
Ron: so the rigidity is specifically targeted at the engine.
Brian: yeah and it keeps the chassis from bending inward
Ron: ...from the engine's weight?
Brian: from that, and the when the car lands from the wheelie
Ron: right. then you have an impact on one side and momentum on the other.
Brian: i'll send you some new pictures after dinner
Ron: cool beans, man. :-)
Brian: thats a pretty good explanation of it. lol, thanks!
Brian: it will take a lot of the stress off of the crossmembers
Ron: the crossmembers are also products of your design, right?
Brian: yeah
Ron: so you are improving your overall approach.
Brian: yeah definitely. this will make an overall much stronger design
Ron: but not much of a weight hit?
Brian: we had talked about this in the beginning, but since brought it up again as a good approach to the problem
Brian: wont be much, the one plate is .090" steel and the other is 1/4" aluminum. Both are profiled to add a minimum of weight
Ron: good!
Brian: i'll weigh them when i get em and see how much we're looking at total
Labels: engineering, young entrepreneurs
Performance Friction Corp. stiffs consultant!
My friend
Rich Barrett did a consulting job for
Performance Friction Corp. in Clover, SC. This company makes, among other things, rotors (like the one pictured) and brake calipers, especially for racing cars.
This gig called for Rich (pictured) to pass along a final report, after which he would be paid a US $600 balance. This balance Rich never saw. In short, he was stiffed. Stiffed by a company who uses the following as part of its operating principles:
Excite the customer, by exceeding their expectations, with the absolute best product, delivery, and value through a total commitment to product and process integrity. Continually improve on the execution of TS16949. No Compromises.
Notice this says nothing about the way they treat their vendors.
Rich has always been an up-front guy, one who wears his heart on his sleeve. Though he feels Performance Friction must bear responsibility for its own lack of business ethics in this case, he sees it as a sign of a larger trend:
In business, the idea now seems to be that we will cheat you in any way we can. [We] will be as crooked as [we] can get away with.
Rich also says that consultants "know each other" -- that they run pretty much in the same circles.
Consultants are entrepreneurs, small businesspeople in general, who can't always absorb a $600 loss like Rich has been able to. So I see this as a sort of
plagiarism, in which Performance Friction takes ownership of work it has never done, and never paid for, and benefits from that work. It also contributes to a lessening regard for smaller entrepreneurs, while increasing its own company value just a tiny bit. And since Rich is my friend, Performance Friction, a company heretofore unknown to me, is now my enemy.
Let me ask you, officers of Performance Friction: was stiffing Rich for $600 worth it?
Labels: character, engineering
Site Feed
