Founder of Silicon Hills News
The buzz surrounding the Initial Public Offering of Facebook and the billions Mark Zuckerberg will receive might make people think that running a startup leads to fame, fortune and fun.
But several entrepreneurs offered up a different view at the Texas Venture Labs “Been There, Done That” panel last week at the University of Texas’ McCombs School of Business. The panel was made up of alumni of the Texas Venture Labs Investment Competition. They also served as judges for the finals competition.
“Expect extreme highs and extreme lows,” said Robert Reeves, director of the IT and Wireless Portfolio at the Austin Technology Incubator. He cofounded Phurnace Software with Daniel Nelson. They won the Texas Venture Labs Competition in 2006. They went on to raise $5 million in venture capital from S3 Ventures and in 2010 sold Phurnace Software to BMC Software.
“You have got to have a certain intestinal fortitude that you don’t have yet, but you’ll get there,” Reeves told the audience of about 100.
Jay Manickam, UT class of 2004, started UShip with two other UT graduate students: Matt Chasen and Shawn Bose. They entered the TVL Competition during its second year and they finished in last place.
Since graduating from UT, Manickam and his cofounders have raised a little more than $7.5 million in two rounds of funding and now have 100 employees at UShip. The company also recently launched a reality TV show on A&E called “Shipping Wars.”
“It’s not where you finish in this competition, it’s the fact that you’ve done it,” said Rob Adams, director of the TVL Investment Competition. “I was an investor at the time and I turned the deal down.”
“In the first stages, things are very, very emotional,” said Hassan Johnson, who created ThaTrunk while at UT as a platform for hip-hop artists. “It’s a rollercoaster, just enjoy.”
ThaTrunk has since evolved into a mobile proximity sharing app for creative content. It was one of TVL’s first portfolio companies. Last summer, Hassan participated in DreamIt Ventures accelerator in Philadelphia and has raised six figures in angel investments.
“Now we’re back on the fundraising trail,” Johnson said.
Angel networks, in general, play a vital role in any entrepreneurial venture, said Jeff Harbach, he serves as executive director of the Central Texas Angel Network. He also owns several small businesses including two 7-Eleven convenience stores. He received his MBA from UT where he co-founded Texas Venture Labs.
He advised entrepreneurs to start off going to the local angel network, accelerators and incubators.
“Start getting feedback as soon as you can,” Harbach said. “Be active in your ecosystem.”
A big mistake entrepreneurs make when talking to potential funders is saying they need money right off the bat, Harbach said.
“That’s the wrong way to go about it,” Harbach said. “If you’re looking for money, ask for advice. If you’re looking for advice, ask for money.”
Texas Venture Labs works closely with the Central Texas Angel Network, Adams said.
“If you look at how deals get funded in today’s environment it’s usually an angel type investment,” he said.
One of the biggest highs as a new entrepreneur comes from getting a customer’s first payment, said Sangram Kadam, who received his UT MBA in 2010 and co-founded Ordoro, inventory management software for online retailers.
But for every customer that says yes, 100 will say no, he said.
Ordoro received a $600,000 angel investment late last year.
“Since then we’ve been growing fast and furious,” Kadam said.
But as a startup founder, he’s gone without a salary and he has eaten many meals consisting of raman noodles.
Aaron Lyons, who finished his MBA in 2011, has launched a restaurant concept called Urban Dish. He’s raised $600,000 toward a $700,000 goal to fund his company.
To launch his venture, Lyons sold his car.
“I got real familiar with the bus schedule,” he said.
He also maxed out a lot of credit cards.
“Just in a day, you hit huge highs and huge lows,” Lyons said. “I’ve gotten used to something bad happening tomorrow, “ if he gets a huge check from a funder or some other good news.
When asked when is the right time to start a company, Johnson said “right after school.” That’s when you’re used to being poor. If you go work for a big company, you might get used to the perks and nice environment, he said.
Reeves said “another good time to start it is after you get fired.” He referred to unemployment checks as startup capital.
Reeves and Manickam also said it really helps to have a technical founder.
“We didn’t have one,” Manickam said. “Nowadays it’s almost a prerequisite.”
“You’ve got to have a geek on staff,” Reeves said. “No one is gong to fund anything with just a Powerpoint presentation.”
Make sure to get family support on your venture, Lyons said.
“If you do have someone else in your life, it’s not just you making the decisions,” he said. “It can add additional strain and pressure. When you have a family to support, you just have that much more on your shoulders.”
But families can also support your venture.
Reeves said his wife “called me on my bullshit.” She supported him, but she also kept him grounded.
“It’s important not to have just a good coach but an ass kicker,” Reeves said.
When seeking investment capital, always check out the profile of the investor to find out what they back, Reeves said.
“Meet the investors on a regular basis,” Kadam said.
Also, share your idea with people who will listen, Harbach said. “Get their feedback.”
The idea is all about the execution, he said. And feedback is essential, he said. The Central Texas Angel Network has office hours on Wednesday from 9 to 11 a.m. at Mozart’s coffeehouse.
Also, things take longer than you expect, Reeves said.
“Much, much longer,” he said.
Never come back from having coffee with a potential investor and tell your significant other you’re getting funding, he said. He made the mistake of doing that.
“Keep your perspective. This is one of many meetings. Tell everyone about your venture,” Manickham said. “Live it. Be proud of what you’re doing. You never know who will be able to help you.”