Category: Austin (Page 214 of 318)

Nine UT Companies Pitch in Silicon Valley

February 7, 2014 / / 0 Comments

By LAURA LOREK
Founder of Silicon Hills News

At the Computer History Museum in Mountain View, Calif. an exhibit contains artifacts and information about the invention of Ethernet.
The invention turned 40 years old last year.
Its inventor, Bob Metcalfe, now professor of innovation at the University of Texas at Austin, is focused on creating the next revolutionary company in Austin. Last week, he brought nine startup companies to Sand Hill Road in Palo Alto, deep in the heart of Silicon Valley, in hopes of igniting the next big ideas.
Those companies had nine minutes to pitch their ventures before venture capitalists Thursday at the Sharon Heights Golf and Country Club.
The UTinSV event is about building the connective tissue between two regions, said Kyle Cox, director of IT and Wireless with the Austin Technology Incubator.
“Capital travels. Ideas travel. Anymore the world is getting smaller. And Bridging the gap between these regions is a good thing,” Cox said. “It requires visibility and getting in front of each other and interacting.”
It’s a warm introduction to the community, said Joseph Kopser, founder and CEO of RideScout, a smartphone app that aggregates all ground transportation options.
“I have no expectations that I’m going to get checks or cash stuffed into my pockets tonight,” Kopser said. “What this is the beginning of a relationship.”
RideScout has raised more than $1.5 million in a seed stage round and is currently raising money, he said.
M87, a company that makes an amplification software system for mobile phones to get better connections, also met with potentials partners and handset manufacturers in Silicon Valley, said Matt Hovis, vice president with M87.
“It is a very big deal for us to build this in Austin and stay in Austin,” Hovis said.
The following companies pitched:

AdBM Technologies – it has created a noise abatement system to protect marine life from underwater oil and gas drilling operations among other applications.

Admittance Technologies – a medical device company that has created a platform called CardioVol, which can help patients with heart disease.

FemtoSurg – “a micro-surgery platform enables precise, targeted medical procedures of the structures of the eye with almost no collateral damage to surrounding tissues.”

Lynx Labs – has created hardware and software to create real-time 3D modeling cameras.

M87 – a software platform that can boost the performance of a wireless phone’s connection speeds.

Ride Scout – a mobile app that aggregates public, commercial and shared transportation services to allow for comparison of all options from taking a bus to riding a bike or hiring a cab.

Toopher – software that prevents fraud and identity theft by using mobile phones for identity verification.

Wise Wear Corp. – a medical device maker that has created wearable mHealth patient monitoring systems.

ProteanSeq- a protein sequencing company.

Bubbles, Unicorns, Outliers and Innovation in Silicon Valley and Austin

February 7, 2014 / / 0 Comments

By LAURA LOREK
Founder of Silicon Hills News

IMG_2628When the Facebooks and Twitters of the world are soaring everyone thinks of Silicon Valley as a glorious place, said Bill Gurley, general partner of Benchmark Capital.
“But when that changes people go away very, very fast,” Gurley said. “They scatter like the lights coming on in a room.”
He tells people they should be investing in Silicon Valley when no one else is. That’s how they get phenomenal returns, Gurley said. They also need to develop long-term relationships, he said.
“I think it’s important for people to understand how cyclical things are,” Gurley said.
He spoke Thursday afternoon on a panel of experts discussing trends and emerging technologies during the second annual University of Texas in Silicon Valley event at the Sharon Heights Golf and Country Club on Sand Hill Road in Menlo Park.
Another panelist, Mike Maples Jr., partner in Floodgate Ventures, thinks this decade is going to be as pivotal in innovation as the 1970s were. In the 2000s, the cost of starting a company collapsed, he said. That created an opening for a new class of venture firms, he said.
“Innovation is becoming democratized,” Maples said.
Bob Metcalfe, professor of innovation at the University of Texas at Austin and the inventor of the Ethernet, is worried there’s a bubble in the startup world going on now.
“I do think one of the reasons the business is cyclical is because we take on risk very marginally and there’s a lot of mimicry,” Gurley said.
IMG_2629For example, in 2012, Workday went public and immediately started trading at 15 times forward revenue even though half the revenue is services and they’re burning $30 million to $40 million a year, Gurley said.
That triggers a discussion in every software as a service boardroom around Silicon Valley about whether the companies are pushing hard enough and going far enough, Gurley said. “So you go raise more money and you build up the sales and marketing line items and you burn more.”
“And so the collective burn of the SAS companies in Silicon Valley must be in the billions right now if you could add them all up,” Gurley said. “Another way to think about this, which I wrote about recently, is the number of people employed in Silicon Valley in money losing companies is at an all time high now.”
The last time it was that high was in 1999, Gurley said.
“There is inherent risk in that,” Gurley said. “If we hit any kind of speed bump you won’t be able to get those companies into a position where they can be sustainable without very catastrophic events.”
Twitter is an example of this trend. It’s unprofitable.
“No one is sacrificing growth for profitability right now,” Gurley said. The markets are rewarding companies for that, he said.

Centers of Innovation

Silicon Valley, Austin and Israel have been so successful as tech centers because they have a fundamentally different belief system in place, said Greg Horowitt, co-founder and managing director of T2 Venture Capital and the author of “The Rainforest: the Secret to Building the Next Silicon Valley.”
One of the beliefs is in the concept of paying it forward, Horowitt said.
“The fact is we have to take care of each other,” he said. “There has to be a sense of yes it’s important to compete, but you also have to collaborate.”
There has to be a sense of a paradox of innovation, Horowitt said. That is only accepted once it’s imitated, he said. It’s hard to spot innovation because there’s no pattern recognition when something is completely new, he said. The bubbles happen when entrepreneurs get caught up in the imitation, he said.
“And so what we have to do is we have to be able to support the crazies,” Horowitt said. “We have to allow them to experiment and be creative. We have to allow people to fail and take the risks and we don’t punish them for doing that.”
The most successful tech centers have created systems in which knowledge and ideas flow freely, Horowitt said. He cited, as an example, author Matt Ridley’s book: Rational Optimism in which Ridley defines innovation as ideas having sex.
“When I read that I knew my job is to promote promiscuity,” he said.

Cultivating risk-tasking environments

The kind of environment that promotes risk-taking leads to rewards, Maples said. At Stanford University, the roots came from the gold rush, Maples said. Its professors encourage students to drop out and try out their ideas, he said.
“The thing I’ve seen in Silicon Valley is why don’t you just try it,” Maples said. “That’s the kind of atmosphere that is going to cause you to find the next rock of gold or create the next Google.”
In Silicon Valley, there is a tiny fraction of outliers who pursue counter-intuitive exponential ideas, Maples said. “Most of them fail. But when they work, they are spectacular. The crazy exponential idea out here gets encouraged and has an outlet. The crazy exponential idea in Austin, which I hope will change someday, but it tends to have mentors, advisors and people around it that say you’re trying to be a vitamin not a pain killer. You’re not solving the customer problem.”
Innovators in Silicon Valley like Sergey Brin and Larry Page, co-founders of Google, and Elon Musk, founder of Tesla and SpaceX, don’t think that way, Maples said.
“That’s the X factor that Silicon Valley has,” he said.
Part of that is volume, Gurley said.
“Every smart and dumb version of every idea gets tried,” Maples said.

In search of Unicorns and Thunder Lizards

The size of undergraduate ideas is very small at the University of Texas at Austin, Metcalfe said.
“We’ve got to do a Unicorn in Austin pretty soon,” Metcalfe said. “That’s in my performance appraisal. I have to deliver some Unicorns.”
Unicorns are startups that hit $1 billion in valuation. Maples calls them Thunder Lizards.
Austin also needs more catalysts to help grow its ecosystem. Dell hasn’t created as many startups in Austin as some of the successful technology companies in Silicon Valley, according to the panelists.
The research university, in this case the University of Texas at Austin, is the driver in the innovation ecosystem, Metcalfe said.
There’s a bubble in social, mobile and cloud, Metcalfe said.
But Maples thinks more opportunity lies in the mobile industry because young people rely on their mobile phones more than cars. His 19-year-old daughter doesn’t have a driver’s license. He investigated and found out many teenagers no longer get their driver’s license. They rely on their phone for freedom that cars once provided, he said. So he thinks there’s a lot more opportunity developing for social, mobile and local apps for the mobile phone.
He thinks there are going to be companies worth more than $100 billion that put mobile first.
Gurley said a lot more of the population is becoming urban.
The democratization of innovation will lead to more diverse tech entrepreneurs creating companies regardless of their geography, Maples said.
In Austin, the new Dell Medical School will spark more innovation and startups in the life sciences and biotechnology industries, said Metcalfe. He often tells his students: “The world’s most important problems will not be solved by yet another website.”

Six Tips from MC Hammer on Entrepreneurship at Startup Grind

February 6, 2014 / / 0 Comments

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By LAURA LOREK
Reporter with Silicon Hills News

Known as an entertainer, entrepreneur and humanitarian, M.C. Hammer also adopted social media tools early on.
Hammer tweeted before most celebrities knew Twitter even existed.
During meetings with Twitter’s founders Evan Williams, Biz Stone and Jack Dorsey, Hammer explored the emerging world of micro-blogging with his fans. He also began meeting with Google more than 10 years ago when the search engine had just a few thousand employees in Mountain View, Calif.
Mary Grove, now head of Google for Entrepreneurs, remembers those times. On Tuesday, Grove interviewed Hammer before several hundred people at Startup Grind 2014 held at the Computer History Museum.
Hammer lived on the cutting edge of technology and adopted new tools early, Grove said. Entrepreneurial from a young age, Hammer sold baseballs in the parking lot of the Oakland Athletics baseball team. Earlier than that, he ran a fruit stand and an ice cream business in Las Vegas, Hammer said.
A lot of similarities exist between rap, hip-hop music and startups, Hammer said.
“I brought my entrepreneurial skills into hip-hop,” he said.
Hammer noticed that the best Oakland As baseball players got the best deals. For example, Reggie Jackson got the Reggie candy bar and he also had a deal to represent Puma shoes.
Hammer decided that a baseball player only plays baseball once a day but a song comes on every hour. So with the increased visibility, he wanted more money from sponsors for his music deals.
Here are six tips for entrepreneurs gleaned from Hammer’s Startup Grind talk:

1. Never be discouraged by the naysayers.

“You just have to keep going,” Hammer said. The first time Hammer started tweeting hundreds of naysayers, primarily public relations people, told him that entertainers and artists shouldn’t do their own marketing.

2. Embrace new technology and tools.

“First thing I say to an artist today – be honest and make the music you want to make – use all new tools to get your music to the consumer,” Hammer said. He’s also a fan of Pinterest. Some naysayers say that “no men are on Pinterest,” Hammer said. “Yes they are. Smart men are on Pinterest. And if it’s all ladies, a smart man like me, should be there,” Hammer joked. But as a marketing tool Pinterest is phenomenal, he said. “The possibilities of what Pinterest can do are actually scary.” He has a page on Pinterest: XX320. He’s also excited about the possibilities of tools like Snapchat.

3. Enjoy communicating with others on social media.

“Tweeting, if you don’t approach it right, is labor,” Hammer said. “It’s never labor to me.” It’s easy to build an influential network on Twitter, he said. In real life, people spend years and pay a lot of money to make relationships with reporters and other tastemakers, Hammer said. The Twitter platform makes it possible to have direct conversations with your fans and others.

4. Give back.

Someone who has less income is as important as someone who has a billion dollars, Hammer said. Treat people well and inspire hope. Adopt Marc Benioff, founder of SalesForce.com’s 1-1-1 model, he said. Spend 1 percent of the company’s equity helping others, donate 1 percent of the employees’ time and donate 1 percent of the products and services to charity. “That model effectively allows you to create a culture for your company of giving back,” Hammer said.

5. Empower People

Previously, Hammer was a control freak. He used to micromanage. Now, he gives his employees power to create and make mistakes. “Delegate authority and allow people to do what they do. Pick great executives and a great team to do that.”

6. Work hard and hone your skill set.

“Silicon Valley, the tech world here, is like the NBA,” Hammer said. “You’ve got a lot of players who look good on the playground on the weekend. They dream of playing in the NBA, but they are not prepared or they are not good enough or they don’t have the skill set to play in the NBA.” When he sees someone who has skills he does everything he can to help them. But they have to work hard to get there. “Do I think that the doors should just fly open and everyone should come in, of course not,” Hammer said. “They have a filter and a vetting process. And what we see in the NBA is the best of the best.”

ECPA and A Reasonable Expectation of Privacy in the Digital Age

February 5, 2014 / / 0 Comments

By SUSAN LAHEY
Reporter with Silicon Hills News

Matthew Henry, an attorney with the Electronic Frontier Foundation

Matthew Henry, an attorney with the Electronic Frontier Foundation


There are a lot of problems with the existing privacy laws when it comes to electronic communication in the cloud. Not the least of which, from the perspective of a company like Rackspace, is the fact that federal investigators want information from emails and cloud storage services, but they really don’t understand the technology. So they ask Rackspace to do the searching for them.
That was a key point brought up by Perry Robinson, vice president and general counsel for Rackspace at a panel Tuesday night entitled: No Freedom Without Privacy: the ECPA Needs an Upgrade. The reason it’s so easy for the federal investigators—among others—to access people’s email accounts, phone calls and other data in the cloud is that laws protecting privacy of communication haven’t changed in nearly 30 years, according to panelist Matthew Henry, an attorney with the Electric Frontier Foundation. As Henry pointed out, in 1986, a personal computer could only store data equivalent to two digital photographs.
Since there was no storage space on personal computers, unopened email stored on a third party server was considered abandoned property after 180 days. All it took for investigators to get hold of it was a written statement that the contents of the email were needed for an investigation. That’s still the case. Senators Patrick Leahy and Mike Lee have proposed one of several sets of amendments to the Electronic Communications Privacy Act that would require investigators to get a warrant for electronic communications. But those are stalled in Congress.

No Privacy in the Cloud?

Investigators, whose case was represented on the panel Tuesday night by attorney and former prosecutor Arthur Gollwitzer III, question whether citizens should have any privacy in the cloud. After all, Gollwitzer said, privacy laws were created to protect what people did in their own homes. But Robinson, whose company has been deluged with requests to mine information from its customers’ data, argues that U.S. has laws governing communication should be device agnostic. It shouldn’t matter what medium that communication uses.
Gollwitzer, said he is as libertarian-minded as any of roughly 30 people in the room and agrees that the law should change. But he pointed out that a lot of the communication people use today is public. Like Twitter and Facebook. Moreover, he said, U.S. citizens can’t protect against privacy violations on information stored on servers in other countries, like Korea.
“Do you really have a reasonable expectation of privacy in the cloud?” he asked. “I don’t know. That’s debatable…. ”
He pointed out that many people trade privacy for convenience when signing up for services. They wind up clicking “I agree” to contracts they never read that permit those sites to share their data for cross selling opportunities.
The difference between that and having your records open to investigators, Robinson said, is choice. His wife, for example, would prefer a land line to a cell phone and has filters set up to keep her searches private. He joked that it takes five minutes for a page to load on her computer. As for him, he doesn’t care if the pizza place tracks him. After all, he’s letting the pizza guy come to his house.
Choosing to make your information public is different from giving federal agencies open access to use your information to investigate you. Information gleaned during one of these searches, even for a non-criminal investigation, can be shared with other federal agencies or even, as Gollwitzer pointed out, with the media.

Intimidation Tactics

In the past, said Robinson, Rackspace rarely spoke about the requests it got to divulge customers’ information. For one thing, if Rackspace spoke about one agency using them to mine information, others would see the company as a source for the information they sought. But Robinson said they decided to begin speaking out, partly because some investigators use intimidation tactics that many small and medium sized businesses who lack staff attorneys may mistake as actual threats. For example, an investigator might say “The attorney general isn’t going to be happy with your refusal to cooperate. ” As Robinson said, as an attorney, he knows to respond “The attorney general is your boss, not mine” and require that any requests follow proper channels. A company who doesn’t have a staff attorney might not know to do that.
Some investigators have tried to pass the visits to Rackspace off as “The cost of doing business” for a hosting company. Robinson countered that the cost of doing business was taxes, health insurance, setting up an LLP. Not, “Oh, from time to time the government might want to come in and take two employees for six hours and pick their brains about how to get this information…. A lot of folks in government have no idea how tech actually works.”
Some companies charge a fee for that service. So far, Rackspace hasn’t. Gollwitzer supported the idea of charging fees for those services as a kind of checks and balances system. On the small budgets they have, he said, a lot of law enforcement agencies would think twice about asking third party providers to do searches for them if the cost were high enough.
Robinson said that wasn’t the point.

Privacy is Device Agnostic

“ECPA 2.0 needs to talk about protecting information generally,” Robinson said. “ We should protect communications. It shouldn’t matter whether it’s a piece of paper, email or a phone call. Whatever we come out with in the future the protection should apply regardless of the medium.”
The current law leaves too much to the discretion of lawmakers. And agencies like the Securities and Exchange Commission want the same kind of access that criminal investigators and those responsible for national security have.
“Law enforcement officers in order to do their jobs…are accessing loopholes for the specific purpose of getting around some of the protections we have in place,” said Howard. “So for me one of the biggest concerns I have when I look at ECPA is that there are loopholes in the law and they are using them and they shouldn’t be.”
Gollwitzer pointed out that, with the law as it stands, investigators were doing nothing wrong to try to get information from private emails.
Robinson agreed that “Law enforcement will go as far as they’re able to go….Judges don’t just sit and look at laws on their own and say ‘Which ones seem constitutional? Let me take a look at all the laws that came out of Congress last year and figure out which ones to knock out with a line item veto….’” People who want laws to change have to take action.
The panel was sponsored by Google and America’s Future Foundation. Arif Panju, attorney with the Institute for Justice, moderated the panel at Fonda San Miguel.

Optimism and Obstacles on the Road to Success with Stella & Dot

February 5, 2014 / / 0 Comments

By LAURA LOREK
Founder of Silicon Hills News

IMG_2554In 2003, Jessica Herrin started Stella & Dot, making jewelry kits out of her home in Austin, Texas.
This year, the company will do $220 million in revenue, Herrin said at Startup Grind 2014 in Mountain View, Calif. Stella & Dot sells boutique-style jewelry and accessories through online channels and in-home trunk shows through a network of independent vendors. Herrin measures the impact of her venture in the ability to create “a life of happiness” for others.
“So many people’s lives have been changed with $500 a month,” Herrin said.
Alfred Lin with Sequoia Capital and a board member of Stella & Dot did a fireside chat with Herrin Wednesday morning.
“It is a classic overnight success that is ten years in the making,” Herrin said.
After a few years, the company moved its headquarters to San Bruno, Calif. and raised a few million in venture capital. But it wasn’t always easy.
“The road to success is paved with a lot failure and a lot of passion and persistence along the way,” Herrin said.
And she faced a lot of naysayers.
“The world is full of people that will tell you it can’t work,” she said.
And startup entrepreneurs face a lot of problems, Herrin said. But instead of preventing them and avoiding them, she embraces them and outlasts them. She learns from the failures and mistakes and she embraces the lessons to help make her company stronger, she said. Herrin is optimistic and full of enthusiasm. She inspires others with her cheerful outlook.
“I was just really certain this needed to exist in the world,” she said. “It levitates me over any problem we have. I never lose doubt. I don’t need instant validation every day.
When Herrin launched her business she launched it as a “lifestyle business.” She had a baby and then she had another one shortly after that. She didn’t take a paycheck from the business for four years.
Someone once asked Herrin when did she decide to scale the business.
“Was it when you got capital? Actually it was when I was done breastfeeding my second child,” Herrin said.
Herrin also advised entrepreneurs that time constraints shouldn’t negate them for doing something.
“Everybody’s got the same amount of time,” Herrin said. “You just need to make choices so you’re living your life according to your priorities. It is about high value activities and what makes a difference and what you choose to do with your precious life.”

Horowitz on Being Authentic and Success at Startup Grind 2014

February 5, 2014 / / 1 Comment

By LAURA LOREK
Founder of Silicon Hills News

urlBen Horowitz joked that he is like Kelly Rowland and Marc Andreessen is like the Beyoncé of their venture capital firm.
Andreessen, co-founder of Netscape, is a much more visible and famous partner, Horowitz said.
Rowland was one of the original members of Destiny’s Child, which disbanded in 2005 and Beyoncé went on to become a break-out solo singer.
But Horowitz hasn’t done too badly for himself. He sold his company, Opsware, for $1.6 billion to Hewlett-Packard in 2007.
Mark Suster, entrepreneur and partner in Upfront Ventures, interviewed Horowitz on the opening night of Startup Grind 2014, a two-day conference focused on entrepreneurship and storytelling, Monday evening at the Computer History Museum in Mountain View, Calif.
In 2009, Horowitz and Andreessen founded a VC firm to invest in companies so that technical founders could remain the CEOs, Horowitz said. In most VC models, the investors want to replace the founder with a seasoned CEO, he said. But he thought the companies that are the most successful in the long run are those that know their business and founded it.
“Founders should run their companies because they know what’s wrong with them and they can continue to innovate,” Horowitz said.
To date, Andreessen Horowitz has raised three funds worth $2.7 billion and has invested in more than 150 companies.
Suster asked Horowitz about what he thought were the pros and cons of the accelerator programs like Y-Combinator and 500 Startups in place around the country to help entrepreneurs.
Accelerators get young entrepreneurs into startups and they have created a path for success for them, Horowitz said. He’s generally in favor of them.
“From a magnitude standpoint, the pros are someone gives you a brand new Bugatti, the cons are someone left some cigarette butts in the ashtray,” Horowitz said.
A con of the accelerator programs are they promote groupthink, he said.
“You can get caught up in the culture of the accelerator and the culture of the startup world,” Horowitz said. “If you’re an innovator, thinking like everyone else is the worst possible thing you can do…..You’re not going to get a breakthrough by copying anyone else.”
Suster asked Horowitz about a blog post he wrote called “The Struggle.” A lot of people were able to fail gracefully before social media and so much public information, Suster said. He asked how can founders get support to get through the struggle today.
When Horowitz was going public BusinessWeek wrote a story on his company titled “The IPO from Hell.” Red Herring magazine wrote that he was “taking his cash and setting it on fire in his parking lot.”
“These things hurt my feelings,” Horowitz said. “It’s lonely.”
His stress didn’t come from what the press wrote about his company, but from what his employees thought of his company.
“It’s amplified if you read what’s said in the press,” Horowitz said.
The best advice is to focus on what you can do and not what’s going wrong and you can’t control, Horowitz said.
“There’s always an answer and god willing you have enough time to get to that answer,” Horowitz said.
Horowitz has written a book “The Hard Thing About Hard Things.” It comes out next month.
His advice on selecting partners is to find people you work well with and don’t create a “fake company” like a “fake band” to meet all the needs.
“You generally are better off being the Beatles than the Monkeys with a startup,” Horowitz said. The Beatles were a bunch of guys who knew each other and formed a band. The Monkeys, on the other hand, started off as a TV show about an imaginary band that wanted to be The Beatles, but it eventually became a real knock-off band.
For more advice on founding companies, selecting cofounders, rap music and more, watch the rest of the Suster and Horowitz interview on the Startup Grind video embedded below.

Spiceworks Pioneers the Social Way to Do IT and Gets $57 Million Funding

February 3, 2014 / / 0 Comments

By AMY MCCULLOUGH
Reporter with Silicon hills News

(L-R) Bacon suit-clad Spiceworks IT pro Darren Schoen interviews Spiceworks co-founders, CEO Scott Abel, CTO Francis Sullivan, VP of Development Greg Kattawar, and VP of Marketing Jay Hallberg at SpiceWorld Austin 2012.

(L-R) Bacon suit-clad Spiceworks IT pro Darren Schoen interviews Spiceworks co-founders, CEO Scott Abel, CTO Francis Sullivan, VP of Development Greg Kattawar, and VP of Marketing Jay Hallberg at SpiceWorld Austin 2012.

In 2005, four IT industry friends met at an Austin Starbucks to brainstorm a way for them to work together, have fun, and find a solution for common needs of system administrators. Scott Abel, Jay Hallberg, Greg Kattawar, and Francis Sullivan envisioned the social way to do IT: a free platform where IT professionals could connect with each other, learn about available technology solutions, and work more efficiently. These conversations led to the birth of Spiceworks in July 2006.

By the end of its first year, Spiceworks had 32,000 users. Now, about 5 million IT pros use the Spiceworks system to manage their help desks, networks, onsite software and offsite cloud services. These users—who influence or control more than $500 billion in annual spend on IT services and products—come to Spiceworks to get unbiased, user-written product reviews of the more than 3,000 technology brands that advertise on the platform.

Spiceworks’ popularity has inspired Goldman Sachs to invest $57 million, which CEO Scott Abel said will be used to ramp up efforts for a new Spiceworks’ goal: creating an app store for the IT industry.

“We were already going down the path (of creating an IT app store), but it was going too slow. A chunk of this new money will go to accelerate the effort of the development of the platform for that app store, as well as for marketing to get the word out and let developers know this is an incredible platform where they can reach 5 million IT pros and not only build products but also sell them and make money,” Abel said.

David Campbell, managing director in Goldman Sachs’ Merchant Banking Division, will join Spiceworks’ board of directors.

“The emergence of professional networks like Spiceworks represents the next wave of social innovation,” Campbell said in a statement. “Spiceworks has a unique platform for technology brands to directly access a rapidly-growing, critical, and underserved market of IT professionals that commands over $525 billion of spend today.”

Spiceworks’ funding began with Austin Ventures. More support followed from Austin Ventures and Shasta Ventures, then Institutional Venture Partners, Adams Street Partners, and Tenaya Capital, for a total of $55 million, prior to the Goldman Sachs investment.

The Spiceworks “spice”

Abel expects the company to add about 100 employees this year, which will bring Spiceworks’ count to 340 by year end. An upcoming challenge will be maintaining the company’s unique culture.

“We started this company for the four of us (founders) to start having fun again, and most of that revolved around how people behaved from day to day. One of the biggest challenges for me is how do we maintain the unique culture we have, given how fast we’re growing,” Abel said.

New employees start off with a program called Jump Start, where they interface with the company founders. A company goal is transparency and accessibility, Abel said.

Spiceworks’ users are uniquely enthusiastic. Many IT pros chat in the online community about some of their favorite food topics, like bacon and chili. Some have even gone so far as to tattoo the company’s mascot, an orange dinosaur called SpiceRex, on their bodies.

Houston-based infrastructure administrator Nigel Hickey appreciates the accessibility of the Spiceworks team of which he feels “like part of the family.” A former DJ, Hickey recently played music at the SpiceWorld conference in Austin.

Hickey, who is responsible for the computers of almost 100 employees and 10 servers in four different office locations at National Specialty Alloys, said he “looked like a champion” two years ago when he began using the Spiceworks help desk system.

When he arrived at his company, no help desk system was in place, and executives were consistently being interrupted with computer issues. Hickey was able to set up a Spiceworks ticketing system in four days. Now, when employees send e-mails to the company help desk, Spiceworks picks them up, converts them into tickets, and puts them in a queue. The system also shows which tickets are assigned to which employees.

From a marketing perspective, Katie Drucker, a vendor representative for South Carolina-based Unitrends, said her company is very happy with its investment in the Spiceworks community.

With any kind of shopping, Drucker said, the best research often comes from asking a friend’s opinion. The Spiceworks community offers IT pros a wealth of product reviews from users and access to information from vendors like Unitrends, a seller of appliance-based backup solutions.

Drucker is Unitrends’ “green gal,” or vendor representative, in Spiceworks. (Spiceworks users are color-coded: Vendors are green, IT pro users are blue, and Spiceworks’ employees’ are orange.) She spends about 75 percent of her work time interfacing with the Spiceworks community.

Although she can’t release numbers, Drucker said Unitrends’ spend in Spiceworks has a significant positive impact on the company’s sales. “We have really enjoyed being part of the community. It gives us great way to interact with our target market … and not only talk to people who are considering a new backup solution, but also help people who are currently using our backup solution at Unitrends.”

Unitrends has tried different advertising strategies in Spiceworks, including banner ads, e-mails and a live stream, Additionally, Unitrends has attended four different SpiceWorld events in Austin and London and are booked to do them again this year.

“We get what we give. By spending time in the community and helping people troubleshoot their issues … we’ve been able to gain a lot of friends and fans,” Drucker said.

Capital Factory’s New Partnership: Growing the Pie

February 3, 2014 / / 0 Comments

By SUSAN LAHEY
Reporter with Silicon Hills News

images-2Silverton Partners and Floodgate’s new partnership with Capital Factory is offering the incubator’s startups a chance to take their companies to the next level, according to Mike Maples Jr., Floodgate’s managing partner.
“When I moved to California, one of the things I noticed was that the cost of starting a company or validating an idea had collapsed,” Maples said. “It doesn’t cost very much to start a company or try out an idea…. But if you’re not careful you can go too far with that. People throw a whole lot of ideas against the wall and see what sticks. This will help serious entrepreneurs working on real ideas have enough funding to make a real go at it.”
With the new matching program, companies in Capital Factory who have $25,000 in support from two mentors will receive a $50,000 matching grand from Capital Factory’s fund. Then Silverton and Floodgate will both kick in $25,000 for a total of $150,000. That’s enough to let people quit their jobs, said Morgan Flager of Silverton.
Previously, said Flager, companies could come into the incubator’s matching program with lower dollar amounts, like $10,000, with a matching grant from Capital Factory.
“If you look at the west coast, incubators are offering more like $100,000 plus,” Flager said. In addition to enticing top companies who might otherwise choose incubators outside of Austin, offering $150,000 investment gives entrepreneurs the opportunity to work on a new idea full time, which having $20,000 in funding generally doesn’t. “This gives them more runway, more confidence to pursue their entrepreneurial ambitions. That kind of money can attract better people.”
In fact, said Josh Baer, executive director of Capital Factory, many companies in the matching program come with a $25,000 investment from angel/mentors. That’s the average investment. Most companies, he said, use a two-step process. First they engage in the incubator program by trading a two-percent equity stake for benefits like free office space, free hosting services and access to investors and mentors who frequent Capital Factory. Then they enter the matching program.
But the new partnership gives startups access to Silicon Valley money as well. “A lot of Capital Factory companies have been funded by Silverton Partners,” Baer said. Silverton has invested in companies such as Sparefoot, which started at the incubator. “And Mike Maples is the Austin guy. It makes so much sense having them involved. It gives the companies a lot of credibility both here and (in Silicon Valley).”
Maples identifies Baer as the “single most important force for leveraging the trend” of democratizing entrepreneurship. “By adding our time and money and expertise to Capital Factory we can help them get involved with even more startups and more entrepreneurs, hopefully with result of greater numbers of successful companies.”
Floodgate and Silverton will take equity positions with the companies they invest in, in the form of convertible notes. But the exact terms will be negotiated with each company.
“Investors either help grow the pie or help claim a bigger slice of the pie,” Maples said. “At Floodgate, we believe it’s all about making the pie massively bigger. We’ll be working with Silverton and Capital Factory so that a whole bunch of new companies can get funded with the probability that the pie that gets created grows massively, offering a whole lot of opportunities.”
The new investment will level the playing field for Capital Factory competing with incubators in other parts of the country that can offer more money, Flager said.
“Hopefully, he said, this will raise all boats. “

Financing Thunderlizards in Austin at Capital Factory

February 3, 2014 / / 0 Comments

CF+floodgate+silverton150Capital Factory, Silverton Partners and Floodgate announced Monday morning they are teaming up to provide matching investments for all Capital Factory incubator companies.
Josh Baer, co-founder of Capital Factory, made the announcement via a blog post and on Twitter. TechCrunch also posted this story on it.
In total, each startup will get up to $150,000 in venture financing through the program.
Here’s how it works: “a startup founder who can find two Capital Factory mentors that invest $25,000 each into the company automatically triggers a matching venture capital investment of $50,000 from Capital Factory’s in-house fund and $25,000 each from Silverton and Floodgate,” according to a news release.

Reaction from Twitter:

Smith & Nephew Buys Austin-based ArthroCare for $1.7 Billion

February 3, 2014 / / 0 Comments

imgres-2Smith & Nephew announced Monday a deal to buy ArthroCare Corp. of Austin for $1.7 billion.
The London-based company plans to pay $48.25 per share in cash for the the medical device company.
“This is a compelling opportunity to add ArthroCare’s technology and highly complementary products to further strengthen our sports medicine business,” Olivier Bohuon, Chief Executive Officer of Smith & Nephew, said in a news release. “Together, we will be able to generate significant additional revenue from the more comprehensive portfolio, combined sales force and Smith & Nephew’s global footprint. With this transaction, we are again accelerating our strategy to rebalance Smith & Nephew towards higher growth.”
The sales price is approximately 20 percent more than what ArthroCare’s shares have been trading for on the Nasdaq market for the 90 day average before the announcement. Smith & Nephew expects the transaction to close mid-year pending regulatory approval.
“ArthroCare and Smith & Nephew know each other well from our licensing and supply arrangements, and this is a natural transaction for both companies,” David Fitzgerald, president and CEO of ArthroCare, said in a news release. “The Board believes that this transaction is in the best interest of our shareholders.”
ArthroCare makes medical devices, instruments and implants. The company specializes in sports medication and ear, nose and throat procedures. It also provides products for the spine, wound care, urology and gynaecology practices.
Last year, ArthroCare bought ENTSurgical, a company founded by Fred Dinger in San Antonio, for $45 million. Dinger had previously sold another company he founded in San Antonio, OsteoBiologics for $72 million to Smith & Nephew Endoscopy in 2006.
ArthroCare has approximately 1,800 employees. It has manufacturing plants in Costa Rica and a research and development facility in Irvine, Calif. This year, the company announced that it had entered into a deferred prosecution agreement involving an ongoing investigation by the Department of Justice. The company paid a $30 million fine.
ArthroCare had total revenue for the first three quarters of 2013 of $276 million, up 2 percent from the same time period a year ago.

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