By LAURA LOREK
Reporter with Silicon Hills News

This year, Capital Factory didn’t host a move your startup to Austin competition at South By Southwest Interactive.

Instead, the downtown technology accelerator and co-working site showed off 12 of its startups during two separate pitch events Friday afternoon. Capital Factory is home to more than 400 startup companies.

Austin Mayor Steve Adler kicked off the event by welcoming everyone to Austin. Then each startup gave a three-minute pitch.

“Experts agree that one of the best ways to improve our healthcare system is to allow for easy and open sharing of medical records,” said Bryan “Buzz” White, co-founder with BlueHub Health.

BlueHub Health allows consumers to collect, manage and share their health records and information. The company has four employees and is completely bootstrapped but plans to raise funding soon, White said.

“What wakes us up everyday is driving the consumer focused industry,” White said. “Not enough people serve the patients. We’re here to serve the patients.”

Curb has created a device that fundamentally changes the way consumers use energy by monitoring every electric device in a house. It lets consumers save energy and money.

“Curb can give you specific and unique recommendations for your house,” said Erik Norwood, founder of Curb.

The Curb device hooks into a house’s circuit breaker box. The Curb sensor can then tell how much every device in the house is using is electricity. It can also send alerts via a smart phone to homeowners if they leave on the stove or iron. The company has 150 customers. It has five employees.

Feathr is a marketing platform for event managers to monetize their audiences online for live events. It allows event managers to sell more sponsorships. The company started in Gainesville, Florida and last year it won Capital Factory’s SXSW Move Your Company to Austin competition. The company has two employees and has raised $400,000.

PenPal Schools connects students and teachers worldwide to learn from each other. The startup has connected 60,000 students in 63 countries. The startup lets teachers pay whatever they want to join their platform. It has also partnered with Dell. The company has four employees and is going to raise a seed stage round of funding between $500,000 and $750,000 to expand operations even further and hire three more employees, said Joe Troyen, Founder and CEO.

SocialMatterz turns tweets into leads. The startup has created a social media marketing campaign that engages consumers on twitter to find “nurtured and qualified leads” for companies. The software can help a brand grow its social media audience online.

Student Loan Benefits has created a program that allows companies to help their employees pay off their student loans faster through a company matching program, said Tony Aguilar, its founder. The benefit gives companies an extra perk to lure top talent in a tight job market.

Tastebud is a marketplace that matches consumers with restaurants that are looking to fill seats during off-peak hours through special deals offered through its smart phone app. The app launched at UT in the fall of 2014. The company, which has raised about $600,000, is on track to do more than 3,000 transactions in March, said Marcelo Vieira, founder & CEO. It has four full time employees and five part time employees.

Togga is a fantasy sports network for soccer.

Earlier in the day, Capital Factory showcased its A-List Pitch companies, which are looking for Series A venture capital investment. Those startups included: Aceable, Chiron Health, Goodybag, Loop & Tie and ManagerComplete.

By LAURA LOREK
Reporter with Silicon Hills News

Being an entrepreneur is an irrational act, said Jason Cohen, founder of five startups.

In the corporate world, employees can make steady six-figure salaries as executives. But entrepreneurs don’t.

An entrepreneur often forgoes a salary for years and drains his or her bank account, Cohen said. And in the end, the venture will probably fail, which means you just blew your savings, he said.

The stress, the daily grind, the expense and the time make the entire endeavor sound pretty miserable, Cohen said. And yet, entrepreneurs do it, he said.

“To me the reason we do this is we have a genetic defect,” Cohen said. “We want to do this to ourselves even though it is not rational. I don’t know if that’s ego.”

Cohen compared the practice of entrepreneurship to someone with a mental disorder who cuts himself or herself all the time, except it’s mental.

But this is why entrepreneurs tend to be serial entrepreneurs, Cohen said. It’s the only thing they can do really, he said.

Unicorn #2 at SXSW

On Friday, Cohen moderated a panel at South by Southwest titled “Unicorn #2: How Entrepreneurs Choose the Next Idea.” The panel featured successful serial entrepreneurs from Austin including Dean Drako, founder of Barracuda Networks and Eagle Eye Networks; Bob Fabbio, founder of Tivoli, White Glove Health and eRelevance Corp.; Vinay Bhagat, founder of Convio and TrustRadius. Cohen has also founded Smart Bear Software and WP Engine.

The panel was presented by Capital Factory, a downtown tech accelerator and coworking space, which Cohen described as the center of entrepreneurial activity in Austin.

Fabbio’s story

“Many great businesses start out with big ideas,” said Fabbio.

In the late ‘80s as companies started moving from mainframe to network computers, Fabbio started thinking about ways to manage complex heterogeneous networks of computers. He wanted to manage those networks as a single computer and do it with a graphical user interface.

“I had no idea what it was like to run a company,” Fabbio said.

In 1989, Fabbio quit his job at IBM and launched Tivoli Systems with no money. The company created one of the largest software categories in the world – Enterprise Systems Management. The company went public. And IBM acquired it in 1996.

In 1989, Austin was a sleepy town, Fabbio said. Tivoli lacked clarity and culture, he said.

“We didn’t understand what business we were in or how to make money for many years,” he said.

Today, Fabbio is on his eighth startup and tenth CEO gig. He has also been a venture capitalist. And Austin is now an entrepreneurship mecca, with a great support system at Capital Factory, he said.

Fabbio founded eRelevance Corp, a next generation marketing system for healthcare providers to better engage their patients.

Unlike Fabbio’s experience at Tivoli, this time he worked really hard to address the “whats” to define the business. He addressed questions like “What is the target audience? What is the business model? What is the distribution model?”

Bhagat’s story

In 1999, Bhagat, founded Convio, a software platform to help nonprofit organizations engage people and raise money. Blackbaud acquired Convio in 2012 for $325 million

“We took this concept to market and basically changed the way nonprofits raised money,” Bhagat said.

“My new company was born out of a challenge we faced building Convio,” Bhagat said.

In 2013, Bhagat founded Trust Radius, a website with reviews of business software which aims to become the Yelp of business software.

Every time Convio needed to buy technology to scale its operations it was a pain, Bhagat said.

“The question I kept asking myself – when you buy technology – it’s really difficult,” he said. “There’s no source of credible intelligent about software.”

Now Trust Radius is changing the way software gets bought and sold, Bhagat said.

Drako’s story

Dean Drako has started five companies during the last 25 years. He bootstrapped three of them and raised VC funds for two. The most successful one Barracuda Network, founded in 2003, created an appliance for $2,000 to put in front of an email server to stop spam and other bad stuff, Drako said. He sold the product as a subscription model for hardware, which turned into a recurring revenue stream.

As an entrepreneur, the best problems to solve are the ones you understand intimately and personally, Drako said.

“All of the companies I’ve done and continued to do are based on personal problems I’ve faced in one of our businesses,” he said.

All the products focused on Barracuda were products Drako understood. He also understood the marketplace and he could get his head into the customer’s shoes.

In July 2012, Drako founded Eagle Eye Networks, a cloud-based video security company.

Cohen built four companies and sold two. He founded WP Engine, the world’s largest provider of WordPress hosting.

How to decide on what idea to pursue?

Before pursuing an idea, an entrepreneur should make sure they have clarity around the business definition.

“It’s much easier to sell painkillers than it to sell vitamins,” Drako said.

He looks for a product that he can build and a customer who is willing to pay money to get the product.

“I meet a lot of entrepreneurs who fail to make sure the customer is able to pay money for their product,” Drako said.

“The most precious asset an entrepreneur has is their time,” Bhagat said. Evaluate the idea carefully before pursing it, he said.

“I evaluated half a dozen ideas before I landed on this one,” he said.

With Trust Radius, Bhagat launched a private beta to test the idea. He wanted to make sure it had traction before he raised money and committed himself to the project.

All of the panelist agreed that entrepreneurs must do something they enjoy and that they are passionate about pursuing.

“You can be successful at many things, but what can you be passionate about?” Bhagat said.

“If you’re asking yourself whether you’re going to enjoy it, give it up,” Drako said. “You’ve got to have that passion.”

The importance of company culture

Building a company culture is also a key to having a successful startup, according to the panelists.

“If you’re doing a startup for the first time it’s difficult to implement “company culture.” Cohen said. “After you’ve done it once, you identify the importance of culture.”

The key people you hire off the bat define your culture, Bhagat said.

He was very thoughtful about how he hired initially.

“We made sure these people were entrepreneurial, customer focused, collaborative and frugal,” he said. “Those key first people you bring on board set the tone for everybody.”

The management team defines the culture, Drako said. But initially, the team doesn’t have time to define keys to the culture, they are too busy running the business, he said.

Fabbio said Tivoli had a messed up culture early on. He said the CEO defines that culture, but it took him time to realize that.

“The companies that express clearly what their values and beliefs that give employees ways to thrive are far more successful,” he said.

The Entrepreneurial Journey

In the end, most startups fail and run out of money and even the successful ones come to an end, Cohen said.

“Trying to go for a specific outcome is actually not the goal and not the way to spend all the time on that startup,” Cohen said. “It’s not really fun. It’s actually horrible.”

It’s important to find fulfillment on the entrepreneurial journey, Cohen said.

“The promise of entrepreneurship is to build a life that is fulfilling in a certain way,” he said.

By SUSAN LAHEY
Reporter with Silicon Hills News

The thing that makes Austin a great town for an international startup, according to Jean Belanger of Pruf Technologies who moved his Montreal company to Austin in 1994, is the character of the place.

“The geography here is not spectacular,” he said. “Montreal is a more beautiful city than all the other cities in Texas put together. But people here get things done. People here don’t look for excuses and don’t look for government to solve their problems. They believe they’re supposed to solve their own problems. People who come here come to do things and the people who have been here got things done.”

Belanger was speaking on a SXSW panel called Austin, the New Gateway for International Startups. About 60 people were in the audience, many of them entrepreneurs from other countries. They heard testimonies from Dr. Ann-Christine Langselius, co-founder of Miraculum Applications, a Swedish native who was living in Germany and moved to Austin in July with her three children knowing no one but the real estate agent. She told the kind of story one commonly hears about talking to an Austinite on the plane on the way here about her concerns for finding a good track program for her son and having her plane-mate connect her with star athlete and track coach Gilbert Tuhabonye that day.

Since she moved to Austin, she said, she’s been welcomed into a number of networks, made relationships with patent attorneys and connected with incubators.

“I haven’t met any obstructions yet,” she said. “A lot of the people who are here moved here and they know what it is to come to a new place. There is a spirit of abundance. People who are caring. That creates more opportunities for everyone.”
George Koutitas, CEO of Gridmates of Greece, said starting a company was all about moving out of your comfort zone but that Austin was the comfort zone outside of the comfort zone.

He has been in Austin only seven months, he said, and chose Austin because of the cost of living relative to other U.S. tech hubs. But he has had no difficulty connecting and finding angel investors to fund his company.

During the question and answer period, some participants asked about the drawbacks and Austin’s two perennial issues—crazy transportation and lack of venture—emerged as issues. Belanger agreed about the transportation but said that people in Austin needed to accept that Austin is not a financial center and finding big money would require reaching outside of town. If they don’t want to do that, he said, they don’t have to. But they shouldn’t “bitch about it.” Silicon Valley, he acknowledged, is a financial center. But if you don’t have a billion dollar opportunity before you, you will get lost in the shuffle. Not true in Austin.

Investor Christopher Shonk spoke up and said anyone in Austin could get one meeting with a billionaire. But if they come back in three months and haven’t changed their decks or acted on advice, they’re done.

“You can’t just lie around on bean bags and drink Diet Coke and complain about not getting funded,” he said.

Few of those who asked questions were entrepreneurs considering moving to Austin. International opportunities, visa issues and opening Austin as a global city is a big focus for SXSW 2015.

By SUSAN LAHEY
Reporter with Silicon Hills News

Honest Dollar had a huge day Friday at SXSW, launching at pitch competition ReleaseIt at SXSW, winning that competition, then celebrating with a launch party at the W Hotel.

The competition, in its second year, featured three minute pitches by 10 companies who are either launching at SXSW or very close to it, said Chris Valentine, manager of the SXSW Accelerator and Startup Village.

“The point is to encourage companies to launch at SXSW,” he said. One of the things that has put the international interactive conference on the map is the success of companies like Twitter that made their public debut at SX.

Honest Dollar CEO Whurley (William Hurley), who pitched the retirement plan service for small businesses, started the post-pitch question-and-answer period by squatting down in front of judge Susan Amat of Miami-based Venture Hive and saying: “You’re the one who seems to be asking the toughest questions so let’s start with you.”

The toughest question seemed to be how Whurley expected the company to grow “virally” among standard small businesses.

Whurley explained that the company was popular among startups and the investors who funded them. A recent Harvard study, he said, showed that retirement benefits came third after compensation and bonuses for benefits requested by employees. He did not believe in the viral effect, he said, but the response from coverage like a recent story in the Wall Street Journal changed his mind.

Spotlight Health, Austin based company that provides comparative pricing on medical procedures along with comprehensive information on the practitioners themselves won second place. The company allows people to find out how much certain doctors or hospitals charge for procedures and compares that to the local average. A knee replacement, for example, might range from 16,000 to 61,000 with the average cost around $30,000. The public can also find other information on the doctors they’re looking at.

Third place went to Ridgewing, a New Hampshire company that produces guitar part modules that can be interchanged and pieced together to make a custom guitar.

First All Woman Judging Panel?

One interesting aspect of the pitch competition was that the panel comprised three female judges. SXSW has been working in recent years to combat claims of racism and sexism and many sessions in 2015 focus on the role of women and minorities in the tech world. As it turned out, the three-woman panel was the result of two male judges not showing up, according to Amat.

“So much of the startup world are men who only think about making a lot of money, which is awesome. But what most entrepreneurs need is the nurturing to become great CEOs and CTOs and CFOs and focus on the people who are going to help them be able to execute,” she said. “ I don’t care how well someone pitches if they can’t freaking execute.”

While she acknowledged being the judge who asked the tough questions she said it was the job of a judging panel to point out the gaps in what they’re seeing in the companies pitching. It’s not about being tough, it’s about helping companies see the holes in what they’re trying to accomplish.

Honest Dollar, however, appears ready to roll.

By SUSAN LAHEY
Reporter with Silicon Hills News

Signing up for a 401K or other retirement plan through a broker can feel like joining a religion: You’re trusting your future to a system you don’t entirely understand, managed by gatekeepers you’re giving money to but who aren’t always accessible, but you’ve decided to have faith that it’s all being done for your benefit. But there is another way, says serial entrepreneur Whurley (William Hurley). His new company, Honest Dollar, has created a low-rate, high transparency retirement plan app that small businesses—and eventually individuals—can sign on to right on their mobile devices, in minutes.

Honest Dollar, which launches at SXSW Interactive, will provide outsourced retirement plan services, enrolling them in index funds that will cost an average of .09 percent as compared to 0.50 percent up to more than 2 percent for traditional 401Ks. That may not sound like much of a difference, but with a $10,000 initial investment in the account and $1,000 added every year at 6 percent return, an account with a one percent expense ratio would cost nearly $27,000 over 30 years, whereas the one with a .09 expense ratio would cost less than $3,000. Honest Dollar will leverage six portfolios of varying levels of risk for its users. While there is an option for minimal risk (i.e. cash), there are options, which can hold up to 70% equity stakes.

Another benefit is that small businesses don’t have to handle administration of the funds, which means they have no fiduciary responsibility, and extremely limited legal liability. The cost for businesses would be $10 per employee per month. And when an employee leaves the company, the company is no longer responsible for paying even that $10 fee. The account goes with the employee.

The Finance Nerd and Tech Geek

Founded by Whurley and Henry Yoshida, who has worked in corporate retirement planning for more than a decade, Honest Dollar also has cool technological features. Employees, for example, need only to show the QR code on the back of their driver’s licenses to the app to begin their signup.

“If you’re a business owner and you’ve got to onboard 20 people it’s just like dink, dink, dink, then they have to enter the last couple of pieces of information,” said Adam Lipman, CEO of Thoughtleadr and former COO for Chaotic Moon Studios—Whurley’s last venture. Thoughtleadr is one of Honest Dollar’s beta customers.

“The interesting thing about Honest Dollar is you’ve got the combination of Whurley’s technology vision aspect and Henry’s super deep knowledge of the financial space. Financial service has this really stodgy, antiquated image and it has in large part earned that. There’s nothing particularly innovative about the technology. Whurley has a vision of disrupting that space.”

The partnership was a big inspiration for James Oury, founding partner of the legal and accounting firm Oury Clark in London, to invest.

“I was tasked a number of years ago by the International Bar Association to assist with the building of a mobile app that could act as an evidentiary tool for recording war crimes,” Oury said. “I reached out to Whurley as a highly respected systems architect on one of my many trips to Austin to visit businesses expanding into the UK and the EEA. At our core we both wanted to help people by using technology as an enabler and we also loved to skate board, so the human connection and bond was omnipresent from inception.”

“Whurley and Yoshida with their impeccable technical team are first class co-founders with deep domain complimentary expertises. Prudence and discipline in the commercial execution coupled with a market that is open to high levels of scalable disruption from an enabling platform technology also guide (my investment choices).”
Whurley and Yoshida met because their wives had been trying to get them together for a long time. But Whurley “didn’t want to hang out with the finance nerd” and Yoshida “didn’t want to hang out with the tech geek,” Whurley said. But when they finally talked, they discussed the fact that there were over five trillion dollars tied up in 401K plans and both lamented the fact that the system was antiquated, expensive, and—as Yoshida pointed out—designed for people who had a lot of money. Not for the average American.

Financial Democracy

A big part of Honest Dollar’s value proposition is transparency. Typically, companies that manage funds take out fees and either reduce them from gains or add them to losses before reporting quarterly earnings to account holders. Consequently most people don’t know what the management of their accounts is costing them. With Honest Dollar, all activities, including fees will be transparent and that transparency is required throughout, including from their partners who manage the funds. At any point, an account holder can log onto the site and find out what their portfolio is worth and what’s going on with it.

“Fintech is a great space, financial in conjunction with technology really has a chance to open up services that are typically available to a small minority of people to make more money to bring that down to everybody. And the current industry from the finance side isn’t structured that way,” Yoshida said. “It was an industry that was built on an infrastructure to serve the top five percent of America and then everyone else is just a person to receive a product or a service for which they have to pay a penalty.”

If you don’t have as much money, he said, you pay a higher interest rate for your automobile or mortgage insurance and the industry has always maintained that financial services are too complex to change that. But technology can serve to democratize financial services.

Whurley said the company plans to announce more technological breakthroughs in the spring and summer.

“On May 12 we’re going to be making an announcement at Finovate about an unbelievably huge technology surprise that’s coming, probably over the summer,” Whurley said. “We’re trying to revolutionize technology for what technology was meant for, to eliminate the complexity and cut through all the BS and get right to the point….” And the point, he said is “How much money at the end of the day will you have in retirement?”

His biggest endorsement of Honest Dollar, the founders are putting almost all their retirement savings (except some they couldn’t legally withdraw from existing accounts yet) into the Honest Dollar system.

“We’ve invested all our money right alongside you.”

Looking for a taste of the Texas tech startup scene during South by Southwest Interactive? Check out these nine innovative tech startups that call Austin home.

Able Lending – Launched last year, this startup offers low-cost loans to entrepreneurs. It requires its applicants to raise 25 percent of the loan amount themselves and then it provides the remainder with interest rates ranging from 8 percent to 16 percent.

Aceable – offers driver’s education and defensive driving apps on a mobile phone. Aceable is available on iOS and through the Aceable website to all Texas drivers as an alternative to classroom-based and web-based defensive driving courses.

Clarify.io – this innovative tech startup has created technology that lets people easily search audio and video files by keywords. It’s a graduate of the Techstars London program, Fintech Innovation Lab and the BBC Media Lab.

Honest Dollar – this newly minted startup launches at SXSW. It provides outsourced retirement plan services with low administrative fees so that people can earn more money on their 401K retirement funds.

People Pattern – has created software that analyzes data in social media feeds to help companies learn more about their customers so they can create highly targeted digital marketing campaigns.

Spreadfast – this spunky startup merged with Mass Relevance last year to create a massive social marketing company. It sells a social media platform to its customers that let them manager all of their social media channels including Facebook, Twitter, LinkedIn, Google+, YouTube and other blogging services.

SpareFoot – a Capital Factory accelerator graduate, this startup operates a marketplace that lets customers find and reserve storage units online. It has the largest inventory of storage units in the U.S.

TrendKite – has created a software as a service platform that uses data to create predictive analytics to measure how well an online marketing campaign is doing so that customers can adjust it to get a better return on their investment.

WP Engine – specializes in hosting WordPress websites. It has more than 23,000 customers and it recently expanded to San Antonio and opened an office at Geekdom. It also has an office in San Francisco.

No drones can fly the skies at South by Southwest Interactive this year.

“SXSW has a strict no drones policy due to the safety risks drones present to the public,” according to a blog post on the official SXSW website.

The Austin Police Department ban the use of drones with the city limits for public safety reasons.

Last year, Chaotic Moon Studios made headlines at SXSW with its “Taser Drone” that shocked an intern with 80,000 volts of electricity. He was not injured in the stunt.

This year, Chaotic Moon planned to fly its newest drone, Tyrone, during the SXSW festival. The drone “can tag a wall with spray paint, accost onlookers with silly string or deter attackers with a three foot flame,” according to a news release. It was going to debut at the show.

“Drone Tyrone is about pushing the utility aspects of drone and beacon technology,” Chaotic Moon Studios’ Ben Lamm said in a news release. “We wanted to prove that you can use these vehicles for more than just aerial photography. For Chaotic Moon Studios, it’s always about pushing technological boundaries. We got a lot of flak last year for the taser drone, but we did that to start a real dialogue about citizen drone surveillance and submission. The technology was outpacing the legislation, and that event was a huge catalyst for public awareness and education.”

Chaotic Moon has several other projects its showcasing at SXSW. It is launching “FitCoin, a fitness band crossed with BitCoin that actually pays you to work out. They are also revolutionizing indoor lighting with their LED and fiber optic system called Solaura, and they are partnering with global architecture firm, Gensler, on a 30-ft tall interactive pneumatic tree called ORCHARD.”

“We’ve got a ton of awesome stuff going on at South by Southwest,” said Lamm. “We’ll figure out how to debut TYRONE, one way or another. We didn’t get where we are by asking for permission.”

OutboundEngine Thursday announced it has moved into larger office space in downtown Austin.

The Austin-based startup, which launched its email, social media and content marketing platform in 2012, late last year closed on $11 million in venture capital.

When OutboundEngine closed its funding round, company officials said the company would use the money to support office expansion, product development and entry into new vertical markets.

“Given our consistent growth over the last couple of years and our recent round of funding, we quickly realized that our office space needed to evolve with the company,” Branndon Stewart, founder and CEO of OutboundEngine, said in a news release. “The open layout of our new location will provide our employees with a collaborative environment that better supports our work. The larger space will also accommodate new hires as we look to expand our employee base here in Austin.”

OutboundEngine’s new office is at 504 Lavaca Street.

“The space is equipped with a spacious employee lounge to encourage interaction and relaxation, a custom throne for each month’s top sales representative to show appreciation for dedicated and hard-working employees, a designated area with a chalkboard wall for idea-sharing and brainstorming and large meeting spaces named to remind people of poor business practices like abusing “Reply All” and the use of jargon,” according to a news release.

SpareFoot, one of the most successful startups to spin out of the Capital Factory accelerator, has landed another $33 million to propel its growth in the marketplace for finding self-storage.

The Austin-based startup received its latest round of funding from new investor Revolution Growth which led the round with participation from existing investor Insight Venture Partners and new investor Monkfish Equity, according to a blog post on the company’s website.

As part of the funding deal, Scott Hilleboe, partner at Revolution Growth and entrepreneur Rony Kahan, co-founder and chairman of Indeed.com, the world’s largest online job posting site, will join SpareFoot’s board of directors.

SpareFoot plans to use the funds to expand nationally and to add more products. SpareFoot, founded in 2008, has raised $49 million in venture capital to date. Capital Factory, FLOODGATE and Silverton Partners also are investors.

“Using the SpareFoot platform, consumers in need of self-storage are able to quickly and easily find and book a facility that meets their needs based on price, location and other filterable options,” Steve Case, co-founder and partner at Revolution Growth, said in a news statement.

SpareFoot, with about 280 employees, is also hiring employees in engineering, product development and customer service.

“This investment will allow us to make it even easier for consumers to find the best self-storage facility in minutes and to help our thousands of independent self-storage operators compete online,” Chuck Gordon, the company’s co-founder and CEO said in a blog post.