Bob Metcalfe

Bob’s keynote was an exercise in entertainment and information.  He cautioned the audience not to buy into the two extremes of startup mythos: Luck on one extreme, and virtue on the other.  The truth is that you have to be ready – ready to deal with uncertainty that will be there, and ready to take advantage of opportunities that present themselves (and often, later, look like luck).

Bob refers to the complex “ecosystem” around startups as an ecology – because a system sounds like something designed by man.  However, an ecology is something that comes into being, unplanned, through the independent actions of a larger number of people.

A few minutes into his talk, he dedicated it to the consummate entrepreneur – Steve Jobs – and followed up with an interesting story about how he turned down a job at Apple… only to have Steve Jobs help him make the connections he needed to make to get 3com off the ground!

Bob’s list of five things you have to be good at to be successful at scaling your startup:

1. Energy – keeping healthy: “Don’t buy into the bullsh** that you need to kill yourself.  Figure out when you need to get up and go to bed 8 hours before that!”
2. Writing: you’re going to need to do a lot of this.
3. Speaking:  you’re going to need to persuade others to your cause.  You need to give a lot of talks to practice and hone your skills.
4. Selling:  you may hate the idea of selling, but you have to understand it and be good at it for your company to succeed.
5. Planning:  you need to have a plan.  You can’t change your plan or pivot if you didn’t have a plan in the first place.

Bob’s story was that after doing an inventory of Austin’s startup ecosystem, he saw a need to improve the University of Texas’ association with startups.  As he pointed out, surprisingly, Austin has a better reputation for startups and innovation than UT itself.  Bob is energizing professors at UT about startups, but his new class, 1 semester startup, is also inspiring students.

It was a compelling kick-off to the morning.

Startup Pitches

The five companies presenting gave some great pitches.  The hard work preparing these presentations really paid off.  Stacey Higganbotham on GigaOm had great coverage of the 5 startups:

I was struck by how product-oriented these startups were, and how all of them had paying customers. I also thought these companies didn’t really spend a lot of time on their “big vision” as some Bay Area startups tend to do. Maybe it’s Austin’s general orientation toward the enterprise market, where products talk, and big vision may get you financing but few customers, or perhaps it’s just the way these startups think.

The article goes into detail about each startup as well.  My personal favorite presentation was HelpJuice’s Emril Hajric – his style was perfect for a technical founder presentation – honest and rough around the edges.  But he also had a great value pitch to make for his product, which helps spruce up FAQ’s and customer service. Another startup, SwimTopia, was anchored by the former CTO of Frog Design – Mason Hale.  The maturity of the companies presenting was impressive.

Even BusinessInsider had modest coverage of the event, but the local journalists did a more thorough job of it.  Lori Hawkins of the Statesman also covered the event:

The companies made eight-minute presentations to a crowd of 300 people — mostly entrepreneurs and investors — at the University of Texas AT&T Executive Education and Conference Center. Later in the day, another 15 Austin startups made three-minute pitches to the audience.

Brian Sharples, CEO of HomeAway

After the pitches, Brian Sharples of HomeAway gave another keynote.  He basically explained how HomeAway happened – with some background about his life experiences that allowed him to seize the opportunities as they arose, and to do the risk planning to avoid some previous failures. He had some interesting advice that I jotted down as notes, paraphrasing:

• Look intensely at competition. Be curious. Call anyone you can find to learn about the business you’re entering. Try to figure out who has tried this and failed. And figure out why?
• Business is about game theory. You have to plan for the fact that those other companies will react. it is such a fast follow environment. Groupon was a great example of the fast followers being really crazy right now. Airbnb is another good example.  (In my opinion, one of the really smart things HomeAway did was raise a truckload of money, early, which discouraged some of the fast followers when the recession was in full swing).
• Hard to get a big team, so make it a good one.  “The team at HomeAway saved the company.”
• Have a profit model. The figure it out later model- “It ain’t reality”. You have to have a business that makes money. HomeAway has been 30% free cash flow since early on (I think I’m quoting that right).
• Really want to pick investors rather than the other way around – and profit or free cash flow is what allows you to do that.
• Do what it takes to get there- to get the funding you need. Don’t hoard equity if it costs you the capital you need to execute your strategy.
• Shhhhhh! Everyone likes press and PR, but keep quiet until you’re ready for competition.  If you’re a PR machine but you’re not ready to beat the competition, you’re just inviting competition.  (Note: this is not the same as stealth mode).

It was a really entertaining talk – but you had to pay attention to pick out the bits you could use to improve your own startup.

Fast Pitches

The afternoon fast-pitches were actually pretty good.  I’ve seen these kinds of pitches before and been disappointed – these were actually quite good, and entertaining.  A couple of these fast-pitches clearly have real traction and real customers already. I didn’t take notes during this section, however, I just enjoyed listening.

Startup America

John Price, CEO of Vast, gave a pitch for Austin startups recruiting more people to the Austin area – which ties into previous posts on this blog-  as well as for Startup America.  I loved his comment that Austin startups need to get better at using one of our “unfair advantages” – SXSW-interactive.  22,000 badge holders hit the conference in 2011, and it is a once-a-year opportunity to recruit talent to Austin.  Or, from the Austin Chamber of Commerce point of view, to recruit startups to Austin.  We could write an entire blog post just about that.  I’ll just take a moment to hit on a theme I’m stuck on:  it is time for software companies to invest in people.  That means challenging them with opportunities they’re not prepared for – that stretch them.  If they don’t have the opportunity to fail, it isn’t an opportunity at all.  But it also means investing in their success – with your time, energy, knowledge, and experience.

Wrapping Up.

The event wrapped up with networking and a tour of local Austin startups (The ATX Startup Crawl). 

The biggest takeaway for me is that Josh and the other contributors and participants in Capital Factory are on their way to building on the virtuous cycle in Austin.  I saw a lot of startup CEOs and entrepreneurs in attendance, as well as investors.  Not everyone at the event has “skin in the game” but they’re still engaged, interested, offering free advice, and making connections.  I definitely left full of positive energy for Austin and for our mission at BP3.

My thanks to everyone involved in Capital Factory for a great contribution to Austin – and thanks to Red Velvet Events for putting on a great event!

Related posts:

1. Capital Factory’s Demo Day, 2010
2. Capital Factory’s Demo Day ’09 #dd09 #bpm
3. Capital Factory in Austin, TX

The 2nd Capital Factory Demo Day is coming on September 8th. We will have 300 investors, press, and technology entrepreneurs in attendance to watch the launch of the 5 companies from our 2010 program. This is an invitation-only event, and we’re keeping the quality of the content and the networking as high as possible.

I went last year, and I found it interesting to witness, essentially, part of a process for bringing new companies to market.  The event was surprisingly good, the startups were surprisingly good, and the discussions were pretty interesting.  It sets a high bar for the second event.  I think there’s no doubt that Capital Factory and the Demo Day event have been good for the Austin startup scene, though the organizers will be the first to admit that this approach isn’t for every startup, or every entrepreneur.

I plan to be there again this year, schedule willing.

Related posts:

1. Capital Factory’s Demo Day ’09 #dd09 #bpm
2. Capital Factory in Austin, TX
3. Capital Factory’s Demo Day 2011 #DD11

Part of the process is Demo Day – where the best concepts get to present to a panel of investors, as well as a packed house of interested people in the Austin and startup communities.  I attended for a few reasons.  First, because I’ve always been interested in the software startup community in Austin.  Second, because Josh is an old friend and I was curious to see how his latest endeavor had turned out (he’s had some really interesting previous ventures, like OtherInbox).  Third, quite a few of my colleagues and friends were going to check it out- and if something like this is worth the investment of their time, that’s a good proxy for it being a good investment of my time as well.

Finally, I wanted to attend a Red Velvet Events‘ produced event – this is my wife Cindy Lo’s firm, and often I’m watching the kids while she’s at an event, or working for BP3.  She did a great job, and there were a great number of compliments from the managing directors of Capital Factory, as well as many of the attendees.  I’m biased, but for my money, Red Velvet Events is the best event planning firm in Austin (not that your event has to be in Austin to benefit from their expertise!).

I have to say I found this event surpassed my expectations in nearly every respect – starting with the fact that the coffee was good enough to drink.  The keynote by Mike Maples, Jr. was clearly in his sweet spot and he shared his thought process around evaluating startups. He does a great job calling out what could be differentiating, thematically, in Austin – the intersection of social and enterprise software (consumerizing IT).  He has a point – there are an awful lot of startups that could be described this way – and some enterprise software companies (like Lombardi) are offering newer products that adopt more social web features (blueprint). Don’t take my word for it – watch the Ustream video! (the first capital factory link above).

The startups gave really good presentations – across the board I was impressed with the professionalism and quality of the pitch, definitely exceeded my expectations.  Which is good, because there were a whole lot of Austin entrepreneurs in the room.  The panel of VC and Angel investors gave some really good feedback, especially for the first presenter (Cubit Planning).  It looked like the common thread for all but the last startup (Sparefoot), was that they needed more thought about the go-to-market plan.  Luckily, that’s a place where investors can really help a lot (and have the financial incentives to get it right).

My favorite was Sparefoot, which can be simply described as “Uship for self-storage” – and I really think they could change that market. Second favorite was the PetsMD concept – but if I were them I would change my pitch around go-to-market to simply describe it as “OpenTable for Vets”.  Because if you can win the scheduling application for veterinarians, then you have a real barrier to entry for new firms, and leverage for pursuing all the other concepts (content, product sales, social/community features).

After the demos, the attention turned to the panel of VCs, which Josh Baer moderated masterfully.  I think the consensus favorite quote “Austin startups have great ego to ability ratio compared to the Bay Area.” Overall, I think a couple of the investors came off as very credible and capable.  In particular, though, Mike Maples, Jr. clearly made an impression on the room.  The number of tweets extolling his virtues was pretty large today – and I think there was a room full of entrepreneurs who would love to have Mike investing in their startups.  A key differentiation – he has heart, and isn’t afraid to show it.  Entrepreneurs want investors to be as passionate as they are about their prospects.

There’s some good coverage of DemoDay ’09 in the Statesman, and here (where Austin Startup goes into some details behind the program).  A bit of live blogging on TechDrawl (and interviews with the founders of the various companies on TechDrawl’s site as well), and on Twitter if you search for #dd09.  This was a great event for the companies presenting, for establishing Capital Factory’s credentials, and for Austin.  If anything, I’d suggest next year alloting even more time for networking because it really was a fascinating cross-section of people from the Austin tech scene.

Links to the startups:

Sparefoot – wow, great looking site!

Cubit Planning – the longer-term play, but probably the most defensible play.

PetsMD -to me this is Open Table for veterinary practices…

Famigo – social gaming for families (lost track of the site link… updated link)

Hourville – great site for hourly contracting – I can definitely imagine cleaning services and independents leveraging this.

UPDATE: kudos to Capital Factory, there’s now an article on Tech Crunch here.

AND there’s now a crunchbase widget:

Related posts:

1. Capital Factory’s Demo Day, 2010
2. Capital Factory’s Demo Day 2011 #DD11
3. Capital Factory in Austin, TX

Hopefully some of these ideas will turn into big, successful businesses that will continue to make Austin a great place to live and work.

Related posts:

1. Capital Factory’s Demo Day, 2010
2. Capital Factory’s Demo Day ’09 #dd09 #bpm
3. Capital Factory’s Demo Day 2011 #DD11