Building a Winning Advisory Board for Your Startup (Part 1)

The following post is written by Garrett Eastham, Co-Founder of Edgecase and Chief Data Scientist.

When I left my full-time job as a product manager at one of Austin’s fastest growing companies to pursue my life dream of building a successful enterprise marketing technology company, I knew next to nothing about how to go about doing such a thing. I had about twenty grand to my name and a personal runway of less than 10 months to figure it out. In less than a year, I had raised $3.5 million in venture backing, built a team of seasoned ecommerce executives, and signed on our company’s first IR100 client. None of it would have been possible if I hadn’t spent most of that year developing a winning advisory board.

As a new entrepreneur (especially if it is your first venture), the single highest leverage task you can perform with your time is identifying, pitching, and developing key advisors. An advisory board serves several purposes, however, all too often entrepreneurs treat them as names on slides and people to hit up for investor contacts when it’s time to fundraise. The best advisory boards – ones that are carefully crafted and honed – will function as an extension of your executive team (and if done correctly, one you probably could never afford at market rates).

A winning advisory board will serve multiple purposes. They will help you evolve both your business idea and your business model in ways you would have never imagined. They will introduce you to your first cohort of potential customers (who will close at a statistically above average rate). And they will help connect you to that rockstar engineer who otherwise wouldn’t even respond to your tweets. But for this to be possible you must build your advisory board wisely.

Step 1: Seek the right mix of advisors for your problem domain

One of the most common mistakes I see young entrepreneurs make is naively asking the first notable entrepreneurs who take their coffee meeting to join their advisory board. While these folks will most certainly be flattered, the best ones will advise that you first consider the particular skillset and make-up that you want at your table.

Above all, let your problem domain dictate the requirements for your advisory board. All lasting businesses solve real, tangible problems for customers, and much of what you accomplish from building a business comes from learning how to adjust to the needs of a particular market’s response to how you solve these problems. Once you identify the core problems you want to (someday) solve, focus on building a mix of types of advisors.

  • Industry Leaders / Veterans (Ideally Entrepreneurs): Some of your best advisors will be existing successful entrepreneurs within your target industry. At Edgecase, I have had the immense fortune of working with many of the early Bazaarvoice executives – including Brett Hurt, Sam Decker, Michael Osborne, and several others. As a young entrepreneur attempting to build a SaaS company selling to the enterprise ecommerce market, I could not have asked for a better set of minds to debate ideas with and learn the inside secrets from. If you’re concerned about whether a seasoned entrepreneur will take your call, just remember – aside from being boldly persistent – these types of people are typically personally invigorated to meet impassioned entrepreneurs as it can often remind them of their own personal experience in starting their businesses.
  • Technical Experts: Depending on your problem domain, it will likely be necessary to seek particular expertise when building your product or offering. As a business trying to solve a particular market problem, you will need to bring some new insight or IP that does not exist; therefore, you can get significant leverage by seeking out key product managers, designers, developers, or data scientists. You will likely not be able to afford them at the start (or possibly ever) and therefore, landing these types of people can help bring your product into a different competitive landscape. Great examples of this type of leverage are notable scientific advisory boards – like the one that has been built at Helix – where the difference between solving a market problem and successfully selling that solution depends on your ability to convince the market that you are technically capable of pulling it off.
  • Customers (Existing & Potential): Every business founder will engage with customers at some point – ideally every chance they get if they’re doing their job correctly. Adding customers to an advisory board is a great way to get honest feedback that might be held back otherwise in the traditional customer relationship. For those selling into the modern enterprise, it’s great to have high-profile potential customers on your side (such as a key executive for the top brand in in your industry); however, do not think that doing so guarantees that company as a client. In fact, you will most likely not have the big fish customers on board early on – it’s often just too risky for a large enterprise to trust their assets with an unproven enterprise, no matter how strong the executive champion. Don’t worry though, you’ll spend plenty of time courting and closing those big fish while trying to move from Series A to B.
  • Market Thought Leaders: Many entrepreneurs get so focused on customers or product development that they forget there are often extra-market factors that reside outside of that otherwise important interaction. Every industry – whether consumer, small business, or enterprise – has market thought leaders that its constituents respect: analysts, famous bloggers, celebrity Instagrammers, etc. While having these individuals on your advisory board does not guarantee you a place in the next Gartner Magic Quandrant, it can go a long way in showing providing an important 3rd party voice in customer / product interactions.
  • (Possibly) Investors: While it might seem like a straightforward benefit to have folks that could write you a check when the times comes on your advisory board, keep in mind that these individuals are already strapped for time running from one board meeting to another. Also, most investors are spread across different product categories and industries (typically because they invest in patterns of business models versus specific markets); therefore, their impact will not be as significant when you are in the formation phases of determining just how to win at a given market (read – finding product market fit). On the other hand, if part of your problem domain is to figure out how to apply a new business model to a legacy market problem (think Uber / Lyft on consumer transportation), it can be invaluable to find an investor that has a particular passion around certain kind of new / emerging business models – like on-demand, SaaS, PaaS, etc.

(Stay tuned next week for Building a Winning Advisory Board for Your Startup :Part 2)

Winning Weekend for MSTC

FlippedHealth

MSTC teams Flipped Health and DraftCrunch at the TVLIC

It was quite the winning weekend for the Texas MSTC Program! Our students took home victories in not one but TWO business plan competitions, as well as one second place finish.

Last week 20 teams in five divisions competed in the Texas Venture Labs Investment Competition, including 10 from UT’s MBA programs, six from MSTC, and four from PhD programs. Three MSTC teams were selected to move on to the final round of five teams, with MSTC team Flipped Health taking home the first place win and MSTC team DraftCrunch clutching the runner up position.

StowCart

MSTC team Colter Durham at the Georgia Bowl Business Plan Competition

Flipped Health will represent The University of Texas at Austin in the Global VLIC in May, incubate at ATI for a year, and receive $5,000. DraftCrunch will receive $3,000 to invest in their venture.

The celebrations don’t stop there! Texas MSTC team Colter Durham claimed a first place victory at the Georgia Institute of Technology’s Georgia Bowl Business Plan Competition. They’ll be carrying their $10,000 prize home in their ingenious Stow Cart, and will be joining MSTC team Flipped Health in the 2015 Global VLIC.

Congratulations to all of the Texas MSTC teams that competed this weekend. We’re glowing with pride. Hook ’em!

Four Tips for Start-up Businesses Seeking Private Equity

Originally posted on McCombs Today by Samantha Grasso

Austin skyline (Credit Flickr user: byeagle)

In a rich startup hub like Austin, young entrepreneurs are constantly looking for strategies to logistically shape their company to the competitive business world, and also make their product stand out to consumers. Alan Cline, principal for Vista Equity Partners, echoed this notion when he spoke on how his private equity firm selects their investments.

“The strategy is…find a business that fits our criteria, which is mission critical enterprise, software data, and technology enabled services. Find it with a very strong value proposition that is different from your competitors,” Cline said.

On Oct. 7, Cline was joined by Bill Wood, founder of the venture capital firm Silverton Partners, for the Herb Kelleher Center for Entrepreneurship speaker series. Moderated by the center’s Laura Kilcrease and co-sponsored by Bank of America Merrill Lynch, the presentation focused on Wood and Cline’s experiences in the industry. Together, they divulged advice on catching the attention of a venture capital or private equity firm.

  1. Be mindful of size, metrics, and the market  
    When considering a company for venture capital investment, Wood said the first thing he looks at is the company’s market, how their product fits in the market, and initial metrics of the company. Among those details, Wood said he questions if the market is interesting in size, growth rate, and competitive structure, if the product is innovative or proprietary, and what the company’s competitive positioning is like.”Even though [the data] is embryonic and early, we want to see the right things in terms of traffic, emergence, customer acquisition cost, long term value,…[and] monthly growth rate,” Wood said. “We’re kind of looking for indications that, ‘Hey, this is an interesting business.'”
  2. It’s all about “machine-based decision-making”According to Wood, taking advantage of available data can help entrepreneurs make stronger company decisions. If the data doesn’t exist, then develop a method to obtain it. Wood said that under this type of decision-making, marketing for startups is no longer strategized through guessing and estimations, but based on A/B testing.

    “Broadly speaking, I don’t care what you do in your life: Decision-making is dramatically changing, and if it isn’t, you’re behind. You can increasingly make better decisions based on data…If you don’t have the data, you create it,” Wood said. “We’re moving into a phase of machine-based decision-making, and it’s incredibly powerful.”

  3. Take advantage of modern business modelsBusiness models have become more important, real, and predictable. Wood said while business models used to be “people folding out assumptions,” models can now be built mathematically, and tested for reliability.

    “You can look at every assumption, you can test every assumption, and you can know pretty quickly whether you’re on track or not, and then you can start correcting,” Wood said. “They tell you, ‘Will it work?’…’Is it working?’ ‘How do I need to tweak and turn things to make it work?'”

  4. The culture of private equity funding is changingJust because a business is being sold from one equity firm to another, it doesn’t mean the business is failing. Cline said this previous notion has evolved over the last seven years, and he now knows a change of firms happens more often because the fund lifecycle has ended, or the vision of the next firm better fits the company at that point in time.

    “When we’re kind of passing the baton from one firm to another, those are the real great winning situations, because we get involved at a stage where we see opportunity…We take it as far as it makes sense for us to be involved, and then someone else says, ‘Hey, great asset, I love what you’ve done with it, now we’re going to take it global,'” Cline said.

Two MSTC Companies Accepted to TVL Accelerator

 

Texas MSTC team, RainSeed, after being selected for the Wells Fargo Clean Energy Challenge at the 2014 Global Venture Labs Investment Competition.

Texas MSTC team, RainSeed, after being selected for the Wells Fargo Clean Energy Challenge at the 2014 Global Venture Labs Investment Competition.

Two companies formed by graduates of Texas MSTC Class of 2014 have been accepted into the Jon Brumley Texas Venture Labs (TVL) Accelerator for the fall semester. Designed to help startups raise capital and bring their products to market, the TVL Accelerator will allow the founders of both Hrvst and RainSeed to focus on the companies they developed during the Texas MSTC Program.

“My founder and I had Dr. Adams for a professor in our UT MSTC program and saw first hand what other companies could accomplish through TVL. We both knew if we went forward with Hrvst as a company the resources and network TVL could provide us would be extremely valuable as a new young company,” said Jason St. Peter, co-founder of Hrvst, a data-driven investment portfolio management tool.

“RainSeed’s acceptance into the TVL Accelerator allows us to continue to leverage the university’s resources after the Texas MSTC Program, as well as the expertise of Rob Adams and the TVL team. This gives us the opportunity to build our business and grow more effectively than we could do on our own, something that is invaluable at our current early stage,” explained RainSeed CEO and MSTC alumni, Jim Nelson.

RainSeed is a technology platform that allows water utilities to connect to their end-users to more effectively manage water resource use. While in the Texas MSTC Program, RainSeed won the 2014 Nebraska Innovation Competition and went on to make it to the second round of the Global Venture Labs Investment Competition. 

Hrvst is an Austin -based technology company developing an online platform to help investors better understand their overall portfolio while guiding them to better long-term investment decisions.

The TVL Accelerator accepts 14 companies each fall and spring semester. Participating companies receive 200+ hours of student time, a chance to present at the Venture Expo, and access to the TVL Alumni Network. TVL has worked with over 63 startups that have raised over $187 million.

Alumni Spotlight: Dr. Donna Kidwell, MSTC 2007

Dr. Donna Kidwell is a member of the Texas MSTC Class of 2007. We invite you to read on to learn about her experience in the Texas MSTC Program.

DonnaKidwell

Name: Dr. Donna K. Kidwell
Year of MSTC Graduation: 2007
Education Background:
BA History, UT Austin 1992
Doctorate Business Administration, Grenoble Ecole de Management, Grenoble, France, 2012 on the commercialization of science and research out of universities into industry.
Pre-MSTC Job:
Innovation Manager, Keller Williams Realty International
Post-MSTC Job:
Co-founder and President, Webstudent International AS, a Norwegian based startup creating innovative eLearning solutions between universities and industry.
Favorite MSTC Class:
Just one?! Kate Mackie’s Marketing course.
What technology did you work on during the program?
Virtual worlds and virtual world currencies.
How did the Master of Science in Technology Commercialization change your outlook on entrepreneurship and business?
The MSTC gave me systems and processes that I employ daily to develop my business. From learning and validating markets, creating new revenue models to launching international businesses: I use those lessons daily.
What is the most valuable thing you learned in the MSTC program?
There is systemic work behind entrepreneurship. It isn’t magic or happenstance – it’s actual work that you can do: decisions you can make, risks you can analyze, and models you can prove and build.
What advice do you have for prospective MSTC students?
As an MSTC student, you have a unique opportunity to explore areas of interest and open doors. That is much harder to access and create time for later on. In each trimester you have a framework for developing expertise and insight into a technology field you are passionate about. Plunge in and dive deeply!

Building a Better Band-Aid

Originally posted by Andrew Faught on McCombs Today

Every year, nearly 750,000 tendon repair procedures are performed in the United States, most of them without precautions to prevent excessive scar tissue formation, which can cause chronic pain in patients.

John Joyoprayitno, MSTC '13, in suit and tieBut not if John Joyoprayitno, MSTC ’13, has his way. The co-founder and chief operating officer of Austin-based Alafair Biosciences is working to commercialize a natural membrane that could minimize adhesions by acting as an “internal Band-Aid” on surgical wounds.

“You basically cover the wound, let it heal, and then the membrane degrades and resorbs back into the body,” Joyoprayitno says. “It allows the body to do what it’s supposed to do, and it prevents excessive scarring.”

Adhesion-related complications, which can force doctors to re-operate, create a $3.45 billion annual health care burden in the United States, he adds.

Joyoprayitno’s membrane (which hasn’t been given a name yet) was developed at The University of Texas at Austin, which licenses and has part ownership in it. The film, made of naturally occurring sugar molecules, will be submitted for review by the Food and Drug Administration and could be available to doctors in late 2016.

Plans to bring the technology to market for tendon repair took root while Joyoprayitno was a student in the McCombs School of Business’s one-year M.S. in Technology Commercialization (MSTC) program, which targets aspiring entrepreneurs who want to launch new ventures based on emerging technologies. The membrane already has been issued two patents, and it’s received four other provisional patents.

Since it was founded in 2011, Alafair has grabbed the notice of state policymakers. In May, Gov. Rick Perry announced that the company was the recipient of a $2 million award from the Texas Emerging Technology Fund(TETF).

The TETF is a $485 million fund created by the Texas Legislature in 2005 at the governor’s request, and reauthorized in 2007, 2009, 2011, and 2013. A 17-member advisory committee of high-tech leaders, entrepreneurs, and research experts reviews potential projects and recommends funding allocations to the governor, lieutenant governor, and speaker of the house.

In the past, too many good ideas were leaving Texas because of a lack of investor savvy, says MSTC director Gary Cadenhead. To date, TETF has allocated more than $250 million in funds to 87 biotech ventures. The impact is palpable: the state reports that in 2009, the biotechnology industry had a $75 billion economic influence in Texas.

The same study found that for every biotechnology job created, 2.3 additional jobs are generated, which fuels the Texas economy.

“It’s one of the really good things that the state of Texas has done — giving money to firms that are in the critical area, when it’s probably a little too early for venture capitalists,” Cadenhead says. “It bridges that gap between what friends and family can put up, before big money comes in.” Continue reading on McCombs Today.

For Joyoprayitno, who once considered enrolling in medical school but instead opted to become an entrepreneur (he’s also co-owner of the Austin Speed Shop, a car restoration business), the TETF grant will allow Alafair to grow and expand its employee base.

The company isn’t the only player in the membrane business. Other products exist, but they’re often made with collagen, which is expensive and has questionable efficacy, Joyoprayitno says. Doctors also have complained that other membranes are difficult to work with because they lack flexibility.

“Our product will have better handling characteristics,” says Joyoprayitno, who notes the Alafair membrane can be changed on demand from a flexible membrane to a mucous-like consistency that causes it to stick to the wound. “It allows the surgeon to place it more accurately.”

For now, all efforts are on successfully commercializing the membrane, which goes well beyond simply having a great idea.

“It takes organization, hard work, and wearing all of the hats,” Joyoprayitno says. “You’ve got to figure out what needs to happen and make it happen. Everybody uses the saying, ‘drinking from a fire hose.’ You really have to be able to handle that.”

Cadenhead, for one, likes Joyoprayitno’s chances for hitting a biotech bonanza: “I think he’s got a winner.”

McCombs Holding Strong in Entrepreneurship

Originally posted by Matt Turner on McCombs Today

RANKINGS_McCombs_PR_entrepreneurship_programs_no_7_4x3_0-300x225McCombs came in 7th in the nation in The Princeton Review’s tally of the top 25 graduate schools for entrepreneurship programs, which it publishes in partnership with Entrepreneur magazine.

The top three spots, in order, went to Michigan, Babson, and Harvard.

This is the fourth year in a row for McCombs to make the top 10 in the ranking, which has been published annually since 2006. Among public schools, McCombs is third, behind Michigan (1) and Virginia (5).

The Princeton Review surveys nearly 2,000 programs across the country and examines entrepreneurship with a wide lens, touching upon faculty, students, and alumni, and including activities both inside and outside the classroom. At McCombs, the survey included entrepreneurship among the MSTC and MBA programs and the host of initiatives and opportunities available to students (see below).

The survey measures programmatic items like scholarships, mentorship programs, and business competitions, but also considers outcomes, such as the number of businesses launched and their survivorship after graduation.

Robert Franek, The Princeton Review’s senior vice president of publishing and a nationally recognized expert on college admissions, noted in a press release the high quality of the recognized schools’ faculties, courses, and out-of-class offerings. “Their students have extraordinary opportunities to network with established entrepreneurs, interact on teams…and develop skills to launch their own businesses,” Franek said.

“This is just one more example of why I’m excited for this coming year at McCombs,” says Brett Hurt, who recently joined McCombs’ Herb Kelleher Center for Entrepreneurship as entrepreneur-in-residence. “Already, I’ve seen a tremendous response from students, who have an almost insatiable appetite for startup insight. Best of all, they are coming to me with eyes wide open; no dreamy idealists, they want to dig in, work hard, and build companies to last.”

McCombs offers rich opportunities for graduate students interested in all things entrepreneurial. A few examples include:

  • Venture Fellows, which helps MBAs get a leg up in the venture capital arena by offering internships with venture capital and private equity luminaries.
  • Jon Brumley Texas Venture Labs, a campus-wide initiative that helps link students to the entrepreneurial, business, technology, and legal resources available on campus and provides mentoring, team-building, business plan validation, and technology commercialization.
  • The Venture Labs Investment Competitions, which is held in Austin each May. Founded in 1984 as Moot Corp, it is the first and longest operating, inter-business-school, new-venture competition in the world.
  • Austin Technology Incubator, which was the first university-based incubator in the country. Established in 1989, it has raised over $1 billion in investor capital and spawned more than 200 companies, including many new ventures created by Texas MBA students.
  • Master of Science in Technology Commercialization (MSTC). Established in 1996, this one-year alternating weekend program is designed for aspiring entrepreneurs who want to identify new technologies with market potential, bring them to market, and create wealth in the process.