MCED Blog

MCED helps innovators fill in the gaps between their deep industry expertise and the strategic business skills critical to launching a scalable, sustainable venture. Maine's unique economic and geographic challenges demand more that a traditional business incubator. They demand a catalyst.

Pitching In Portland
Top Gun Prep Pitch Night wraps up the class
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Angel Group Investing Trends
Angel Group Investing is steady nationwide
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Customers Are Your Best Funding Source
Generating revenue early on has lots of benefits
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Advisory Board vs. Board of Directors

Here's a great blog by Steve Blank about the critical difference between a board of directors and a board of advisors:

Don't Give Away Your Board Seats

We work with companies to think through the progression, which is generally:

1) work with coaches

2) work with mentors

3) form a board of advisors

4) form an outside board of directors 

Step 4 is only necessary with "significant" outside financing.

Probably a big difference between Silicon Valley (where Steve Blank is) and Maine is that here, a "significant" financing is probably between $300K and $500K, whereas it's probably 3X that amount in the Valley.

In other words, a decent size angel round or modest size VC round in Maine will lead to a requirement to develop an outside board of directors.

 

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Top Gun Showcase video

MCED is proud of the community that came together to support the Top Gun 2013 class during the Showcase. About 300 people came out and saw that amazing ideas and great companies are starting here in Maine!

 

Top Gun 2013 Showcase.

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Excellent Execution
How do you learn excellent execution?
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Pub Hub #17
Quite possibly Portland's best networking event.
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Top Gun Showcase recognition
Nice to get some Top Gun Showcase Recognition!
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Great article on Mentoring
Insights on Mentoring
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Failure 101

My very first “real” job was working for a technology startup in Portland. I was employee number three and to this day, my time spent there remains one of the most exciting and rewarding career experiences of my life, even though we failed. I’ll get to the failure part in a bit.

First, allow me to set the stage: Portland’s Old Port in the mid to late 80s was an exciting place to be. The cobblestoned streets were lined with eclectic shops, upscale law offices, real estate development firms, cool startups, and great, I mean really great, restaurants. Remember, this was a time when credit card interest was still a tax deduction so two-hour power lunches were common. (Heck, Happy Hours started at 2:00 at some bars.) Word Processing typewriters sat on desks along with intercom systems and if you were an early technology adopter, you bought a computer from a value added reseller like Valcom.

Our company had developed an early barcode point-of-sale application with an inventory control module called It Works. Four investor/partners, and the developer, launched the company in 1986 and by 1988 we were out of business. At our peak we had a hip Old Port office on the third floor of 5 Moulton Street and a well-stocked beer refrigerator. We often joked that it was “happy hour somewhere” as we popped beer caps, but that’s not to say we didn’t work hard because we worked very hard.

Since working at MCED for nearly five years now, I’ve had the pleasure intersecting with many startups; I often find myself reflecting on the lessons I learned from working at a failed one and am struck by how relevant they still are today. Here are a few things I learned from the experience:

1. Slow down and get it right first.

We came out of the living room too quickly. I totally agree with Steve Blank’s teaching that you should talk to customers early on but we sold to customers too early. We had installations at Sunday River, Joseph’s clothing store and Colonial Shoe. Customers led to needing an office, having an office meant hiring staff, having overhead created sales pressure, adding customers prematurely led to technical problems with the product- which ultimately meant less time for R&D and more time putting out fires.

2. You might survive one bad decision but not a series of them.

We decided a second programmer was needed to get us back on track because our lead developer was now spending several days away at Sunday River. To offset this added salary expense we became VAR dealers for hardware and started selling a couple of software packages. The hardware solution wasn’t terrible but the market was still small and selling hardware created the need for more storage (read additional office space) and a hardware guy. Ca Ching!

3. Know thy customer.

In an effort to generate more revenue, we chose to sell the Ventura Publishing suite and a restaurant POS system called Digital Dining. We sent a couple of employees to a very expensive conferences and trade shows to learn and be able to sell the products. While we were correct that desktop publishing was going to be a game changer, had we done our homework, we would have learned that 99% of the tiny desktop publishing market was using PageMaker and significant sales were still years away. Plus, the few customers we did manage to land required a lot of technical support. Ca Ching!

Even though Portland had more restaurants per capita then any other US city, most of them were small 40-seat places that purveyed daily, paid employees under the table and ran cash operations. Restaurant owners didn’t care about inventory control or time card management features and the big players like DiMillos and the hotels were all happily adapted to a biggest player in the market, Remanco.

4. Hire a CEO ASAP!

We never had CEO. Each partner had an area of expertise, two lawyers, a sales guy, and an established business owner and though not a partner, our lead developer was a shareholder. It has been said that unreasonable founders sometimes get in the way of good execution and that was definitely at work. We were leaderless, lacked a core sales strategy and never fully developed a business model. Desperation gave way to unsound business decisions. A seasoned CEO would have made the difficult choices earlier on that would, most likely, have resulted in layoffs but perhaps the ultimate survival of the company.

5. Wall Street matters.

Nothing sours a startup like drastic market dips and on October 19, 1987, Black Monday, two of our partners lost a great deal of money. Although the crash of ’87 proved to be less of a drag on the economy then predicted, the feeling of not having a safety net weighed heavily on us and within a few months the layoffs started. The office closed later that fall and in early 1988, the dissolution process had begun.

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Ag Tech gets VC funding!
Agricultural Tech funding grows
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Scaling
How to think about initial scaling
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I Have An Idea
I Have An Idea Table Talk
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Another Pets and Vets Cluster company
College student's Dorm Business
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Good Timing

I spoke last night at the monthly PubHub gathering at the Casco Bay Tech Hub. It was fun, and an honor, to join the line-up of distinguished speakers who have shared their stories with the growing entrepreneurial community that gathers each month to network, drink Baxter Brewing beer, and support each other in their respective ventures.

My subject was "Aha!" - things that have struck me, sometimes like a sledge hammer, sometimes like a gradual dawn, as important to doing this entrepreneurial thing. I finished with my Aha! about timing: I'll take good timing over the first mover advantage any time.

My dad's entrepreneurial misadventure was a case of bad timing: computers installed in trucks to monitor drivers, and communicate back to home base. The late 1970s was perhaps 20-25 years too early, and the company failed while I was taking a year off in college.

I wrote reports about the future of telecommunications in my first job, at The Yankee Group. I was speculating about fiber optics to the home - in 1982. Thirty years later, it's starting to get close.

I started my a cappella music catalog in 1992. Twenty years later, in 2012, the movie Pitch Perfect grossed $190 million with a story about college a cappella groups. (btw, the non-fiction book Pitch Perfect has a chapter about me as the evil capitalist of a cappella)

But now, for the first time in my career, it feels like my timing is just right. The Maine entrepreneurial scene is poised for growth after more than a decade of ground-breaking work. Jake Ward of UMaine sits on the MCED board; he's been at this for 20 years. MTI was started more than a dozen years ago, as were a number of the incubators. 

I've been at it now for about 2 1/2 years, and I can see and feel the community growing in a sustainable way. The best metric is great people, moving to Maine or coming out of the woodwork in Maine to try their hand at building ambitious ventures. The crowd of 80 or so last night was just the latest confirmation; today I'm heading to Orono for a packed Pitchfest, sold out Equity Prep class, and our latest and greatest Top Gun (which concludes May 22 with our big Showcase). The time is right!

 

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Aha! That's What Reconciling Is For

I'm talking tomorrow night at PubHub about my "Aha!" moments. Some of them are basic but important, stemming from lessons learned the hard way.

One in that category is understanding why it's important to reconcile your Quickbooks accounting with your bank statements. The tactical objective is to make your Quickbooks exactly reflect what your bank is telling you (and occasionally, vice versa).

It's a labor-intensive manual process, even with Quickbooks' help, and when I started my business I didn't ask my staff person doing our bookkeeping to do it monthly. Big mistake. When I finally realized there was a yawning gap between the two versions of our P&L, it took many days to make it right. Back to that in a moment.

I should have realized it was important early on, as one of the most vivid memories from my first job, as an analyst at The Yankee Group, was "Black Thursday," when a third of the company was laid off. The precipitating event was bad bookkeeping combined with a lying, cocaine-snorting VP Sales. She'd been snowing Yankee Group President Howard Anderson with stories of sales closed. Meanwhile, bookkeeping was a bit behind and sloppy, so the shinkage of cash was unknown even as new employees were being hired to keep up with all of the phantom new business. Finaly, it hit the fan, people were let go or fired, and I suspect improved bookkeeping followed thereafter.

Monthly reconciling of bank statements and computerized accounting would have brought the problem to management much earlier.

In my a cappella music business, the large gap between bank statements and Quickbooks led to some forensic accounting. My wife Kate in particular started looking at some large paychecks going to the staffer doing the bookkeeping. Oops. The staffer suddenly "quit" and "worked closer to home" at a 40% (nominal) pay cut. We didn't pursue charges but suspected the bookkeeper had been overly generous to herself.

After that, we hired an outsider to reconcile books once a month. He was a retired cop - squeeky clean, good on process, sure to catch anything funny in the books. Aha! Reconciling is about keeping the books on the straight and narrow.

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Cool Companies for Maine grads

Last night I visited USM in Gorham for the final class of this semester's "Innovation Engineering - Create" class. I haven't taught the class this year - I've been trained to teach the second course, "Innovation Engineering - Communicate" and I was there to convince some students to sign on. Valerie Lamont and I are scheduled to teach it in the fall.

After doing my pitch I hung around to see how the students were doing. I was pleased to see several student presentations about innovations they thought were interesting.

One of the students (a class star, I was told) showed a video of a car "rally" that takes place in Morocco, the only rally in the world where women are the only drivers. She was obviously excited about the event, and more generally, high adreneline outdoor events.

So I shared with her and the class one of the Cool Companies of Maine. Aura 360 is in Portland - actually just down the hall from us at 30 Danforth St. They produce and own some crazy high adreneline sports on behalf of major global brands. "This company is in Maine?" she wondered. 

YES - there are lots of cool companies in Maine! She dreamed of traveling the world for them.

Connecting smart undergrads to cool companies is part of the Blackstone Accelerates Growth mission, and I hope to be spreading the word about more cool companies in the future!

 
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MTI Seed Grant and Tech Grant WOrkshop
Shane Beckim from MTI talking to over 35 entrepreneurs in Portland and Orono about Seed Grants and Tech Start Grants
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12 IT Terms Small Business Owners Should Know

From our sponsor GWI...

If you own a small business, chances are you manage your own IT, have an employee that does it on the side for you, or employ an outside contractor.  It isn’t what you got into business to do, so you’re not an expert.  In fact, chances are when a real geek starts talking to you, everything they say sounds like a foreign language.  You have vital data on your computers including customer information, your accounts, and possibly trade secrets you don’t want your competitors to get access to.  How can you effectively manage IT if you don’t even understand the common terms?  More...

 
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Inside Top Gun Maine

This is the fourth year of Top Gun Maine, my second running it and the third working on the curriculum. What keeps it fun for the entrepreneur in me is we keep refining it, keep experimenting, keep learning how to do things better.

Last night was week two, "Addressing Death Threats: Agile Acceleration." It was an evolution from last year's immersion experience of participating entrepreneurs in Innovation Engineering. Last year, all the companies went through the three-day Innovation Engineering Leadership Institute.

This year we are doing "Innovation Engineering Lite." We concluded that the ideation tool box ("Create") of Innovation Engineering isn't the most pressing issue for entrepreneurs, based on feedback. Learning to communicate their ideas is critical; I included a fair amount of those tools in Top Gun Prep.

What I realized during my Black Belt training in Innovation Engineering is that the Plan/Do/Study/Act ("Deming cycles") approach for addressing death threats rapidly could be extremely valuable. The notion is pretty simple:

1) identify the most critical issues that could impede your business or kill it entirely

2) come up with fast and cheap ways to get smart about these issues (I call it Learn Fast Learn Cheap, riffing on the Fail Fast Fail Cheap motto central to Innovation Engineering)

3) do it. study it. integrate the learning. repeat.

So that's what the dozen entrepreneur teams and 20 mentors were talking about last night. By the end of the evening there were a dozen very concrete steps to be taken in the next week or two, with progress to be reported to mentors. Then we'll repeat the cycle.

Agile Acceleration.

Here's what it looked like (video posted on the Top Gun Facebook page):

Top Gun Maine

 

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Customer Development for Undergraduates

Many of you know that I'm a big advocate of the Steve Blank "Customer Development" method. I taught it in Top Gun in the spring of 2012, and in Top Gun Prep last fall.

While we haven't fully embraced the "Lean Launchpad" model, I continue to follow it and look for opportunities to bring it to Maine. A recent guest blog post on Steve Blank's blog was inspiring in that this method was used to teach a course for 20 Princeton undergraduates. It was extremely successful in bringing the hands-on dirty and unpredictable process of innovation and entrepreneurship into a very Ivy League school not particularly known for entrepreneurship. (I lived in Princeton for a decade and first time around married into a Princeton family).

I encourage you to read the blog post, and especially check out the student videos. I looked at this video about making 3D printed figurines of custom video game avatars - it's illuminating to see how the students had to pivot entirely away from their original idea.

Wanted: an academic partner to help bring this kind of class to Maine!

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Is Top Gun Maine an Accelerator?

Since I arrived at MCED in October 2010, I’ve been calling Top Gun Maine an entrepreneurship accelerator, modeled after TechStars and other similar accelerators but adapted to Maine. And while I’m sticking to my story, last week I was reminded, twice, that we’re qualitatively different from the internationally known accelerators. 

My first reminder was doing research for an article I was writing. In spring 2010, prior to joining MCED, I attended the weeklong Babson Symposium on Entrepreneurship Education (SEE) with another 60 (would-be) entrepreneurship educators. Babson has now started an e-newsletter for SEE graduates; I had volunteered to write an article, and last week was my deadline. I wrote about the evolution of Top Gun since I’ve been here – pretty dramatic – but I checked out Wikipedia (of course!) for background on “seed accelerators” and found this: 

“Seed accelerators are a modern, for-profit type of startup incubator, with an open application process, taking in classes of startups consisting of small teams, supporting them with funding, mentoring, training and events for a definite period (usually three months), in exchange for equity. While traditional business incubators are often government-funded, generally take no equity, and focus on biotech, medical technology, clean tech or product-centric companies, accelerators are privately-funded and focused on mobile/Internet startups.”

The lack of funding for Top Gun Maine companies is one big difference versus Techstars and Y Combinator. At this juncture, in Maine, I think that funding in return for equity would not be appropriate for all Top Gun companies. Why? It propels companies down the high-risk equity investment path, which is not the right path for many promising companies. Of the 40 or so Top Gun graduates to date, probably less than 25% would find that high-risk equity is a good fit for their long term plans.

Take one of our prominent successes: Liquid Wireless. At MCED’s mentor-only networking event last week, veteran mentor (and venture capitalist) Kip Moore told the story of how, at his first meeting with Liquid Wireless founder Jason Cianchette at the beginning of Top Gun Maine 2009, Jason said that funding was his top priority. Kip gently suggested that maybe talking to customers ought to come first, to make sure there was demand. A few weeks later when they met again, Jason said something like “I don’t need funding – I talked to some customers, they want to buy the product now!” That was a better path for Jason – he owned the whole company when he sold it in January of 2012 - even though his “lead generation from cell phone users” business could probably have raised angel investment.

My other reminder was during a visit the following day to the New England Angel Capital Association quarterly syndication meeting. I was there to act as the lead investor supporting Newfield Design, which was one of four companies chosen to pitch to the meeting of about 60 angels from more than a dozen different angel investor groups.  Newfield is a “spotlight company” for the Blackstone Accelerates Growth initiative, and a team of us had worked with Jim Colony on his pitch the day before. It was the winner of the 2011 Juice Pitch Competition, which is how I became an investor.

Before the pitches there was a panel discussion on the topic of how angels should interact with accelerators, and the accelerators represented included TechStars Boston and MassChallenge. One of the panelists described the type of entrepreneurs they accept as follows:  there must be a coalesced team, they must have executed “something” already (such as a prototype) but they do not yet have substantial market proof of demand for the concept.

The Top Gun class is far more diverse. Sometimes we take solo entrepreneurs looking for key team members (although that’s a very big risk for startups). To date we haven’t required execution of “something” (although the hurdle for getting into Top Gun gets higher every year). And we do include some companies that have already achieved some level of market traction – some Top Gun companies have annual revenue up to $1 million.

So we’re not a seed accelerator – Top Gun Maine is an entrepreneurship accelerator. A lot of other elements are similar to seed accelerators, but adapted to Maine. Isn’t this the way it should be?

The Top Gun Maine class of 2013 will be announced December 14.

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The Wall Street Journal, Glee and MCED

Every once in a while you feel like the universe is telling you something, even if you're not quite sure of the message. I've had one of those experiences in the last 24 hours, and hopefully it bodes well for MCED and Maine entrepreneurship.

In today's Wall Street Journal, my old venture capital firm Accel Partners received its latest citation as one of the very top investors in Silicon Valley. A page C1 story listed them along with Sequoia Capital and Redpoint Ventures as having 9 IPO exits so far this year. I'm really happy for my former partners; the two founders, Jim Swartz and Arthur Patterson, were big reasons I joined in 1986 – seemingly a terrible time to enter VC, as the IPO market had peaked in '83 and the sector was in a cyclical decline. Along with other firms we had a bit of "Kleiner envy," as Kleiner Perkins Caufield & Byers on Sand Hill Road were the unrivaled VC leaders. A young associate hired after me, Jim Breyer, wanted to become the next John Doerr (and who didn't?), Kleiner's celebrity VC.

Now, decades later, Jim Breyer is on top of the world from his Facebook board seat, Accel Partners gets top billing in the Journal, and Kleiner Perkins didn't even make today's article. And I'm in Maine – where I moved in 1996 to do my a cappella entrepreneurial thing. I'd started an a cappella catalog in 1992 as something I could operate in Maine, at a time when unaccompanied singing was a really obscure niche. The first catalog had all of 150 CDs listed.

Fast forward to last night, when the hugely popular Fox TV show Glee culminated in a show choir competition, and one of the three featured groups was a high school all male a cappella group. They performed a popular tune, dancing across the stage, to thunderous applause. Mainstream media recognition for a cappella was a wild-eyed dream back in 1992, yet there it was last night – three years since I sold off the last piece of my business. And one of my former business partners, Deke Sharon, is music director of The Sing-Off, an a cappella competition reality TV show on NBC that will run weekly this fall. Weekly a cappella on network television!

So I've been fortunate to be early in associating with organizations and trends that went on to national recognition after I left. I'm hoping that the third time is a charm, and that MCED and Maine entrepreneurship will reach similar heights while I'm still involved. I see huge potential here in Maine, with no more daunting obstacles than VC faced in 1986, or a cappella in 1992. We'll get things accelerating here soon.

Starting with Top Gun Maine this fall. The application deadline is a week from today: July 15. Let's get going with the next Big Thing: scalable innovation based Maine entrepreneurship!

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5 Minutes with Attorney Karin Gregory

Partner: Furman, Gregory Deptula, LLC

Practice Areas: Corporate: Entity Formation, Intellectual Property, Corporate Management, Commercial Transactions Finance, Private Equity: Private Financings and Private Investment Funds, Alternative Investment Representation, Merger & Acquisitions and Other Liquidation Events

Ms. Gregory's career spans over 25 years in the healthcare field, as a basic scientist, healthcare administrator, lawyer and venture capitalist.

1. When should an entrepreneur file for a patent and/or trademark?

I recommend that an inventor file for a provisional patent before any public disclosure is made. For a trademark, either to secure the mark before it has been used in commerce, or soon after you can demonstrate that it is being used in commerce.

2. Do I need an attorney to file my trademark and/ or patent application?

In either case, the USPTO can assist in the initial filing, but the inventor should do some preliminary searching to see about prior art in the cases of patents and trademark applications or registrations already on file . Subsequent to the first filing of a patent, the invention should seek a patent attorney to ensure that the claims are well prepared. In the case of a trademark, once an office action is received, it is very useful to get some guidance and advice on how to reply. In either case, using an experienced IP lawyer will make the process go more smoothly.

3. How can an entrepreneur compete with, or "design around," a patent?

That's a very hard and complex question that requires a review of existing art, and even if there is an opportunity to avoid infringement, it is likely depending upon the industry, to be concerned about another company bringing suit for infringement. You need to have an enforcement and a mitigation strategy in place if the technology might have such risks. Trademarks, on the other hand, afford a company an opportunity to use the same mark in a different industry or for a different purpose so as to argue the ability to use a very similar mark that will not confuse the public if both are used in commerce.

4. If my patent is pending, is the information in it available for public consumption?

In the US, a provisional is only good at the present time for 12 months, and then a full application must be filed for the work to remain able to claim the priority date of the provisional filing. The application currently becomes public after 18 months, with some exceptions. Outside of the US, the patent applications are public almost immediately.

5. Am I violating a patent when the patent is written so vaguely that the patent covers a wide range of products?

If the patent is written vague, those claims will not likely be issued. Generally you should have an opinion about a possible infringement, so that there are no facts to support a later claim of willful infringement.

6. Should you trademark your brand name?

Trademarks are good for products, and positioning a company's name/logo, in order to have the public identify it the product with the company's name..such as the red bullseye for Target. A tag line or service type company would also do the same-Nike-"Just do it". Technically, that is a servicemark.

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Top Gun applications coming to a close June 25!

Once again, we have received some very promising applications from some intriguingly innovative ventures. It's time to put Maine back on the grid and introduce the rest of the region to our talent and vision. The Top Gun program continues to receive a great deal of support from both the private and public sectors in the form of mentors and financial contribution. I am really pumped about this year's curriculum and can't wait to introduce the class of 2010.

If interested in applying, don't delay any further, http://www.mcedtopgun.biz/topgunapplication

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