Interview 1 Ð Technology Entrepreneur 1: Background
The technology entrepreneur is currently undertaking a web service based business that has been in existence for nine months and is still at an early stage and living off seed funding. The service will be entering a private beta testing phase shortly and is looking to launch at an event in London at the end of September 2009. The business consists of the two founders and uses external resources as needed to help develop the web based service offering.
Resources and skills of the founders
The technology entrepreneur has a commercial background and skills in developing businesses. Previous experience includes growing a global spinout business out of a larger organisation from small beginnings to a significant size and he has good social skills and enjoys networking. He brings the sales and marketing and business development drive to the business. The other founder is a technical architect with a background in the implementation of support systems and he undertakes the service design activity for the business.
There are only two people in the business and they are unable to do everything that needs to be done on their own, as such they have to bring in outside resources. They are a development company but neither one of them is a developer; they bring the architecture and sales and marketing expertise. In an ideal world they would take on a team of developers but they canÕt afford to do this as a start-up business that has to bootstrap using matched funding from friends and family; they canÕt take on any permanent employees.
Resolving the resource gap
The business has looked to offshore-based outsourcing. They began by building a prototype product internally, undertaking a steep learning curve in doing so, and then went to an online marketplace to put together a requirement for bids to be received against. From the bids received they selected a business to work with.
They have used online marketplaces to gain accesses to resources for logo development as well as developers. Through experience of these marketplaces they have become better at dealing with third party suppliers. With regard to the logo design, by the third time of undertaking this activity they knew exactly what they were looking for and were able to specify it accordingly. When going to these marketplaces they also look into the background
of potential suppliers and provide encouragement where they see talent. They have matured in terms of understanding what to ask for and how to engage effectively with the market. They found that off shoring was a straight jacket for the business and didnÕt work well, so when it came to developing the frontend website and web applications they wanted to access local resources. To do this they used friends, contacts from previous jobs and start-up activity, networking groups they are part of, and local technology events, although there are not many around outside of London. Through these groups they found a number of individuals as well as finding more by way of referrals by other start-ups they knew who had used developers. They have a business mentor they found through their business incubator and they asked him about developers, he also came back with a number of possibilities. The issue for web based service start-ups is that resources are spread thinly and not concentrated, like in Silicon Valley, hence a great deal of hunting is required. The next place they looked for developers was through LinkedIn, and relying on referrals found a number of other potential candidates. LinkedIn holds a network of contacts they have met previously and they were able to tap into the networks behind these contacts to find candidates.
Even though they found a number of potential candidates, they still faced the issue of cost. This problem was posed to a group of MBA students following a presentation and one of the suggestions that came back was to use students. They then went through the open source network and found some very strong student resources, although many of them had already been taken for the summer by other businesses. They then contacted the twelve East Midlands universities. From the universities they were able to select two students to undertake the development work.
Access to financial contacts and resources
They made a deliberate decision to bootstrap. It costs a lot of money to build a technology company and a product, but the longer you can put off looking for an investor by supporting yourself the better. To understand more about investment, they have undertaken local government training for start-up investment readiness through Connect Midlands and GINEM (Growth Investment East Midlands).
Whilst attending a pitch competition a business angel pointed out that they needed a product to show before investors would be interested. Early on when talking to a venture capitalist about how to overcome this issue the response was ÒCredit CardsÓ.
They have had no formal interaction with venture capitalists or business angels yet regarding the business. London is the hub for investment in the UK and he goes down there once a week to network events and conferences to build his network of contacts in the technology sector. Many people talk about it being a waste of time to throw a business plan at a venture capitalist without building a relationship first. He has been meeting venture capitalists at these events and two have asked for a business plan, but he turned them down because they arenÕt looking for funding at the moment but he has maintained these contacts. In fact he got an email recently from one of the venture capitalists wanting to discuss his business further. They have been laying the foundation of the finance network but know they need to get the product in place, the management team strengthened, and customer traction before they can go further. All the investors he is maintaining contact with have been met through networking events in London and most of the venture capital funding for web based businesses comes from London. Through these same events he has met the UKÕs biggest up and coming technology start-up and has had meetings with them regarding their experiences. The new network that he has developed through the networking events has become very important and he has regularly swapped information about resources and been able to access resources through it. He knows of some investment companies in the East Midlands, but they are mostly early stage venture capitalists and business angels.
Grant Funding
There is not much of a focus on software technology companies, so it is very difficult to get money. There are fewer strings attached so it is attractive but there are many hoops to jump through. EMDA just arenÕt interested in software businesses, even though the biggest UK software start-up is in the region. This has not been an avenue for them to follow.
Accessing wider networks
Their first target market is the technology community. They have a technology product so there is a connection to this group and they would be much more likely to adopt the product. They want to engage with the broader community and building a potential customer base has been a focus, but when youÕre a start-up people are busy and they arenÕt interested in you. From his marketing experience he knows that you have to engage with potential clients multiple times through different contacts. To get their brand out there they have agreed to sponsor an event that will also act as their launch event. A wide audience of around 1500
He has been using social media to raise the profile of the business; itÕs a great way of spreading the message and moving up the search engine rankings. He blogs about twice a week, but it should be more. There is no revenue generated from this activity but it is a controllable means of PR and he gets 4000 visits a month. He uses his blog to discuss the technology industry, entrepreneurship, and start-ups. He knows that the venture capitalists he has been engaged with have visited his blog and will be making judgements about him and his business, as will the wider audience of people that visit it. He always promotes his blog to people he meets and sees it as a powerful way of raising awareness. On the back of this promotion, they now have over 100 people signed up to partake in their beta testing and are getting a further 5 to 10 new people a month signing up. The blog is drawing in new contacts all the time and provides an effective means of maintaining loose connections. Loose connections are also strengthened by using the blog to link to others online content and provides these people with a reminder of his existence.
There are always good people to know that have very broad networks that they can draw upon. They have made a few links with these types of people, but they hold power as a result of their networks and are not always willing to provide access.
Facebook use has been limited and itÕs not the best PR channel, but they do use Twitter to promote the activities of the business and have gained over 200 followers.
Gaps in the network
Potential customers are the biggest gap. They are active with the technology community in the UK, but they need to grow their US network. It is difficult to do without a presence in the country. They have seen other international focused start-ups base people in country and employ local advisors to aid with building a presence. To be successful they have to identify the niche markets for their service and engage with each of these niches in turn. The issue they are facing is how they can gain access to each identified niche market outside of the technology community, each niche is different therefore the messages have to be different. To engage with a wider audience they need PR but they are concerned about how much it can cost, however there is a lot of value to be gained if the business appears in an article. ItÕs not advertising but it gets a positive message across, plus if you build a relationship with a PR person you gain access to their address book and a wider network to spread business messages.
The other big issue is the fact that they need more money and they are currently going through a second round of friends and family funding so they can bring in some full time resource to drive the business forward.
Incubator experience
Interaction with the other entrepreneurs in the incubator has been useful and they all share information with each other. When he gained access to the student resources others wanted to know how they could do the same and he told them how. The only issue is that the incubator isnÕt very busy, so interactions are limited and there are only a few other technology companies in their incubator. However it has been a useful community.
The address is a bonus of the incubator; it looks more professional and is low cost, which is good for an early stage start-up business. They have a broad business support network that can be accessed, for example they have gained access to a few copywriters. The hot desk space and meeting rooms are another benefit, however there is the draw back that it is not your own office and can be quite noisy. Also they donÕt have the facilities that a technology company requires to develop. As the business has taken on people it has made things more difficult because of the limited space in the incubator and they are outgrowing the facility, but their experience of it has been worthwhile.
Closing discussion
The buzz is increasing around the use of social media as a way of increasing the profile of businesses and the activities they are undertaking, however it requires a significant time commitment to make it work effectively. He spends over a day a week on his blog and other online posting activity, but his profile is rising.
Finished with a short discussion around augmenting offline networking with online networking. There are issues with maintaining networks as they grow larger. Moving online and using social media is a means of addressing this issue but with all the noise online you have to have a good story and a ÔwowÕ product to gain traction. If this can be managed, word of mouth is very powerful at building genuine interest from potential customers and other groups.
Interview 2 Ð University TTO 1: Background
He has worked for industry, the Government, and academia. He is a scientist and holds a PhD. He has been in post for around 18 months and his role at the University covers intellectual property and commercial activity, his remit is to track down ideas and commercialise them in order to generate revenue for the University.
Resources to aid spinouts
The most important thing is having a commercially focused presence at the University. Spinout activity is very different from the usual academic regime and academics donÕt often know what is supposed to be done and what isnÕt. They enable constructive discussion to take place between academics and business as well as providing knowledge on what can and canÕt be done. They are also the avenue to access funding for commercial activity.
Spinout activity and the Technology Transfer Office (TTO)
All intellectual property generated belongs to the University and academics must come through the TTO to begin with, but they will not necessarily stay with the TTO. If a way forward for the IP cannot be seen, the academics will be left to pursue commercialisation on their own. Also if an academic has developed IP outside of the University setting the TTO will not get involved.
The University treats all employees equally with regard to its ownership of intellectual property. Undergraduates and most MSc students own their own intellectual property, the University owns anything produced by anybody else unless there is a commercial contract in place with a company who are paying the full cost of research and development, this only covers a small proportion of activity.
The key external relationships
Key to spinout activity is the Lachesis fund and their relationship with an early stage venture capitalist. The Lachesis fund is key to supporting spinout activity in the East Midlands and £25,000 to £250,000 can be accessed in funding. They also have a framework agreement in place with a venture capitalist that provides first choice of refusal for all spinouts coming from the University. The venture capitalist model is effective and a representative is regularly on campus. When they get involved with a spinout they provide a management team to run the company, as academics are very often not the right people to do this; they are
skilled at research but often not good at business management. The University has around 70 projects on their disclosure list and the venture capitalist will pick up 1 or 2 a year.
Spinout activity and the Business School
There is not a big link between the two. This year they have been involved with the MBA programme on one of their modules and have provided the MBA students with four ideas for them to explore in terms of producing a market survey to test the potential for commercial success. The relationship is improving and this year has been the first year they have managed to get the relationship to work well and get a beneficial outcome.
Management team recruitment and the TTO
Have only undertaken one spinout outside of the Lachesis and venture capitalist route. All other spinout activity is directed through the two aforementioned groups and the management teams are recruited through them and not the TTO.
Other key external relationships
Knowledge transfer networks are a useful means of finding out what is going on in any given sector as well as uncovering who has spare time and who has had a good idea. It is beneficial to be involved in these networks, which are managed and funded by the Government and cover universities, businesses, and Government departments. There are networks for each technology area and they enable you to find out where your idea fits within the broader community. ItÕs a discrete way to gauge reaction to an idea without having to formally disclose any information.
It is useful to know how organisations like EMDA function and the University has a single channel through to them, this provides a good form of control in terms of managing the relationship and it works well.
Relationship gaps
Finding local skilled managers to support the spinouts is an issue, but it hasnÕt been a showstopper because Lachesis and the venture capitalists have provided them. However it is still a gap in his network.
There is a big gap in the relationship back into the academic community. If there is a good idea it will get funded but they donÕt get to see as much of the output from research as they
to see regular multi disciplinary activity, but often a single academic drives this by drawing on other departments.
ItÕs an ongoing battle to find new ways of interacting with the academics to gain greater access to research technologies and intellectual property. He now carefully selects new recruits who have just graduated to the team and puts them under orders to maintain their existing connections with their old departments in order to gain disclosures. He has also tried low-key presentations to a number of departments to gain interest, but it has had limited success.
He relies heavily on maintaining face-to-face relationships with the academics because he needs to be able to assess how keen academics are to support any given spinout opportunity, if their commitment is questionable then it may not be worth undertaking the spinout activity. The Internet and relationships
They are in the middle of developing a new intranet site to promote the role of the TTO across the University, but he is unsure at this time if it will provide any additional benefit in terms of disclosures. They need to keep pushing their agenda to increase disclosures and he feels that the best means of doing this is through face-to-face interaction.
University commercialisation targets
The University is currently undergoing a time of change so targets cannot be specified at the present time, although he is sure that targets will be put in place. He would like more disclosures, but with that comes higher costs in terms of patents and commercialisation activity.
Licensing activity is slow at the University and they are trying to use links that academics