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NuMat Technology Wins 2012 Global Venture Labs Investment Competition

NuMat Technology Wins 2012 Global Venture Labs Investment Competition

 

May 7, 2012

Austin, Texas — NuMat Technologies from Northwestern University beat out 37 teams from top MBA programs around the world to claim the grand prize at the 29th annual Global Venture Labs Investment Competition held at The University of Texas at Austin on Saturday, May 5. NuMat Technologies designs and creates high-performance materials to store clean fuels and produce them on a large scale for industry.

NuMat Technologies was awarded the top prize after the two-day competition that featured 15 international MBA teams and 22 teams from the leading MBA programs around the U.S. Finals-round judges were William Glasgow, Prime IX Investments; Phil Speros, Halsa Pharmaceuticals; Mike Dodd, Austin Ventures, and Thomas Pickens III, Astrotech Corporation.

NuMat Technologies’ COO Tabrez Ebrahim received his B.S. in Mechanical Engineering from the Cockrell School of Engineering at The University of Texas at Austin. “It feels really good to be an alum—Austin’s my favorite place.” Ebrahim also worked with cleantech startups at the Austin Technology Incubator, which has helped 200-plus startups raise over $1 billion in investor capital.

The NuMat team won a $135,000 package including Austin Technology Incubator office space, mentoring and consulting services; a full-page ad in Inc. magazine; consulting with the McCombs entrepreneurship faculty worth $25,000; and cash. The winning team will also close the NASDAQ Stock Market on July 27th.

A team from Thammasat University in Thailand won the first-ever $10,000 Wells Fargo Clean Energy prize. Their startup Paramaxx has a proprietary technology that can extract valuable natural minerals such as magnesium, nitrogen and phosphorus from industrial waste.

NuMat Technologies was one of two teams that reached the Saturday-afternoon finals round of four teams via the Wild Card Challenge. The other was Ischiban from the University of Cincinnati, a medical device startup company that develops comprehensive diagnostic and monitoring systems for emergency, mobile and long-term applications to aid in the assessment of neurological status for conditions like stroke.

Athena Laboratories, which was first runner-up, is the first team from McCombs’ Masters of Science in Technology (MSTC) program to make it to the Global Venture Labs finals. Athena CEO Ravine Woods said, “We’re super excited and very proud to be in the finals.” Athena Laboratories is a medical device company whose FemtoSmooth™ laser technology can treat cellulite in a minimally invasive, less painful manner.

Rounding out the finals was Sustainable Agriculture Solutions (SAS) from Universidad de Los Andes in Colombia. SAS will produce an enhanced-efficiency fertilizer incorporating a patented nanotechnology called CDS® that protects crop nutrients, saving in fertilizer cost, increasing productivity and safeguarding the environment.

The Global Investment Venture Labs Competition simulates the real-world process of raising venture capital. It is a unique partnership that brings together graduate students and business leaders. The judges function as an investment group seeking to reach consensus on the business venture they would most likely fund. The quality of the idea, the strength of the management team and the clarity and persuasiveness of the written plan and oral presentation all influence the judges’ decisions.

Begun at the University of Texas at Austin by MBA students in 1984, the Venture Labs Investment Competition is the oldest new venture competition in the world, and it provides MBA student teams with a chance to simulate the real world process of raising venture capital.

The competition was sponsored by Jon Brumley Texas Venture Labs. An interdisciplinary education and research initiative, Venture Labs promotes new venture creation at The University of Texas at Austin through education and mentoring, market and business plan validation, team-building and networking and direct links to resources and funding.

 

 

 

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2012 Global Venture Labs Investment Competition Finalists Announced!

2012 Global Venture Labs Investment Competition

Finals

 

Saturday, May 5

Room 204

2:30 PM      Sustainable Agriculture

                     Universidad de Los Andes

3:25 PM      NuMat Technologies

                   Northwestern University

 

4:20 PM      Athena Laboratories

                   University of Texas at Austin

5:15 PM      Ischiban

                   University of Cincinnati

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Lessons Learned from Killing a Startup

By: Sid Allen – Principal, Texas Venture Labs

Last summer I passed up an internship to participate in a great program called SEAL (Student Entrepreneur Acceleration and Launch) at the Austin Technology Incubator (ATI ). SEAL replicates the conditions of a start-up – no pay, no phone line, no sympathy. The program “provides a structured problem solving and business building environment for student entrepreneurs who want to take their business ideas to the next level.”  It also allowed my co-founders and me to focus all of our time on our company, Pheir Healthcare. Pheir was going to solve the problem of medication administration errors in nursing homes. Currently half of all errors of this type occur in nursing homes, mainly because they rely on pen and paper to do this laborious task, leaving lots of room for human error. Pheir was going to offer software to automate the process on a mobile device through the software-as-a-service model, making it affordable to even the poorest nursing homes. Over the summer, we learned some very valuable lessons. These lessons aren’t revolutionary, but I guess I was snoozing when they were taught in business school.

First, domain knowledge is paramount. This is often taught in business school, but is often dismissed and countered with numerous examples of successful entrepreneurs with no prior domain knowledge. I don’t believe it’s required, but it definitely makes the job easier. My team had domain knowledge in the industry, but not with our target market. Luckily, we had two great advisors (courtesy of participation in SEAL), Steve Andrade and Kyle Cox, who had enough knowledge in their fingertips to save us hours of time and frustration. The point is that if domain knowledge doesn’t exist in the co-founding team, it should find a few advisors to fill this gap. A few hours of time with these advisors could save an entrepreneur weeks of effort.

Second, competitor analysis should be one of the first steps of market validation and it should be taken very seriously. Books have been written about market validation, which is an extremely complicated process. Competitor analysis is part of this and we diligently scrubbed hundreds of companies from Hoover’s and other databases. After this and some time spent doing Google searches, we found 4-5 minor competitors and quickly moved on to the real “hard core” part of market validation – primary research through talking to customers, measuring and defining pain and fancy surveys. After deciding that there was in fact a need in the market place for our product, we turned back to looking closer at competitors. Over the course of several weeks, we discovered more than 30 competitors making a similar product! They weren’t all huge, but that knowledge would have saved us months of research trying to figure out if there was any substantial market demand for our product. A detailed study of competitors also gave us incredible insight into other aspects of the market, such as price points, channel partnerships, product features and marketing strategies. It turns out that what we thought was a low price point (from earlier competitor analysis) was actually a high price point – our revenue models were laughable!

Finally, I learned the importance of measuring opportunity cost when starting a new venture. We believe we can make a product better than 29 of our competitors, we believe we can sell it and we believe we can do this with a fair investment of seed money. However, we also realized it would take us several years to reach critical mass, several more years to return to our current salary levels and maybe a decade to have a business we were proud of.  We knew no investor would consider investing in a company like this and in the end, we felt the same way about our own time and money.

So we killed it. RIP Pheir.

Sid Allen is a native of Round Rock, Texas. After graduating from West Point and serving in the U.S. Army for 10 years, he decided to come back home to pursue his dream of starting a company. He recently founded Escapaide.com, a website offering personalized travel itineraries for international business travelers.

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Working Capital Management: A Must for Any Startup

By: Rex Morrow

In any company, large or small, venture-backed or lifestyle, there is an inherent tradeoff between liquidity and profitability.  Liquidity is the ability to meet your short-term obligations, like paying suppliers or making loan payments, while profitability is an accounting convention which indicates the value created by the business over a period of time, expressed as earnings.  Large companies possess resources to help them manage this tradeoff such as an accounting department, negotiating power with their suppliers, or access to the capital markets.  For the entrepreneur, however, who is often resource-starved and doesn’t have enough operating history to secure additional credit, managing this tradeoff can feel like walking a tightrope.

To illustrate the tradeoff between liquidity and profitability, consider the following example.  Your new company has gained some traction in the market, and monthly revenues have remained steady over the past few months at $100K.  Your operating margin is steady at 10%, meaning that each month your fixed and variable costs equate to $90K.  You’ve just signed a customer who wants to test your product next month to the tune of $20K in additional sales, and if satisfied after the trial will triple his business with you.  This represents huge growth potential for your fledgling company and is an exciting opportunity, but let’s take a look at the economics.  With operating margins remaining at 10%, the $20K in sales equates to an additional $2K in operating profit, increasing your profitability.  However, it also means you’ll have to spend an additional $18K on variable costs next month, and since you offered this new customer net 30 terms, you won’t see his payment until the following month.  As a startup with little cash on hand, how will you finance that additional $18K in expenses next month, or triple that in future months if this new customer decides to increase his business with you? 

Growth in sales requires a growth in assets, and specifically current assets.  This is a direct relationship.  For example, higher sales volume may be achieved only if production increases, and higher production rates require greater investment in inventories.  Said another way, sales growth requires more working capital, or the cash used to fund day-to-day operations.  Therefore, growth requires policies for working capital management, especially for the startup with limited resources, for which the difference between good and bad working capital management policies can be the difference between growth, or just plain survival, and bankruptcy.

A good metric for assessing your company’s working capital efficiency is the Cash Conversion Cycle (CCC).  The CCC can be defined as the length of time between paying your expenses and receiving payment from your customers, or the number of days it takes to convert your company’s activities which require cash back into cash.  Take a look at the following graphic, which shows one operating cycle and the resulting CCC:

CCC = DIO + DSO – DPO

Where:

DIO = Days Inventory Outstanding

DSO = Days Sales Outstanding

DPO = Days Payables Outstanding

To calculate DIO, DSO, and DPO you’ll need some information from your financial statements:

For the average inventory amount (or receivables/payables), calculate the average between inventory this period and last period:

Most companies have a positive CCC, but there are some, like Dell, which have a negative CCC.  Dell accomplishes this largely because it has the negotiating power to be able to delay payments to suppliers (long DPO), but it also employs business practices like just-in-time inventories (shorter DIO) and built-to-order production (shorter DSO) which reduces its CCC and frees up cash within the business.  More important to note in Dell’s case, however, is that the company’s business model was designed to intentionally minimize the CCC and maximize the amount of cash available to fund the company’s operations.

Take a look at your business model – are there missed opportunities to shorten your CCC?  Are there ways to redesign the business model to free up more cash?  If not, are there other areas where your working capital could be managed more efficiently?  The answers to these questions are different for each business, but in the end, an effective and efficient policy towards working capital management can greatly facilitate your ability to walk the fine line between liquidity and profitability.

_________________________

Rex Morrow is currently an Accenture Venture Partner at Texas Venture Labs. He received his MBA from the McCombs School of Business, with concentrations in Entrepreneurship and Finance, after serving as a Company Commander in the U.S. Army.  A TVL co-founder, Rex has always had a passion for building teams, and is equally as passionate about working with entrepreneurs to navigate the fast-paced world of startups.

rex.morrow@mccombs.utexas.edu

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TVL Portfolio Companies Raise $5M+ in Funding in December

In addition to the already $20M + raised by our portfolio companies since inception, five have raised a total of $5M over the last month (Dec-Jan):

 

Alafair:  $700K

Gazzang:  $2M

Hyper Wear: $260K

Ortho Kinematics:  $600K

Xeris Pharmaceuticals: $1.5M

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8 TVL Portfolio Companies Make Austin Chamber’s Startup “A List”

Eight TVL portfolio companies made the Austin Chamber of Commerce’s “A List” of startups including: eCampus Tutors, Gazzang, InfoChimps, Hurricane Party, Ordoro, Ortho Kinematics, Mass Relevance, and Loku. Additional University of Texas/McCombs Alumni founded companies include: QCue, Famigo, Karmaback, and Clearbrook Imaging.
Great work and Hook ‘em!!
-Aaron Lyons
AUSTIN CHAMBER DEBUTS ‘A LIST’ OF STARTUPS WITH STRONG GROWTH POTENTIAL

By Gary Dinges

AMERICAN-STATESMAN STAFF

Tuesday, Jan. 3, 2012

Austin startups in search of funding are getting a boost from the Greater Austin Chamber of Commerce.

The chamber had area investors put together the first “Austin A List,” which features more than 30 Central Texas firms they believe have strong growth potential.

"Austin has a great reputation in regards to entrepreneurism, with enormous potential to both recruit new startups to our area, as well as grow and expand those currently here," said Susan Davenport, the chamber’s senior vice president for global technology strategies.

"In that vein, the chamber’s Tech Partnership is working on numerous initiatives to better publicize Austin’s potential and tell this story better."

The A List is one of those initiatives.

Chamber figures show the region has 3,800 tech companies, big and small, with a combined 100,000 employees, Davenport said.

The A List includes startups that, among other things, offer online daily deals, allow bar patrons to close out their tabs using their cellphones, help people find nearby shops and restaurants, and create and sell products to help stabilize the human spine.

For Spredfast, an Austin social media firm that made the list, “2011 was a year of tremendous growth for our company and product,” said Jim Rudden, the company’s chief marketing officer.

"With $14 million in growth capital raised this past year, we are excited to continue the expansion of our product offerings and team in 2012, and deliver a social business platform that helps the largest brands and agencies better manage their increasingly complex social media programs."

SpareFoot was also named to the A List. It helps consumers locate storage space.

"SpareFoot truly embraces Austin startup life, so it’s an honor to be recognized in the chamber’s A List," said spokeswoman Rachel Greenfield.

"Our Web marketing products for self-storage facilities are gaining popularity in the industry, and exciting developments are under way. 2012 will be an amazing year for SpareFoot."

gdinges@statesman.com; 912-5987


The 2011 A List

Funding groups identified these Austin-area startups as having strong growth potential:

aDealio

Adlucent

CacheIQ

Clearbrook Imaging

Digby

DocBookMD

ecampus Tutors

Evix

Famigo

FanTrail

GameSalad

Gazzang

Hurricane Party

InfoChimps

Invodo

Karmaback

KLD

Loku (formerly Borrowed Sugar)

Lumos Pharma

MainStreet Hub

Mass Relevance

Ordoro

Ortho Kinematics

Phunware

Qcue

RavelData

SmileyMedia

Socialware

Spanning Clouds

SpareFoot

SpineSmith

Spredfast

TabbedOut

Who do you know @

YouData

Source: Greater Austin Chamber of Commerce

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Wells Fargo Provides Grant to University of Texas for Clean Energy Business Ventures

Dec. 5, 2011

Austin, Texas — As part of its national environmental grant program, Wells Fargo today announced that it has provided a $125,000 grant to the McCombs School of Business at The University of Texas at Austin that will fund a new Clean Energy track within the 2012 Global Venture Labs Investment Competition (GVLIC).

Graduate students from universities around the globe come to The University of Texas at Austin each May to present their business plans at The Global Venture Labs Investment Competition. From among myriad offerings, panels of investors select the best new-venture opportunity. With aspiring entrepreneurs soliciting start-up funds from experienced investors, the competition simulates the real-world process of raising venture capital.

Competing for the new Clean Energy Prize sponsored by Wells Fargo (along with the overall Global Championship) at the GVLIC will be start-ups focused on improving energy efficiency, innovating energy delivery and offering energy from alternative fuels, for both residential and commercial energy sectors.

“This partnership with Wells Fargo is ideal due to its commitment to renewable energy and entrepreneurial endeavors in this rapidly growing sector,” said Rob Adams, director of the Global Venture Labs Investment Competition.  “Wells Fargo is a leader in Clean Energy and their reach and abilities are of real value to the companies raising money through the Venture Labs process.”

“What impressed us most about the university’s competition is that it has a worldwide reach and covers renewable energy, greener buildings and energy efficiency, areas that are also core to our business,” said Michael Klein, Regional Executive of Wells Fargo’s Commercial Banking Office in Austin. “We also look forward to lending our business expertise and mentoring these aspiring new business opportunities by leveraging our leadership throughout the competition with Doug Mangum’s involvement, who was recently hired to head up Wells Fargo’s Technology and Clean  Tech practice in the southwest out of Austin.”

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.3 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, the Internet (wellsfargo.com and wachovia.com), and other distribution channels across North America and internationally. With approximately 275,000 team members, Wells Fargo serves one in three households in America.  Wells Fargo & Company was ranked No. 23 on Fortune’s 2011 rankings of America’s largest corporations. Wells Fargo’s vision is to satisfy all our customers’ financial needs and help them succeed financially.

About the McCombs School of Business at The University of Texas at Austin

The highest ranked business school in Texas and the Southwest, and a top-ranked research institution, the McCombs School of Business at The University of Texas at Austin is dedicated to educating the business leaders of tomorrow while creating knowledge for industry and society.  McCombs educates more than 6,000 undergraduate, MBA, MPA and Ph.D. students each year, creating one of the largest cumulative impacts of any business school in the world. About 2,000 professionals also participate each year in custom programs designed for working executives and their firms. McCombs is one of the few business schools in the country to receive top marks in nearly all the business specialty areas ranked annually by U.S. News & World Report—at both the undergraduate and graduate levels.

For more information, contact: Renee Hopkins, Red McCombs School of Business, 512 471 6746; Helen K. Bow, Wells Fargo 713-319-1752.

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Market Validation: Why Ready, Aim, Fire Beats Ready, Fire, Fire, Fire, Aim

by: Dr. Rob Adams

More than 65 percent of new products fail. Based on the percentage of new products that fail, $260 billion is lost in the U.S. alone. 

You’re working with an established company and looking to launch a new offering, or you’re a new company trying to muscle its way into a market. Or you’re just a savvy business person trying to figure out more about the markets around your existing products.

If these descriptions fit you, you need the book If You Build It Will They Come? Three Steps to Test and Validate Any Market Opportunity (Wiley, April, 2010) . More than 65 percent of new products fail. And that’s just in established companies with other established products and deep resources. If we switch over to start-ups, the failure rate takes a huge leap to 90 percent. The amazing part is, we’re not looking at data related to recessions or other tough business circumstances. These numbers have been stubbornly constant for thirty years.

Here’s the bottom line: these numbers are simply not acceptable. Based on the percentage of new products that fail, $260 billion is lost in the U.S. alone.  That is dollars right down the drain. What a phenomenal waste of time, effort, capital and business resources.

Why do products fail?

Products fail because they don’t generate enough money. Of course. But why don’t products generate enough revenue?

Because they don’t sell well enough. Customers aren’t willing to pay for them. Customers feel they’re not compelling enough, or not worth the value given the price. They can’t generate enough revenue to cover their expenses. Not, as many urban legends suggest, because the parent company or outside investors won’t fund them. As an experienced investor and former corporate executive, I can assure you that corporations and investors will back promising products and services that show market traction. But companies have to prove customers want the products for this to happen.

Clearly, if a company’s first product fails, that’s the end. If a new product fails in an established business, the company may or may not survive.  It all depends on the strength of other revenue streams, and on how many resources were burned on the failed product.

A company fails because it doesn’t sell enough product or services. Outside investors or a parent company might cover shortfalls for a while, but ultimately the offering must stand on its own. It must generate returns that justify the capital—and the risk—that went into creating, marketing, and selling it.

So whether you’re in a start-up or an established business, if you want your company to succeed, you need to consistently get your product or service offering right.  This book was written to address this issue head on. It will show you how to cut your chance of failure. It’s not a magic bullet—just a big step toward significantly improving the likelihood you’ll succeed. It’s also not a theoretical method, but a pragmatic system I’ve used with great success.

The process is Market Validation

Market Validation is a series of common business practices, assembled in a unique way, that prove the validity of a market before you make the product investment.

The concept was initially introduced in my first book, A Good Hard Kick in the Ass: Basic Training for Entrepreneurs (Random House: Crown Books, 2002). In that book I covered Market Validation basics in one chapter. The response to that high-level treatment has been significant and led me to write a book exclusively dedicated to Market Validation.

Use Market Validation to probe, test, and validate your market opportunity—before you invest all that money in product development. It is a systematic, proven approach. And it will make or break your business.

As you will see, there is nothing esoteric or magical about the Market Validation process. Like everything in business, there are no easy answers; if there were, business would be easy and all new products would flourish. Conceptually, Market Validation is easy to understand—but it takes discipline and effort to get it done.

Whether you are designing, building, or selling products, whether you’re in a large corporation or a tiny start-up, whether your business is service- or product-based, Market Validation will significantly increase the likelihood your product will succeed in the market.

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Beth Comstock, GE CMO Visits Texas Venture Labs and the McCombs School at The University of Texas

On November 2, 2011 Texas Venture Labs (TVL) hosted a visit to the McCombs School of Business by Beth Comstock, CMO of GE. The visit was part of a tour of the core schools from which GE recruits in order to boost awareness of its Experienced Commercial Leadership Program (ECLP).

Given that the theme of GE’s visit was entrepreneurship and innovation, TVL was an obvious choice to host the visit. Texas Venture Labs delivers the intellectual horsepower to promote new venture creation at UT Austin through education and mentoring; market and business plan validation; team-building and networking; and providing direct links to resources and funding. TVL has worked with 30 companies over the last three semesters, which have raised over $20MM in funding. 

Max Broadsky, a GE ECLP member within GE capital and McCombs MBA graduate said, “My roommate joined TVL as an engineering masters student and after his second semester he became so fluent in the concepts of market validation and the language of entrepreneurship that he could’ve sat in any MBA class discussion and you wouldn’t have known he was not an MBA.”

During the visit, TVL representatives presented the selected group of portfolio companies below as they met three criteria: a balance of early and late stage technologies, an interesting mix of market problems and alignment with industries in which GE already participates.

  • Nanohybrids: a technology developed at The University of Texas that can eliminate the need for biopsy through nano contrast agents.
  • Zilker Motors: an emerging Austin car company that is developing a vehicle that can achieve both high performance and high efficiency through a unique modular transmission technology. 
  • Akimbo: a financial services company that provides prepaid visa cards to university students and other individuals who need them. The card provides the ability to transfer money between cards instantly and for no cost online. 
  • RayDyne: a commercial concentrated solar power production technology that is installable on rooftops. It is significantly more efficient in terms of energy capture than standard thin film technology. 
  • Waldo Health: a complete telecare health monitoring solution that connects doctors to patients on an ongoing and as needed basis. 

Many of Comstock’s comments regarding the presentations compared TVL with GE’s own internal incubator. She was very impressed with the speed in which TVL turns around projects for its portfolio companies. “Even in an academic environment, TVL is very deadline driven, something our internal program could benefit from,” she said.

Moreover, Comstock observed that GE has no problem producing technological innovations, but could apply TVL’s attention and discipline regarding market validation. That is one of the reasons Jeff Immelt, CEO of GE, created the ECLP program, to infuse commercial leaders into every part of the organization to promote market driven innovation. TVL follows the principles of market validation espoused by Rob Adams, the program’s faculty director and teacher, in his book If You Build It Will They Come: Three Steps to Test and Validate Any Market Opportunity.

With TVL starting to emerge from its infancy and establish itself as a hub for technology commercialization and entrepreneurship, companies such as GE are reaching out to build relationships and get ideas on how to better model their internal innovation centers. Comstock’s visit is a clear indication that The University of Texas and Texas Venture Labs are taking the right approach to creating innovation.

To learn more about Beth, visit http://www.facebook.com/ElizabethComstock or follow @bethcomstock on twitter.  Interested in learning more about GE’s ECLP program? Read about the experiences of program members from around the world at www.eclpblog.com.