Connecting Parallel Startup Universes

Denver Startup Week was huge for the Denver entrepreneurial scene! It was vibrant with a ton of activities and wide participation from the Denver area. Also in Denver during the same week was the Rocky Mountain Life Science Investor and Partnering Conference, put on by the Colorado BioScience Association. For a bio nerd and startup junkie like myself, it was a very rewarding week. I enjoyed both events, I’m thankful to have been able to IMG_2471participate, and I’d go back next time they come around. CNBC even covered both here and here. My perspective is on the intersection of the events – or more accurately, the lack thereof.

I’m beginning to obsess over this idea. How do we connect the parallel universes of Colorado startup industries? Life Science/Biotech isn’t the only silo, but outside of tech it’s the only one I’m immersed in. Brad Feld talks about the issue in his book Startup Communities, and specifically highlights an unsuccessful interaction with a Boulder biotech group. I won’t say that any person or any group is to blame for the current split – only that we’re here now, and it needs to get better.

Denver Startup Week has been successful twice in two years, and grew significantly from 2012 to 2013. It was not quite, as their signs suggested, a “celebration of everything entrepreneurial in Denver” but it’s getting there, and I only expect the event to grow and become better. It is led by inclusive entrepreneurs, so there is significant community support.

IMG_2473The Colorado BioScience Association’s conference also stands on multiple years of success. Launched in 2009 as a biennial (every 2 years) conference, it brings startups from 5 states: Colorado, Utah, New Mexico, Arizona, and Montana. The 1-day event featured 30 big investors from Colorado, both coasts, and in between: VC’s, public company venture arms, and Angel investors. 30 startups also presented, pitching for everything from angel rounds to getting ready for an IPO. InnovatioNews has a great review of the day here.

Within their own communities, both events were huge. However, almost everyone I talked to at DSW about the biotech conference had no idea it was going on, and many at CBSA’s only found out DSW was going on from the signs on 16th St, since Basecamp was only 4 blocks away. It was close enough that I walked over from the Ritz during a networking break.

There are bright spots in the gap, however. Rockies Venture Club leadership, volunteers, and a few of their top Angels were all over both events. The fact that RVC was founded in 1985 and serves a variety of industries probably helps in that area. There are other people building connections and bridges between the parallel universes, and we need to encourage and cultivate that. This year DSW added a manufacturing track, and I have every reason to believe they’ll keep growing the events. Denver did have a broader focus than Boulder Startup Week, in comparison. BSW was also a great event this year, albeit primarily focused on software and internet. I attended and loved it, and I’ll proudly wear the BSW t-shirt with the 1’s and 0’s logo, even though I can’t write a single line of code.

The noble idea that brings entrepreneurs, creators, artists, and (good) investors together is the belief that we can always make things better by creating value. Startup communities grow organically and tend to be messy, and that breeds collaboration and innovation. I have no doubt this chasm will be bridged; entrepreneurs will lead the way, and the process will add value to anyone involved. The Boulder and Denver startup communities were once pretty segregated, and we’ve seen incredible progress there. Connecting the parallel universes within the Denver/Boulder area is a positive sum game and must be seen that way. It will not be an easy or quick process, but it is worth the effort.

Tim is a regular contributor to the Rockies Venture Club blog and a Master’s of Engineering Management student at CU-Boulder. He holds a bachelor’s in cognitive neuroscience from the University of Denver, and has worked for startups since he left his corporate life as a licensed investment advisor.

Twitter: @taharveyconsult

 

 

P2Bi Raises Series A, Helps Small Businesses Via Crowdfunding

Crowdfunding has been a growing force in the financial industry, disrupting sectors each time it reaches a new one. p2biMicroloan platforms like Kiva and peer-to-peer lending such as Prosper have proven to be a quickly growing alternative in debt, and have increased access and choice for those looking for financing. Companies such as Indiegogo and Kickstarter have given rise to donation and pre-sale based funding for a wide range of people and businesses, and with the implementation of the JOBS act, equity can be sold over similar platforms as well. New technologies that connect people in meaningful ways have a way of changing the world, and P2Bi plans to be a part of that.

 

One area of financing that has not been disrupted by crowdfunding (yet) is the business receivables market. The idea of a business selling its invoices (accounts receivable) to a 3rd party to raise cash isn’t a new idea, and was even established in the Code of Hammurabi nearly 4,000 years ago. However, this $136 billion industry (in the US alone) has been quiet with relatively little innovation. Transparency has been an issue in the factoring industry in the past, and since it usually involves business-to-business transactions, it isn’t found in a public light very often.

P2Bi (Peer-to-Business Investor) is working to change this. As the first crowdfunded business receivables market, they have opened up a new and transparent path to finance growing companies, and have been connecting investors with small businesses since early 2012. This is an increasingly important gap to fill – according to a Pepperdine report, nearly 2/3 of small businesses in the US were recently unable to secure bank loans, where many had the ability and desire to repay loans but not the credit for a traditional bank to provide funding to them. With P2Bi, business owners are able to find competitively priced loans, and accredited investors can buy into portfolios of asset-backed business receivables, which are likely to generate a higher interest rate than cash instruments that are currently returning closer to 0 than even 1%. P2Bi works with a wide variety of small businesses, with the exception of transportation and construction.

P2Bi recently raised a Series A investment round, including investors from the Rockies Venture Club and John Spiers (who recently exited NexGen), among others. This follows their August 2012 seed round, and will be used to help the business scale. Among other activities, they will be hiring for multiple positions (LINK) and relocating from Louisville, CO to Denver. “We’re really excited about moving to Denver. It makes the most sense with the density of businesses and the finance industry in Denver,” said Krista Morgan, co-founder and CMO. P2Bi will also benefit from local investors and connections in the community. “Peter Adams (of RVC) was really instrumental in getting investors there and convincing them to come on board, Krista said.

Congratulations to P2Bi on closing their Series A, and best wishes helping small businesses grow while creating value in Colorado!

Tim Harvey is a Master’s of Engineering Management student at CU-Boulder and a regular contributor to the Rockies Venture Club. He has started a few businesses (nothing big yet) and most recently worked as a Fortune 500 marketing consultant with a neuroscience-based startup. Prior to that he was an investment advisor for individuals and corporations, holding FINRA Series 7 and 66 licenses.

5 Elevator Answers You Need to Have While Fundraising

It is awkward to ask people for money. Whether an entrepreneur or fundraising for charity– most people are not used to asking for cash from other people. They’re obviously not the same, though – investing in an entrepreneur (hopefully) produces a financial return. If you’re talking to an angel or VC and you feel like you’re just asking for charity, you need to get your head right. Your frame of mind determines much of your life and other people’s response to it, so feeling confident while raising money is obviously important.

If you feel like you’re asking for charity from investors because you’re not sure about your business, stop. Save everyone’s time and money and change something before you ask for money.

If you feel awkward fundraising but believe in your business, you have some room to work with. When raising money, your mindset should be closer to “This money will allow me to better grow my company and my investors will benefit”, than “I need this money so I don’t go out of business.” Both statements may be true, but focus on the positive. I’m not saying your business should only be chasing money – I believe the goal should be to create value for your customers, and if this is done well profit will follow.

Whether you’re nervous or not, here are five questions you need to be comfortable with. Think of them as “elevator answers” where you can get the main point across in 15-30 seconds, with the ability to expand on them as necessary.

1) How much is your company worth?

Simple question, not-so-simple answer for a startup.

There are a number of different ways to value your company, and the Angel Capital Association has a great post on methods here. The important thing is to use a few, because they take into account different factors and can demonstrate your ability to think from multiple perspectives. Be able to explain why you used the methods you did, as well as underlying risks, assumptions, and caveats in your models. It’s not as important to come up with the “correct” valuation (not a multiple choice test here) as your approach in finding it. You don’t really define your company’s value anyway; value here is determined by what investors are willing to pay for equity. Also keep in mind that valuation is not necessarily the most important thing on the term sheet, and that a high one means more growth necessary to generate the same return.

On a very basic note, know the valuation inherent in your ask. If you ask for $1 million for 20% equity, you’re valuing your business at $5 million pre/$6 million post. If you’ve taken the “college business plan” route so far and came to your valuation by “here’s what I think I need and how much equity I feel like giving up” go back to the drawing board.

2) What are you going to do with the money?

Be specific, and ready to explain each aspect of your plan. Whether it’s to fulfill a huge backlog of orders of widgets you’ve already been selling at a high margin (great!) or you need to hire programmers or a sales team, know the specific reasons and why they’re important.

3) Can you make this work with less?

Genentech is a great example – in 1976 they originally wanted about $3 million from Kleiner Perkins, and were persuaded to prove the concept first. A $250,000 investment helped accomplish this, with much less upfront risk for the entrepreneur and investors. Genentech had a $300 million IPO in 1980, and was fully acquired by Roche in 2009 for $46.8 billion.

Know all the finances. You should already have your current and projected numbers down pat, including revenue, EBITDA, margins, etc., as well as your hopes for an exit. Also, know as much as you can about your industry’s numbers and how other valuations were determined, such as with a financial multiplier or number of users. While many entrepreneurs like to think they’re the only startup in their space, even risk-prone investors like angels or VC’s get wary of moving into virgin territory. It’s useful to have industry comparisons, but be able to distinguish yourself and why you are more likely to succeed.

4) What does it cost to acquire a customer?

This is an important and often-overlooked metric but is increasing in popularity. What does it take to produce your product and get customers to pay you for it? Once you have a customer, do they stick around? Sticky customers lead to scalability.

5) What will this investment cost me?

Last, but perhaps the most important question: ask yourself – what will this investment cost me? For the investor, this is a straightforward answer: usually a check, or a check and time on a board. (On top of due diligence – your potential investors have to pay for that, too)

For the entrepreneur, it is not so easy to answer. Raising money is not making money, and it means you have more to build to generate the same return on value. As a startup ecosystem we have a tendency to celebrate dilution, but more funding is not always better. If you get a high valuation early and need more money before the company’s value has grown, you’ll be facing a painful “down round”, where the share price is lower on a subsequent round. Last quarter, (Q2 2013) 22% of the VC deals in Silicon were down rounds, while 14% were flat rounds – the un-sexy side of high valuations.

 

In the wisdom of Notorious B.I.G. – “Mo’ money, mo’ problems.”

Having excess cash in your pocket can lead to an unnecessary burn rate and not validating customer traction. Even successful entrepreneurs can fall into the over-funding trap, especially after exiting their first company with a windfall. If fundraising, diluting founder’s equity to the point where it impacts your motivation is dangerous as well.

Raise money only if you need to. If you do, start the process 6-12 months before you actually need it, and make sure you’re on top of your game.

 

Tim Harvey is a Master’s of Engineering Management student at CU-Boulder and a regular contributor to the Rockies Venture Club. He has started a few businesses (nothing big yet) and most recently worked as a Fortune 500 marketing consultant with a neuroscience-based startup. Prior to that he was an investment advisor for individuals and corporations, holding FINRA Series 7 and 66 licenses.

Venture Capital for Health Care companies doubles in 2013.

Health care companies are receiving a lot of attention from VCs this year and the trend appears to be increasing.  In the first two quarters of 2013 there were 272 deals completed in health care compared with 163 for the totality of 2012.

These trends in VC investment are a good harbinger for angel investors in health care who often rely on VCs to take on the next Series A round of funding.  When VCs are funding lots of health care deals it reduces risk for angels and provides additional opportunities for growth.

A lot of the growth is in areas that will be presented in RVC’s upcoming “Investing in Health Care” event  (Monday, September 9th 5:00-7:30pm) will be in the hot industry sectors including wearable devices, patient engagement, patient-to-physician, provider to provider and other technologies.  RVC is also presenting non-IT based companies including a new approach to curing breast cancer and is currently in due diligence on a break-through cardiac product that reduces some heart surgeries by as much as 80%.

health care IT vc fundingAn interesting trend in this growth is that consumer focused investments are growing at an even faster rate with consumer-focused technologies representing 112 deals for a total of $416 million – about double from last year while practice-focused technologies represented  56 deals totaling $202 million for the quarter.

Health Information Management companies received the most VC funding at $212 million while mobile health came in at $158 million.

According to a report on Q2 Venture Capital activity in health care funding by Mercom Capital Group llc, Consumer-focused companies specializing in apps, wearable devices & sensors, remote monitoring, patient engagement, rating/shopping, and social health networks for physician-to-physician, physician-to-patient and patient-to-patient were all involved in multiple funding deals this quarter, whereas medical imaging, data analytics and EHR/EMR companies were among the practice-focused technologies that received most of the attention this quarter.”

To see some of Colorado’s most promising angel-stage companies present for investment and to hear about some of the leading trends in health care, be sure to put Rockies Venture Club’s “Investing in Health Care” event on your calendar.  Click here for more information and to register.Register for Investing In Tech Companies event

 

Angels Love Health Care

0326_health-care-investing_400x400Angel investors put their money into all kinds of early stage companies with the goal of helping entrepreneurs and getting great financial returns.  There are misconceptions out there that angels shy away from health care investments, but nothing could be farther from the truth.

Health care investments can carry the traditional market and execution risks that any company has, but they can also have extraordinary regulatory risk if FDA approval for a product is required.  The FDA process can take years and millions of dollars to complete.

Most health care investments that Rockies Venture Club Angels look at don’t have FDA risk, or if they do, the process is minimal and takes only two years or less from the date of the investment. All FDA approvals are not the same and as a group we’re learning about the kind of FDA processes that we can accept as a part of an angel risk profile and those that are better left to large Venture Capital funds who have both the money to get through the process and the time to wait it out.

Angels typically like investments that can exit within five years or less.  There are a lot of Health Care companies that fit this profile.  One trend we’ve seen is that companies can exit earlier now since they are no longer required to build a sales channel as part of their proof of concept.  Once they can show that their innovation works and that people will buy it or that FDA Phase 1 trials are successful, they are ready for exit.

Smart founders will have a target list of acquisition targets identified before they even raise their first angel round.  By the time their concept is validated, they should already have relationships established with the major acquirers in their industry and be ready to negotiate a deal.

To see four examples of companies that can have profitable exits with 10x investor return in five or fewer years, check out the pitch presenters at this year’s “Investing in Health Care” event put on by Rockies Venture Club.

  • RXAssurance, Bob Goodman, provides a platform for patients and providers to keep each other informed about whether medications are being taken and that they are effectively treating the patient.
  • Six One Solutions, Ginny Orndorf, an innovative targeted method for blocking breast cancer.
  • LeoTech, Steve Adams, a wearable system to detect and report hydration in patients, athletes or others for whom hydration is important (ie. Everyone)
  • ExchangeMeds, Anand Shukla, rovides better ways for pharmacies to manage their inventories by sharing with others across a network.

To learn more about these companies and trends in investing in health care, you may want to consider attending the RVC “Investing in Health Care” event, Monday September 9 5:00-7:30 in Golden.  For more information, or to register for the event, please Click Here.

Rocky Mountain Innosphere Expands Cleantech Activities

Rocky Mountain Innosphere, an incubator focused on high impact scientific and technology startup companies, recently announced the launch of the cleantech focused “Innosphere at CREED”. CREED is the Colorado Center for Renewable Energy Economic Development, co-located with the National Renewable Energy Laboratory (NREL) in Golden, Colorado. Until now, Innosphere’s sole physical location has been in Fort Collins, Colorado, so the new location represents a significant geographic expansion.Innosphere_Circle
Innosphere’s move into CREED comes a few months after CleanLaunch, an incubator focused exclusively on cleantech, moved out. Four CleanLaunch companies transitioned into Innosphere during this time, including Fabriq, US e-Chromic, Solid Power, and EcoVapor Recovery Systems. Rob Writz, former Director of New Ventures at CleanLaunch, is now Innosphere’s Director of Clean Technology Programs. Clearly, Innosphere at CREED has enabled some continuity in the support available to former CleanLaunch companies, and it has preserved the presence of a cleantech focused incubator at CREED, which are both good things for Colorado’s cleantech industry.

Historically Innosphere’s industry focus has been much broader than CleanLaunch’s was, but according to Innosphere CEO Mike Freeman, Innosphere has always been committed to the cleantech space. This is reflected by the fact that Innosphere has nine current cleantech clients in addition to the four that recently came over from CleanLaunch. Innosphere at CREED reinforces this commitment to cleantech, and strengthens it through a closer relationship with NREL and NREL’s ecosystem of cleantech focused investors and partners.
Cleantech is an incredibly broad industry, so Innosphere has chosen four specific segments to focus on, including transportation technologies, building efficiency, electrical systems integration, and sustainable materials. Even these segments are extremely broad, but they are still narrower than the cleantech industry as a whole, which allows Innosphere to provide deeper support than they could if they tried to cover every clean technology.

Overall I believe Innosphere’s move into CREED represents a positive development for cleantech in Colorado, in part because it brings a new organization and some fresh eyes to explore ways to help local entrepreneurs take advantage of all that NREL has to offer. Sometimes it helps to shake things up a bit when tackling something as challenging as commercializing new clean technologies, and combining the substantial organizations of NREL and Innosphere might open up new opportunities and new paths to funding for startups that weren’t available, or weren’t easy to find, before.
As a next step, I’d love to see Innosphere open up a space for cleantech entrepreneurs in Boulder. Given the interest in co-working spaces there, which I’ve experienced first-hand at Colab Boulder, I don’t think they’d have a hard time filling it with paying tenants. Impact HUB Boulder, a co-working space for those trying to create a positive impact, comes closest to meeting this need today, but I think there would still be demand for a space dedicated to cleantech. I’m sure Innosphere has its hands full integrating its new CREED site, so I don’t expect to see any new sites opening soon, but I’ll keep my fingers crossed.

Jay Holman is Principal of Venture to Market LLC, a Boulder based consultancy providing go to market services for new ventures in the cleantech industry.

Biz Girls 2013 Recap

 

BizGirls CampEvery year Biz Girls gets better and better.  We’ve evolved from the first year’s amazement that the girls could actually complete the program and get their companies live within the tight time limits of the program to this year’s re-branding of the program from “Biz Girls Camp” to “Biz Girls CEO Development Program.”

While the Biz Girls CEO Development Program works on the same values and principles as the “camp”, we’ve raised the bar on what is expected of the girls – and interestingly – they have raised the bar on what is expected of us.  In response to this, we implemented three new parts of the program this year.  We couldn’t have done this without the volunteer effort of Louise Campbell-Blair, who joined us as Biz Girls’ CMO to get our marketing program in place, but who ended up doing much, much more.  The three new programs include a Mentorship program, advanced workshops and sponsorships to help with tuition, allowing us to achieve our diversity goals.

Mentorship Program:  Each girl is given the option to have a mentor who will work with them after the program has completed.  In the past we’ve had challenges with getting continuity and providing a way for the girls to continue their businesses on into the school year.  We’re hoping that by providing a mentor who can give advice, help set realistic goals and monitor progress, will improve the chances that these young companies will continue to grow and thrive well after the summer ends.

Advanced Sessions in Web Design, Pitch Development and SEO.  This year we brought in a number of experts who helped by offering afternoon programs on three of the program days with advanced sessions covering web design, pitch development and marketing the web sites.  The results were amazing.  The pitches this year were great and included full powerpoint presentations.  The web sites were much more sophisticated and filled out with graphics and logos, especially in Boulder where the girls decided in their strategic plan that developing logos was important to them.  And finally, the SEO worked better than anyone had expected with Rachel from casetaste.com getting her first order the day after the program ended!  Rachel ended up on a CBS TV program as a result of her success!

Finally, we added a program for donors to sponsor a Biz Girl.  This was a tremendous success as it allowed us to pursue our objectives for diversity and make sure that no girl was denied a spot in the program because of an inability to come up with the tuition.  Thanks so much to the generous individuals who supported these girls!

For those of you who haven’t been involved, here’s a summary of the companies that we formed this year:

Denver:

Casetaste.com
Denverdusting.com
Tealpoppies.com
Tenniscoachfinder.com
Upcyclethreads.com
Boulder:
Writerslam.com
Bocodesigns.com
hannimals.com
inspiralook.com
fandomcentral.com

Sun Number – Colorado Solar Analysis Company

Guest Post by James Lester, Managing Consultant with Cleantech Finance

Despite some well publicized difficulties for cleantech investors, one area in particular has been a very rewarding place for investors to put their money. An innovative business model known as third-party ownership, combined with the falling price of solar modules, has led to a boom in the US solar market. Residential solar installations in 2012 reached 488 megawatts, a 62 percent increase over 2011 installations. According to GTM Research, a solar photovoltaic system is installed every four minutes in the U.S.  A Colorado company is poised to take full advantage of this booming market, by providing unique data that give homeowners and solar installers a clear and simple assessment of a building’s solar potential.

sun number

Sun Number, co-founded by David Herrmann and Ryan Miller is building off a $400,000 grant from the Department of Energy’s Sunshot Incubator, awarded last year to develop a tool to make it easier, faster and less expensive for both homeowners and solar companies to analyze the solar potential individual properties. The tool, known as a Sun Number Score, engages consumers by providing a solar analysis of their home or office building with an easy to understand score between 1 and 100, and then putting them in touch with a local solar professional. Solar professionals use the tool to reduce the costs of customer acquisition.

The DOE’s SunShot program established a new $10 million competition last year for innovative, sustainable, and verifiable business practices that reduce what’s are known as “soft costs”. The cost of acquiring customers and designing systems to fit their homes represents about 45% of all balance of systems costs in the U.S. rooftop residential solar market, according to the DOE. These high marketing costs, by some estimates as high as almost $5,000 per residential customer, create barriers for both the potential solar energy consumer and the solar installer. While soft costs have fallen as the solar industry grows, experts believe that further declines must occur in order to for solar to reach grid parity with other energy sources.

A large part of these soft costs results from several different issues with the acquisition process. In some cases, an on-site visit occurs by a professional to estimate the solar potential and energy requirements/capability of a residential or commercial rooftop. This process is not only costly, but often slows down the consultation process with the customer by several days. In many other cases, professionals use Google Earth or another imagery based program to try to estimate the size and location of the system. This often results in inaccurate readings due to guesses on nearby shading and rooftop pitch angles. These imprecise estimates lead to poorly designed systems and reductions in energy savings benefits.

This is where the market opportunity for Sun Number lies. The company streamlines the solar installer’s customer acquisition process. Utilizing high-resolution aerial data, advanced GIS technology and proprietary algorithms, Sun Number reduces these soft costs by providing an accurate, inexpensive, and quick analysis of the property allowing salespeople to screen out unsuitable properties on first contact. Using only a street address and Sun Number’s easy to use interface, solar companies can immediately obtain information about a property’s solar suitability that was previously only available if they sent an employee on-site for a lengthy inspection.

“The trend in solar installations is that soft costs are increasing as a percentage of overall costs, in part due to the labor-intensive analysis necessary to evaluate the solar potential of a rooftop. Not only is it costly, but it slows the sales process to a crawl as both the provider and the customer are forced to wait for their schedules to align and the weather to cooperate. Our goal was to develop a tool that eliminates those high costs and allows providers to get that information instantly,” said Herrmann.

houses

The Sun Number Score represents the solar suitability of a building’s rooftop on a scale from 1 to 100, with 100 being the ideal rooftop for solar. Using a proprietary data set, Sun Number determines the solar-suitable square footage of a building by taking into account factors of importance to solar installers, including:

  • The pitch of every roof section
  • The orientation of every roof plane
  • Shade created by surrounding buildings that might impact solar potential
  • Shade created by surrounding vegetation that might impact solar potential

Additionally, Sun Number Scores will take into account regional factors such as:

  • Average sunshine for the market
  • Atmospheric conditions that may impact solar potential
  • Availability of local solar incentives
  • Regional cost of electricity for calculation of solar savings

While Sun Number considers themselves a ‘data-focused company, the company has much in common with the new wave of energy-related technology, dubbed ‘cleanweb’, which is increasingly getting the attention of venture capitalists for its promise of applying Internet business models and “big data” to clean energy. While many investors have been frightened from investing in ‘cleantech’ companies, this area in particular is attracting a lot of attention.

The Cleanweb, coined by venture capitalist Sunil Paul, describes technology companies that leverage the surge of available data in combination with the internet, social media and mobile to address society’s current resource constraints. When asked about the market potential of cleanweb, Paul said, “The cleanweb is the ability to distribute software and services on top of that infrastructure that makes it more efficient, and that is the next big evolution in cleantech.”

Rob Day, a partner with Black Coral Capital sees that there is significant interest from the venture capital community around the cleanweb business models and system integration. He describes these models as (sometimes financial-oriented, sometimes web-oriented, sometimes software and controls oriented, sometimes deployment-oriented, sometimes just plain services.

Sun Number has found a unique way to deploy rich data sets to reduce costs and increase the growth of the enormous market of solar rooftop installations. Thus far, Sun Number has processed data on over 7 million buildings in 12 metro areas.  The company plans to expand to more cities in 15 to 18 states that are best suited to the growing solar market. The company is also developing a customer focused interface, or ‘dashboard’ that will incorporate the next generation of Sun Number scores, which will include local economic incentives and changing installation and permitting costs. The company plans to implement a dynamic scoring system, which will notify consumers if their Sun Number Score has changed due to recent changes in policies or market conditions.

Herrmann comments, “It is estimated that the solar industry spent over $200M on residential customer qualification and acquisition in 2012, much of it on inaccurate and expensive solutions.  Sun Number is helping fuel the solar market growth by making available accurate low cost data that identifies properties and people that are most likely to purchase solar.”

If you would like to learn more about Sun Number, visit their website or contact David Herrmann at david.herrmann@sunnumber.com

 

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White Paper Outlines Why Venture-backed Companies Should Not Rely Solely on Bulge Bracket Firms When Selecting IPO Underwriters

With the upcoming Exit Strategies Workshop, this press release is a timely bit of research about how to go about selecting an underwriter for your IPO.  With IPOs becoming a possibility in Colorado again, as evidenced by recent offerings by Rally Software and Noodles, this is information we should all take into account when planning Angel and Venture Exits.

To learn more about planning for an exit strategy and why it’s important to have your exit planned before you raise your first round of Angel or Venture Investment, consider participating in the Exit Strategies Workshop on August 20th, hosted by Rockies Venture Club.

 

PRESS RELEASE

Aug. 1, 2013, 11:11 a.m. EDT

Keating White Paper Posits that Venture Capital-backed Companies Choose IPO Bookrunners Based on a Fatal Flaw

 

GREENWOOD VILLAGE, Colo., Aug 01, 2013 (BUSINESS WIRE) — Keating Investments, LLC, the investment adviser to Keating Capital, Inc. KIPO +1.67% , has released a new white paper titled “The Fatal Flaw in Underwriter Selection by Venture Capital-backed Companies: Why Issuers Should Not Rely Solely on Bulge Bracket Bookrunners.” The paper, authored by Timothy J. Keating, President of Keating Investments and CEO of Keating Capital, outlines the reasons that most venture capital-backed companies choose “all-star” IPO underwriters and why these underwriters often fail to produce all-star results.

Keating’s paper argues that it is human nature to assume that bigger is better, but that isn’t necessarily the case when venture capital-backed companies choose lead underwriters for their initial public offerings.

Mr. Keating states, “Just as was the case with the popular book/movie Moneyball, most venture capital-backed companies choose “all-star” IPO underwriters based on flawed premises that often fail to produce all-star results.

“We believe the same groupthink forces are at work regarding underwriter selection for venture capital-backed IPOs, the result of which is an effective oligopoly of three investment banks who, on a combined basis, have served as the lead left bookrunner on 59% of the 148 venture-backed IPOs that have been completed from January 1, 2010 to June 30, 2013 (venture-backed IPOs represented 30% of the total 499 IPOs during this 31/2-year period). This market concentration has contributed to sub-optimal outcomes for these issuers and, because of the central role that IPOs play in small business capital formation, causes distortions in capital allocation, and ultimately negatively impacts the returns to venture capital investors.”

The white paper provides a comprehensive overview of the price and non-price dimensions (prestige and analyst coverage) that issuers use in underwriter selection and outlines the “myths and realities” of analyst coverage which has led to a bookrunner oligopoly.

In the conclusion, the white paper argues that small-cap issuers should include non-bulge bracket firms as bookrunners and select a blend of underwriters after having carefully considered the following:

— Non-price dimensions of underwriter differentiation (prestige and analyst coverage)

— Risk of size misalignment between the market caps of venture-backed companies and the institutional sales, trading and research franchises of bulge bracket investment banks

— Risk of pseudo analyst coverage from all-star analysts who have a very high marginal cost to forego coverage of an existing name in favor of a new IPO stock

— Increasing trend in the rate of “unsuccessful” IPOs and the potential underlying causes

— Drain on management’s time imposed by the need to conduct a non-deal road show after the IPO in order to get the stock into the hands of its natural long-term owners

“After such careful consideration then, and only then, choose the bookrunners,” Mr. Keating concludes.

To download the entire white paper, go to http://keatingcapital.com/newsroom/white-papers/.

About Keating Investments, LLC and Keating Capital, Inc.

Keating Investments, LLC (www.KeatingInvestments.com) is a Greenwood Village, Colorado-based SEC registered investment adviser founded in 1997, and the investment adviser to Keating Capital, Inc. KIPO +1.67% . Keating Capital is a publicly traded Business Development Company that specializes in making pre-IPO investments in emerging growth companies that are committed to and capable of becoming public. Keating Capital provides investors with the ability to participate in a unique fund that allows its stockholders to share in the potential value accretion that we believe typically occurs once a company transforms from private to public status.

To be added to Keating Capital’s email distribution list to receive quarterly newsletters and other announcements, go to www.KeatingCapital.com/contact.

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SOURCE: Keating Investments, LLC