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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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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130801006201r1&sid=cmtx6&distro=nx

SOURCE: Keating Investments, LLC

Investors are always concerned about balancing risk with potential rewards when making angel investments.  Recently P2Bi was able to close their deal quickly by adding warrants as a “sweetener” to the deal for early first round equity investors, resulting in a quick close to their deal minimum and the early round warrant deal closes on August 8th.  

The Deal

Early investors who committed to the first round of P2Bi’s Series A funding received warrants for up to 50% of their investment amount with half expiring in December 2013 and the other half expiring in June 2014.  The warrants allow the investors to purchase additional shares at the original offering price of $1.50.

So, what does this look like to an individual investor? 

Someone investing $50,000 would have the option to purchase up to $25,000 worth of additional shares at the original offering price of $1.50 up to December 2013, or if that was not exercised, they could purchase up to $12,500 worth of shares by June 2014.

Why is this beneficial? 

In every deal there is an execution risk.  The deal looks great, but investors wonder how the company will do once the investment has been made.  The warrants allow investors to observe how well the company performs against its benchmarks and to decide whether they want to make an additional investment at the same rate once the company proves itself and the risks are reduced.  This is always attractive to an investor since later stage funding rounds where risk is substantially reduced typically will have a price that is as much as double or triple the original investment cost per share.

For more information about how this deal was structured you can contact Bruce Morgan at P2Bi (bmorgan@p2bi.com)

title picPost by:  Adam Holcombe

On July 9, another strong showing from the members of Rockies Venture Club appeared at a monthly RVC event in downtown Denver. The discussion included a number of the startup community’s elite members to include: Erik Mitisek – CEO of Colorado Technology Association moderated the event which featured Chris Onan – of Galvanize, Andrei Taraschuk – of Boulder and Denver New Tech, and Jenny Slade – of National Center for Women & Information Technology (NCWIT).

Chris Onan opened up by defining Denver’s current grow engine as more arriving millennials than in any other US city. This growth in the city will ultimately lead to increased quality and quantity of ideas going forward. Chris also mentioned that a potential problem facing Denver is that there is a lack of strong tech bellwethers to build the community around. However, in his own words “money finds good ideas”. This challenge goes out to those looking to pave the way from idea creation to the launch of a new value-creating venture. Chris also highlighted a key point that leads entrepreneurs to success “you must give to get”. This important concept highlights the importance of patience as yet another virtue necessary for entrepreneurial success.

Andrei Taraschuk was next to speak about the business ideas that have been most prevalent in the local community as of late. Andrei has seen more hardware along with Smartphone related devices recently due to the increased usage. These “small screen” devices are rising in popularity across the globe, and “growth is expected to continue at a 10% compound annual growth rate through 2016”1.  Andrei also highlighted that it takes a long time to build a community for start-ups and explained the importance of fostering the relations between entrepreneurs and venture capitals. Andrei highlighted an interesting dynamic between himself and Chris Onan, as Andrei had pitched a business idea to Chris as a potential investor about six years ago and Chris didn’t invest at the time. Andrei’s key point was to focus one’s efforts on building a business and don’t worry about the cash. He, along with other members of the panel, went against the conventional wisdom of viewing the attraction of capital, as definite start-up success by describing, “Don’t celebrate dilution”.

Jenny Slade gave the closing comments. Her data driven comments were core to what drives her decisions to play a significant role at NCWIT. She forecasted significant growth in tech jobs in the next 10 years with only 18% of current computer science majors being female. This undoubtedly leads to her next point that “we are missing half of the good ideas”. Her true goal is to ensure the startup community leverages diversity and all that women bring to an organization. Many tend to agree as the change in business dynamics lend more favorably toward collaboration and multi-tasking, women are viewed as more equipped to keep pace than their male counterparts (For More). One key point Jenny made was that women tend to await an invitation versus interject themselves into a start-up. In her words, one clear way to keep women from applying to a job is by putting “ninja” in your job description as women are generally less inclined to desire to be viewed as a ninja versus men.

This successful RVC event is yet another example of how a bonded community can truly leverage its strength in strong, local organizations to enhance growth and value creation. The key concepts included give in order to get, build the business and don’t worry about money, and finally don’t miss out on half the good ideas by not inviting women into your organization. I truly appreciate the “lessons learned” from a group of true business leaders in the community, and I wanted to share the insight gained from the event. I look forward to being apart of more RVC events like this in the near-term.

 

About the Author – Adam Holcombe is a partner of Cohort Capital, a Venture Capital Firm in Denver featuring a group of young professionals out of DU and CU’s MBA programs coming together to find and fund great opportunities. Although we source our deal-flow from across the country we have a love for Denver and the regions budding entrepreneurial ecosystem. We believe the city is poised to become one of the country’s top regions for start-up activity.

 

1: http://www.fiercemobileit.com/story/global-smartphone-market-growth-estimates-vary-among-research-firms/2013-06-03

taxi

A detailed, focused, and feasible go to market strategy is a critical distinguishing feature between the majority of startups that fail and the few that achieve great success.

As an example, imagine you are an angel investor listening to a pitch from a company developing an aftermarket add-on to improve automobile gas mileage. Its go-to-market strategy consists of identifying early adopters of efficient automobile technologies and targeting them at auto shows in environmentally conscious and heavily regulated states like California and Massachusetts. The company will sell products directly through its website while building relationships with aftermarket auto parts chains and independent retailers. The emphasis will be on young professionals, targeted through a massive web-based campaign to build awareness and drive adoption. Conversations with early customers will inform product improvements and enable the startup to refine its marketing pitch.

With a few minor changes, this generic and high level go-to-market strategy could apply to almost any technology in any market. As an angel investor, you’ve heard it many times before, and you’re skeptical: activities like “identifying and targeting early adopters”, “building awareness”, and “driving adoption” are easy to talk about but difficult to do well.

Now imagine you are an angel investor listening to another company that is at the same stage of development for an almost identical product. In this hypothetical example, the company tells you that it has identified automobile emissions reduction programs in three major US cities, with the largest in New York City (NYC).

NYC’s program offers attractive rebates for devices that reduce particulate emissions in cars. Although not the primary function of the startup’s device, the company was able to tweak its design slightly to take advantage of the little-known incentive. The company found a chain of aftermarket auto parts dealers in NYC that cater to environmentally conscious car owners, and it has engaged them in discussions about the product’s design and price point while exploring the potential for a distribution agreement. Additionally, a “green” NYC cab company is interested in advertising the product on the roofs of its cabs in exchange for discounts on the startups’ devices.

Based on the attractiveness of the market, the startup has decided to launch its product in NYC and quickly follow with launches in other major cities, starting with the other two that have automobile emissions reduction programs. It will use what it learns in NYC to refine its rollout in the other cities, which are already being planned to coincide with the ramping of the company’s manufacturing capabilities.

Which company would you have more confidence in as an investor? The second company is already doing all of the things the first company was only talking about: it has identified retail partners and early adopters, it has located the market where its offering has the lowest cost to consumers (thanks to the rebates), and it is focusing on a small geography where it can maximize the impact of every dollar spent on sales and marketing by taking advantage of network effects. It has a well-defined expansion plan linked to its manufacturing capabilities, so that it can grow at a fast but manageable pace. As a potential investor, even if you don’t agree with the plan, you know the company is thinking strategically and you have a starting point for suggesting changes.

Putting together a go-to-market strategy is easy, and every entrepreneur has one. Often it relies on the development of a product so great that it essentially sells itself: all the startup has to do is build it and let people know they can finally buy it. By the time entrepreneurs in this mode start thinking about the details of their go-to-market strategy, competitors may have already established themselves in the most attractive market segments and with the most valuable partners. This will make every future sale more difficult, because the startup is forced to pursue customers and partners less interested in its products. Additionally, if a pivot is necessary, entrepreneurs more focused on the technology than the market may not realize it until they have wasted major time and money. The final drawback of this approach is that savvy investors recognize its limitations, and that could make raising money difficult.

In an environment where the vast majority of startups fail, entrepreneurs with such a poorly defined go-to-market strategy are taking on a significant and unnecessary risk. How do you know when your strategy is detailed and focused enough? Ideally, you should be able to list the top 15-20 potential customers (for business to business startups) or the top 3-5 channel partners (for consumer focused startups) based on the features that distinguish your offering from the competition. You should be able to make a compelling argument about why these customers are more promising than those in other market segments, and you should be able to describe how you’re going to sell to them and how you will move beyond those initial customers to the broader market.

It takes time to figure out these details, so it is important to start early. It is much easier and faster to change an existing plan based on new information than to develop a plan from scratch at the last minute. With so many ways to fail, it would be a shame to let one so predictable kill your company.

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.

Visualization Lab, ESIFSince 2010 the National Renewable Energy Laboratory (NREL) has offered up to 40 hours of free assistance to U.S. based small businesses with fewer than 500 employees through its NREL Commercialization Assistance Program (NCAP). The Program is designed to “help emerging companies overcome technical barriers to commercializing clean energy technology”, and it does so by providing limited free access to NREL’s facilities and the technical expertise of its scientists. With the imminent opening of NREL’s new Energy Systems Integration Facility (ESIF), the scope of capabilities available to participants in NCAP and NREL’s other industry partnership programs is about to take a giant leap forward.

At its most basic level, ESIF is a collection of 15 laboratories covering everything from power systems integration, to electrical and thermal storage, to smart power, to materials characterization, to manufacturing, and more. You really have to see ESIF in person to fully appreciate the scale of the facility, and during my recent tour I was struck by the huge amount of space available for equipment testing and systems analysis. The only facility in the U.S. equipped with megawatt-scale (1,000,000 watts) test capabilities, the space is designed for large scale equipment and big experiments. The labs are interconnected with two AC and DC ring buses that allow experiments to expand beyond the walls of a single laboratory, and the facility has a SCADA system in place to monitor and control it all. Petascale computing at the on-site high performance computing data center and powerful data visualization tools round out the facility’s capabilities. The image above shows NREL Senior Scientists Ross Larson and Travis Kemper examining a 3D molecular model of PTMA film for battery applications in ESIF’s Insight Collaboration Laboratory.

The best news is, these laboratories are not just for NREL’s scientists: NREL actively encourages partnerships with industry that provide access to the lab’s facilities and technical experts. If you are a cleantech entrepreneur and haven’t yet familiarized yourself with NREL’s capabilities and industry partnership programs, it’s time to do so. Colorado based startups would be particularly remiss if they didn’t explore NCAP, the free commercialization assistance program mentioned above. The idea is pretty simple: if you have a technical or market related challenge in an area where NREL has some expertise, and you have a project that requires 40 or less NREL labor-hours to complete, you may be able to get support for the project for free.

According to Niccolo Aieta with NREL’s Innovation and Entrepreneurship Center, about 40% of companies interested in an NCAP project actually undertake one. The other companies typically find that their challenges aren’t a great match for NREL’s capabilities, or they have an issue that is too large or complex to be resolved in 40 labor-hours. However, don’t rule out a project until you’ve spoken to Dr. Aieta about the details, even if you don’t see relevant capabilities on NREL’s website (which I’ve found a bit challenging to navigate). Also keep in mind that projects are limited by the amount of time NREL employees can spend working on them, not by equipment or lab time. So if you need to leave a piece of equipment in place to test for a few weeks, then want some quick help evaluating the results, you won’t be excluded automatically due to the long test time.
If NCAP doesn’t work for you, and you are able to pay for support, NREL also works with companies through technology services agreements (TSA) and cooperative research and development agreements (CRADA). These are flexible arrangements that are customized on a project by project basis, so the best approach is simply to contact NREL and start a discussion. One nice feature about these programs is that partners pay NREL’s costs with no markup, which helps keep out of pocket expenses in line.

Besides the obvious benefits of working with a local world-class laboratory, there are additional reasons to engage with NREL that may not be apparent at first glance. Venture investors are still skittish about cleantech, thanks to the industry’s capital intensive nature and the long, risky time to market for cleantech innovations (note the recent rebranding of the Cleantech Fellows Institute to the Energy Fellows Institute). Increased emphasis is being placed on the value that large, well-established energy equipment firms can bring as strategic investors in cleantech startups. Clearly, the more visibility a startup can get with these companies the better, and NREL’s laboratories are great places to rub elbows with their technical staffs. ESIF in particular, with its unique capabilities related to megawatt-scale equipment and grid-scale integration, will be a magnet for large energy equipment companies and should present great opportunities for small local companies to engage with them.

Yes, the cleantech industry is difficult, but that only increases the value of the deep technical and market expertise that entrepreneurs can find in Colorado. Investors and entrepreneurs alike should take notice as the state’s cleantech resources experience a major expansion when ESIF comes online.

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.

Technology Talent Shortage:  Is the solution education, immigration or recruiting women?

tech picAttend any tech event in Colorado and you’re sure to walk away with the impression that there is a huge tech talent shortage here.  Even though the startup scene here is collaborative and cordial, things can get competitive when companies are looking to recruit talent.

In a time of high unemployment, how do we explain this shortage of tech talent?  One thing we know is that the shortage is not limited to Colorado – I am hearing of shortages all around the country.

Some people think that the issue is that we are not turning out enough educated people to fill these positions, yet according to research by the Economic Policy Institute, “For every two students that U.S. colleges graduate with STEM degrees (science, technology, engineering, and mathematics), only one is hired into a STEM job.”   At issue may be not that we are not turning out enough graduates, but that they aren’t graduating with the skills that they need to succeed in the job market.  In fact, the Economic Policy Institute reports that only about a third of the IT workforce has an IT-related college degree, 36 percent of IT workers do not hold a college degree at all and only 24 percent of IT workers have a four-year computer science or math degree, so maybe college education isn’t the answer.

Are programs like Galvanize G-School that focus on quickly educating people in real-world application development taking over and producing more cost effective workers?  The G-School guarantees a $60,000 job within three months of graduation or they’ll give your tuition back.  That’s a pretty confident offer – especially since the tuition is $20,000.  That’s a lot to give back in a refund, but it’s about a tenth of the cost of pursuing a full time private college education these days, and the job prospects are better, so I predict we’ll be seeing more programs like this in the future.

Is there really a shortage of skilled labor, or is it an economic issue? 

Another way of looking at the issue may be that there are plenty of skilled people in the US, but that there are better opportunities outside of IT that may be more attractive.  When U.S. talent is not actively entering the tech job market, the international market jumps in to fill the gap. Here are some interesting statistics (also from the Economic Policy Institute):

1)      The annual number of computer science graduates doubled between 1998 and 2004, and is currently over 50 percent higher than its 1998 level, so we’re turning out lots of grads.

2)      Immigration policies that facilitate large flows of guestworkers will supply labor at wages that are too low to induce significant increases in supply from the domestic workforce.

3)      Immigrant worker visas have more than doubled since 1998.

4)      52.7% of STEM graduates who do not pursue technology careers cite pay, promotion and working conditions as their reasons for pursuing work in other areas.

5)      Computer programmer salaries have remained relatively flat in real terms between 1994 and 2010.

These statistics would lead one to believe that immigrant workers are taking all the IT jobs, but on-the-ground experience doesn’t seem to support this, at least in Colorado where we’re seeing high demand and relatively high wages for developers.  The statistics suggest that all or most sufficiently trained U.S. workers are getting work in tech if they want it and that international labor is filling the gaps while also holding down wages in a Thomas Friedman-like flattening of wages globally for similar work.

What about women in tech?

Here’s the big secret in growing the tech labor force – hire women.

Well – if you can get them, it’s great for business.  Tech companies with women have been shown to use 40 percent less capital and be more likely to survive the transition from startup to established company. (From Cindy Padnos, Illuminate Ventures: “High Performance Entrepreneurs: Women in High-Tech,” 2010.)  Nationally, the Department of Labor estimates that our economy will add 1.4 million technology-related jobs to the workforce by 2020; however, at current graduation rates, we’ll produce only enough qualified candidates to fill a third of these jobs. In Colorado, there will be about 4 tech jobs for every 1 graduate with a bachelor’s degree in computing.  Recruiting more women to IT programs can at least double the amount of available talent.

Here are some interesting numbers from the bureau of Labor Statistics. (Department of Labor Bureau of Labor Statistics, Current Population Survey, 2012; Dow Jones VentureSource, 2012)

  • 26% of U.S. technology jobs are held by women
  • 20% of U.S. software developers are women
  • 11% of executives at U.S. venture-backed startups are women

Conclusions – if you’ve got a tech labor shortage, then you need to address all three areas.  Educate your workforce to be able to do the jobs we need to get done regardless of whether it’s a four year or master’s degree or a six month program.   Continue to recruit international labor to fill job gaps.  Think about how many foreign students who earn masters and PhD degrees that we’re sending back home and consider where to prioritize immigration policy.  Educate, recruit, hire and retain a diverse workforce with gender equality to improve performance and meet talent needs.

To learn more about technology investing, staffing and education in Colorado and around the country, consider attending Rocky Venture Club’s “Investing in Tech Companies” event coming up next Tuesday, July 9th in Denver. Register for Investing In Tech Companies event

 

tech picSometimes it seems as though all startups are tech companies.  When they are in early stages, we talk about “technology risk”, even if that means figuring out how to outsource your supply chain and get your product manufactured overseas by someone else.  It’s not really “technology”, especially if the item is something that is being sewn or otherwise assembled by hand.  We talk about technology risk in the sense that every company has to figure out how to make and deliver whatever product or service it sells. 

In the original Greek root “techne” is about making stuff.  It refers to craft or art, so it makes sense that every company has to make something, even if what it makes is Intellectual Property or a service that can’t necessarily be held in your hand.

Another reason people seem to think that every company is a tech company these days is that you pretty much can’t start a company without using a lot of technology to do it.  Regardless of whether you have programmers setting up an e-commerce site or creating a SaaS application, you’re likely to be using technology in setting up and running your company.  Those companies that don’t use technology probably won’t have the ability to scale and grow big in the way that Angel and VC investors are going to demand.  Since Rockies Venture Club only deals with companies that can scale and provide a significant return to our investors, we don’t see a lot of non-tech companies.

Some people have argued that no companies are really tech companies any more.  Everyone uses technology to create and deliver their product or service, so it’s no longer informative to distinguish some companies as tech companies and others as non-tech.  The real company behind the technology may be providing banking or financial services, wayfinding on your iPhone, tracking your workouts and fitness levels, providing entertainment through games or graphics and so on.  Even though your company may be a SaaS (software as a service) tech company, ultimately it’s probably providing a non-tech service to someone.

A lot of the companies we look at are healthcare tech companies.  These companies are either dealing in healthcare IT where they are providing some kind of information or communications system to make healthcare delivery more efficient, or they have some new technology to deliver drugs, dispose of toxic waste, or other healthcare related operations.  Are these “tech companies” in the same way that IBM is?  Probably not, yet we still call them tech companies.

Ok, so are ALL venture class startup companies tech companies or are NONE of them tech companies?  When it comes down to venture capital and how decisions are made, the fact that a company is a tech company or not really doesn’t matter.  VCs have expertise in highly specific areas, so if you have an IT data storage company (tech company) that will be of interest to certain types of investors whereas if you have an e-commerce company, that may appeal to others.  Within the realm of “tech companies” e-commerce used to be big prior to 2001 and now it constitutes just about 4% of VC investment.  SaaS and other tech fields have eclipsed this number and comprise the bulk of VC investment these days.  So my conclusion is that it doesn’t much matter any more whether you have a”tech” company or not, it matters what you do and who is interested in investing in that.

To learn more about technology investing, staffing and education in Colorado and around the country, consider attending Rocky Venture Club’s “Investing in Tech Companies” event coming up next Tuesday, July 9th in Denver.  Register for Investing In Tech Companies eventhttp://rockiesventureclub.wildapricot.org/Default.aspx?pageId=1349467&eventId=698722&EventViewMode=EventDetails

Guppy Tank LogoPicture this: Your company has a proven business model, consistent recurring revenue, and an obvious path to growth. You’re making money, but need a cash infusion to get to the next level. You aren’t poised to grow the 10-30X VC’s or angel investors might be looking for, and while you have money coming in you don’t have the balance sheet for a bank loan. What do you do?

Guppy Tank, coming to Galvanize in Denver on September 12th, might have an answer. Born from the idea of TV’s Shark Tank, Guppy Tank is a 1-day alternative lending/investing event to help companies that have revenue but need cash. I was able to talk with Founder and CEO Darrin Ginsberg on the phone, and then catch up with COO Jon Engleking after he was on the Venture Banking panel hosted by Rockies Venture Club that evening.

Alternative lending has a few advantages over more traditional methods of acquiring funds. While venture capital may be the sexy way to raise money, only around 1% of companies ever do, since most are outside of the growth potential VC’s are looking for. Even for the businesses in their target range, we’ve seen the Series A crunch, which can fall around the time that companies have proven their model but aren’t profitable yet. Angel investors as a group fund a wider range of businesses, but they’re looking for similar things as VCs. Bank loans mean the entrepreneur gets to keep their equity and upside potential, but they typically loan against either hard assets, or profitability with a strong balance sheet  – neither of which are common in a startup. While alternative lending may involve higher interest rates than a bank, it can fill a gap in the funding landscape for promising companies that are making money but couldn’t get loans otherwise.

The Guppy Tank team has seen success with this concept before. Their first company in the space, Super G Funding, provides debt financing for credit card processing companies (ISO’s), again lending against residual revenue streams. After getting that up and running, BizCash was next, operating on a similar model of revenue backed installment loans, and serving a wider variety of businesses than Super G Funding. 

Guppy Tank is a combination of the ideas from their other companies and the show Shark Tank. Although the events aren’t televised, they are similar in format, hosting 7-10 entrepreneurs to pitch throughout one day. Denver will actually be their first event open for the public to watch. There are a few differences from the show – Guppy Tank will make decisions as a group, so you won’t see them fighting against Mark Cuban for deals. Instead of having a set panel of investors, Guppy Tank invites local angels to participate in events for each city they host events. Although they’re primarily oriented toward lending $25,000-$500,000 per event, The Guppy Tank is also open to making minority equity investments. They’ve hosted events in both Newport Beach and Los Angeles, CA and now have plans to expand to the rest of the country.

“Denver has good vibes,” Jon said at the RVC event. Maybe that’s why they chose Denver as the first event outside of California, ahead of Chicago and New York. They have chosen Denver for investments in the past, as Darrin is an investor in INCOM Direct, SupportLocal, and Zen Planner. Since SupportLocal offices out of Galvanize, they had already had a good experience, and were excited to host the event there.

Applications are due no later than September 8th 2013, but space is limited so make sure to get applications in early. Since the event open to the public, (and just before Denver Startup Week) if you just want to watch, come by Galvanize on September 12th!

 

Article by Tim Harvey, Regular Contributor to the Rockies Venture Club Blog