Blog: 2011 summer speakers

Aug
12
2011
By Avery Faller

Speaker: James Geshwiler
Company: CommonAngels

James Geshwiler HeadshotIn his talk to the YEI Fellows James Geshwiler spoke about a variety of issues from the inner workings of an angel investor fund to why President Obama wants more entrepreneurs. Perhaps the most interesting topic that James touched upon was that of areas of potential risk and return in a startup, which investors (like James) use to evaluate your company from your pitch through due diligence. 

While doing due diligence on a large number of companies, James uses a classification system that he learned while he was an analyst for the CIA.  Originally used as a tool to help think about potential Soviet espionage and state secrets, this system is comprised of three categories: Secrets, Mysteries, and Imponderables.  Placing information into one of these categories allows the evaluator to recognize which pieces of information are attainable and which are not, saving time and increasing accuracy.

Due Diligence with a Grain of Salt (or Two)

CommonAngels LogoSecrets are pieces of information that are not immediately apparent, but do actually exist.  Investors like to see startups that have exclusive rights to proprietary information, like patents and algorithms—in other words, “secrets.”  These give the company a distinct advantage over potential competitors.  For example, the hypothetical company Nacho Cheese X, which manufactures and sells nacho cheese, keeps its proprietary cheese formula a secret.  However, secrets aren’t always positive:  despite their secret recipe, Nacho Cheese X lost $300,000 last year.  And there are secrets about the competitive landscape and other players, like what Nacho Cheese X’s biggest competitor Macho Cheese’s next product will be.  A major component of due diligence is unearthing the secrets about your company and evaluating your competitors as well to ensure that you are truly differentiated and that your product is competitive in the market.

Mysteries are things where there is an answer, but there is not a direct way to discover it.  For example, the question of “What is the size of the nacho cheese market in the US?” is a mystery.  Some analyst companies may perform detailed analysis and come up with a number for the market size, but in many ways this is still just a rough estimate.  The risk associated with mysteries can be mitigated by employing work-arounds like this to guess at what the true answer will be, and smart investors include this type of analysis in their diligence.

Finally, Imponderables are things that there is no way to know or figure out.  “Which company will dominate the nacho cheese industry in 5 years?”  Nacho Cheese X will work hard to increase its market share, but there is simply no way to know for certain if they will “win.”  This is especially true in technology industries where product turnover is incredibly high.  For example, the first iPhone was only released a little over 4 years ago.  One way to deal with imponderables is to try to be prepared for any potential situation.  Nacho Cheese X, for example, also plans to release Salsa and Hummus lines to diversify its holdings.  As an investor evaluates an opportunity, this is where the true element of gambling and risk comes in: in a way, he or she must make a leap of faith hoping that the imponderables remain favorable for your company.

James Geshwiler Speaking

The Takeaway

Just as investors use this framework in assessing investments, it is also valuable for entrepreneurs when evaluating an opportunity or defining a strategy for their fledgling startup.  Consider what information you need to know to be successful, and place it into each bucket – secrets are discrete facts you can find out, if only you look in the right place or ask the right person, so ask!  You can make educated guesses about mysteries, drawing inferences from various sources or estimating based on other knowledge.  Finally, accept that imponderables are just that: unknowable pieces of information that any amount of thinking and research will not be able to reveal; obsessing about them won’t work, but you can turn your energy toward hedging your bets.  In other words, don’t ask “Will I be successful?” – focus instead on doing what you need to do today that can turn that imponderable into “just” a mystery (or a secret!).

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Jul
27
2011
By Avery Faller

Speaker: Sandy Carter
Company: IBM

Sandy Carter HeadshotOver the past fifty years there have been several major breakthroughs in the technological world.  First there was the shift from main-frame computing to desktop computing.  Then there was the revolution that was the internet.  And now, says Sandy Carter, Vice President of Social Business and Collaboration Solutions Sales and Evangelism at IBM, we are in the middle of a social revolution that is changing the way we do business and experience the world.

Social, Good in Moderation

During her talk Sandy told a story about a CEO who she had met in her travels.  This particular CEO had told Sandy that his company had “opted out of social.”  Sandy proceeded to google his company to prove to him that you can’t opt out of social.  Even if you don’t blog about yourself, if your company is in the public conscience, your customers and competitors will blog about you, and they won’t necessarily represent your company in a positive light.  Therefore the best way to handle the social revolution is not to ignore it but to take control of it. 

IBM LogoIn all your online dealings it is important to build up a high level of trust amongst your customers.  There are several main strategies you should employ to do so.  The first is a high level of transparency and openness.  Nowadays, with the world’s information a Google search a way, lies are likely to be exposed for what they are, so its best practice, as well as common sense, to remain honest and forthcoming.  Another important strategy to employ is to be responsive and consistent across all platforms your company uses.  If a customer writes a complaint or a compliment on Twitter about one of your services, tweet back to them in a timely manner with an apology or a thank you.  They’ll appreciate it and others will see it, increasing your customer’s satisfaction.

The Takeaway

There is no reason that a consumer-based company should have to fear social, and there’s honestly no way to avoid it.  Take control of your company’s online image, by instating an effective employee contract to ensure that they represent your company in a positive light.  Be truthful, transparent and responsive in all of your online dealings to build a social media presence.  And, don’t be afraid to let a little character slip into your online presence.  Even though you are spreading your message with bits and bytes, it’s still nice to see a little bit of humanity slip out from time to time.

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Jul
26
2011
By Avery Faller

Speaker: Jarrod Yuster
Company: Pico Quantitative Trading

Pico Quantitative Trading LogoInvestors often weigh the strengths and weaknesses of a venture’s founding team as much as, if not more than, the strengths and weaknesses of the venture’s product.  It is important for the investor to feel confident that you, as the founder of a company, will be able to build your product either through your own great knowledge or through your ability as a leader to attract talent to join your team.  During his talk to the YEI Fellows last week, the founder of Pico Quantitative Trading and sometime angel investor Jarrod Yuster explained what skills investors look for in a good founder.

What Makes a Good Founder?

Jarrod Yuster HeadshotAt startups, people are called upon to widen their roles to fit the needs of the growing company.  One of Jarrod’s main points about founders is that their roles will change as the company grows and its needs evolve, so the traditional, specialized employee can actually be at a disadvantage in a startup.  When investors are examining a founding team, resourcefulness and flexibility are important because these skills will allow the founding team to adapt to changing situations as their company grows and morphs. 

Investors also like to see that founders are good listeners.  Investors have an outsider’s view of the company and year’s behind them in terms of seeing how other startups have succeeded or failed—they want to know the founders are coachable so that investors pass along this knowledge.  But good listening is not just a trait that founders should “turn on” for investors.  Good listening is a skill that founders should employ at all times.  Listening to advisors can help a company make the right decision in situations where the company’s advisors have experience.  Listening to clients can help a company assemble the right products, and listening to the marketplace can help a company pivot before they cease to exist.

Another important area investors are sure to examine the founding team on are their execution skills.  Are you execution-oriented?  You may be able to talk the talk, but can you walk the walk?  Jarrod pointed out that a get-it-done mentality is a great skill and investors are sure to examine your company’s product(s) as proof that you have the ability to achieve results.

The Takeaway

While investors are evaluating you, you should not feel odd about reciprocating the favor and taking a good deep dive into the history and past of your potential investors.  How have past companies that they have invested in fared?  Don’t be afraid to speak to founders at some of their current companies to see if they have been comfortable working with them.  While you may feel compelled to accept the first investor that comes a-knocking on your door, know that when you accept an investor’s term sheet, like it or not, they become a member of your venture.  So make sure that you believe you can have a comfortable working relationship with an investor before welcoming them onto your team.

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Jul
25
2011
By Avery Faller

Speaker: Barry Nalebuff
Company: Honest Tea

Honest Tea LogoFor early-stage companies, branding is often a key part of helping you sell your product, since it allows you to differentiate yourself in a market of more established competitors and target your desired customer base.  Last week, Barry Nalebuff, a Professor at the Yale School of Management, spoke to the Summer Fellows about his experiences in the entrepreneurial world as a cofounder of Honest Tea. 

Branding

Barry told the story of the company’s foundation.  In 1998, Barry and his cofounder, Seth Goldman, recognized a gap in the bottled beverage industry: on one hand, there were artificially sweetened diet drinks with 0 calories, and on the other, drinks with hundreds of calories that were too sweet for many consumers.  They created Honest Tea to be uniquely poised to fill this gap with low calorie teas (but not zero calories) brewed just like the tea you would brew at home. 

Barry Headshot

They chose the name Honest Tea because they wanted their company to be transparent and, well, honest.  It became an effective litmus test for many of the early decisions that they made about the company: is this an honest thing to do?  For example, unlike other iced tea producers that artificially flavored water, Honest Tea would brew its own tea with the highest quality ingredients and have between 20 and 50 calories while comparable drinks had either 0 calories or between 80 and 180 calories. 

The early bottles of Honest Tea were made of glass and had two non-contiguous labels.  In addition to allowing the customer to be able to see inside the bottle with a “nothing-to-hide” mentality, this branding also reminded customers of the high quality of the tea inside.  This honesty (pun intended) was essential to building the Honest Tea brand in the beginning; unlike many other types of companies, customers must be willing to put that company’s products inside of them, so there needs to be a very high level of trust.  Although elements of Honest Tea’s bottle design have changed over time, their branding decisions reflect that their corporate beliefs remain the same. 

The Takeaway

Branding is an important part of creating a successful company.  If your startup creates a product of some kind, think of the package as the place to tell your story, especially if you can’t afford a full-blown advertising campaign.  Your company’s name, if chosen well, can help to communicate your company’s product and beliefs.  Efforts like these allow you and your brand to stand out in a sea of competitors, build a loyal customer base, target your potential customers, and convey your company’s message.  

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Jul
14
2011
By Avery Faller

Speaker: Marc Klein
Company: Clean Energy Fuels 

Speaker: Bill Scalzi
Company: Metro Taxi 

Clean Energy Logo

Last Thursday, YEI had the great pleasure to host not one, but two entrepreneurs.  Marc Klein spoke about his roles in several companies, primarily as co-founder of The Vehicle Production Group, which designs and manufactures the first factory-direct wheelchair accessible vehicle.  Bill Scalzi of New Haven’s Metro Taxi explained to the Fellows how he has built a thriving taxi company fit for the 21st Century by implementing technology like that from Marc’s current company, Clean Energy Fuels, to increase efficiency and be “green”.

Bring on the Innovation

Marc Klein HeadshotFor Marc’s first car, he travelled across the country asking what features different consumers and cab owners wanted.  Las Vegas taxi drivers wanted enough room in their trunks to store four golf bags, so Marc added that to the feature set.  T. Boone Pickens, who is the author of the Pickens Plan, and Clean Energy Fuels, each invested $10 million in the car company so that it could manufacture a compressed natural gas (CNG) model.  Additionally, Marc found an underserved market in the disability community and decided that his car would be the “first factory-direct vehicle that meets or exceeds the vehicle guidelines of the Americans with Disabilities Act.”  Their first car, called the Standard Taxi, was updated to the current production vehicle called the MV-1, which is specifically designed to allow wheelchair and scooter users to roll into the car and be secured next to the driver, a space the passenger’s seat traditionally occupies.  In this manner, Marc spearheaded the design of a robust vehicle that would introduce several new features to the marketplace.

Metro Taxi LogoBack in 2007, it was the original Standard Taxi that sparked the collaboration between Marc and Bill.  But Bill’s story as the founder of Metro Taxi goes back even further.  In 1987, Bill purchased a bundle of taxi permits from a failing taxi company.  Although he had 109 permits, he initially only had 15 cars on the road.  Over the years, he grew the business by adding cars to the fleet and in 1993 he made a critical decision to introduce computer-aided dispatch to supplement his call center to meet a growing demand.  In 1998, he took a large risk and made the investment in a full computer dispatch system.  Even though the system was designed for companies Bill Scalziwith over 150 vehicles and he had fewer than 100 at the time, Bill had a hunch that improving his technological infrastructure would help his business grow even faster.  This turned out to be a prescient decision; his taxi fleet quickly grew to reach the technology’s unfilled capacity.

Having seen the results of making strategic investments in new technology, it’s no surprise that Bill was one of the first taxi companies to purchase the new environmentally friendly CNG MV-1s — and to install a Clean Energy compressed natural gas fueling station on his property. 

The Takeaway

Innovation is good, and often, more is not only better, but necessary.  The automobile and taxi industries are both crowded fields.  In order to succeed against established Goliaths like General Motors and Toyota, Marc’s car company needed to innovate on multiple fronts to create a vehicle that was significantly differentiated from the rest of the marketplace to standout.  Therefore, not only did he design an accessible vehicle that accommodates all of the riding public, he also included a “green” CNG solution with a CNG capable engine (provided by Ford), a large trunk space, and durability for the fleet industries.  Similarly, to stay ahead of the curve, Bill had to take some big risks and bring his company into the digital age and now, the environmentally conscious age and the accessible age.  Learning from both of these innovators, it is clear that it is not enough to stay just one step ahead of the competition to remain unique.  Constant innovation to push your business into the future is key.

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