Thoughts on Detroit Harmonie's Get Funded Challenge and Entrepreneurial Community Building

It's not every weekend that I have the opportunity to be surrounded by entrepreneurs working on transformational ideas in the city of Detroit. Last Saturday, I was invited to judge Detroit Harmonie's Get Funded Challenge, a social entrepreneur pitch event with entrepreneurs competing for $50,000 in funding. I have judged a number of university-, corporate-, and state-sponsored business plan competitions and pitches over the years, but this pitch event was distinctly different. This was certainly one of those "you had to be there to feel it" events. Here are my thoughts on the parallels between what I thought DH did right and its application to entrepreneurial community building in Michigan.

As a background, I have been doing a lot of thinking recently about the lack of a robust statewide, entrepreneurial community in Michigan-- primarily the need and how to go about developing one. I noticed many aspects of the Get Funded Challenge that illustrated key, but often overlooked, points to consider in developing a stronger entrepreneurial community.

1. The DH Board did a phenomenal job in engaging a great breadth of stakeholders in Detroit. A representative from the White House's Strong Cities, Strong Communities was present. The Mayor's chief of staff kicked-off the event. Detroit-based corporations were engaged as sponsors or as participants. Small- and medium-sized businesses were in attendance. (Ann Arbor-based Zingermans had a great cheese-tasting table there-- If you were trying to get to the table, I apologize. I was the one holding up the traffic there, and asking the Zingermans' rep questions about the cheeses and tasting each one.) There were many students from colleges and universities present. And a diverse group of entrepreneurs were also there- engaged, networking, exchanging ideas about startups and community projects, and just having a good time.

Detroit Harmonie engaged with all stakeholders in Detroit. I bet not everyone understood the organization's vision from the website, press releases, or executive summary and just showed up for the celebration (more on this below), but I am willing to bet that by the end of the night, after experiencing the pitch event, great food, diverse people, and live music, everyone understood clearly what DH was about, what makes its activities critical to Detroit's revitalization, and five reasons (five pitches) to support DH.

So, engagement with all stakeholders is critical. If some don't get it, there's nothing like some food and entertainment in a great venue to put on some "show and tell". There are many storied, Michigan-based corporations and family foundations--- has the startup community (and I put myself in this boat) engaged with them sufficiently to help them understand what Michigan's startup universe looks like, its community and economic impact, its challenges, and the types of resources needed to support these job creators? If you are passionate about this, send me a note and I will put you in touch with a kickass group of entrepreneurs heading this project.

2. Another great aspect of the event was its premise. It was very simple, at least in the way that I interpreted it: let's come together to celebrate entrepreneurs who are making things happen in the city. Who doesn't want to be a part of something like that? Think about the city-, county-, or state-wide impact Michigan startups are creating everyday. Did a company close a large financing round, expand its facility, and start hiring people? Did a company exit and its alum are now out there investing in or starting up new ventures? We have many such  examples in Michigan. All these activities translate into quantifiable community and economic impact worthy of a celebration. So, pick a reason and celebrate. Repeat.

3. If you are not an entrepreneur (universities, EDCs, incubators, accelerators, VCs, law firms, corporations), listen up. Put entrepreneurs in the driver's seat. DH's founders and over half its board are entrepreneurs who are committed to Michigan, community-minded, visionary, and working everyday to build a robust community. There is no substitute for this sort of leadership. If you are a public or private organization that is serious about nurturing a statewide entrepreneurial community and making Michigan a go-to place for entrepreneurship, then go find the visionary, community-minded entrepreneurial leaders (and there are quite a few around the state) and ask them how you can help. And then help them. Have them lead and get out of the way.

This post is way longer that I expected. But hopefully the point is abundantly clear: to nurture a statewide entrepreneurial community, all strata and stakeholders of the city/county/state must be engaged --very few people will turn down food, entertainment, and a great cause; make the intersection of the strata/stakeholders an opportunity to celebrate something-- in other words, make it a fun event that appeals to the human element in all of us and not just another boring meeting; and develop/support entrepreneur-led community-building efforts- there is no substitute for it. 

FDA sends letters to genomic testing companies

Of interest to those in the genomic testing space, via BioCentury:

FDA sends letters to genomic testing companies

FDA sent letters to 14 companies that market genetic testing kits notifying them that the tests do not have FDA clearance or approval. The agency requested a response within 15 days. The letters come on the second day of a public meeting to discuss FDA's forthcoming oversight of laboratory-developed tests (LDTs), which the agency has historically not regulated.

On Thursday, the House Energy and Commerce Committee's subcommittee on oversight and investigations will hold a hearing to discuss direct-to-consumer personal genetic tests. FDA has already sent letters to six other companies regarding their respective personal genetic testing kits.

Interleukin Genetics Inc. (NYSE-A:ILI) and Sequenom Inc. (NASDAQ:SGNM) each received a letter. Interleukin markets its Inherent Health personal genetic test, while Sequenom markets the SEQureDx test to detect circulating cell-free nucleic acids in blood samples from pregnant women for fetal gene and chromosome abnormalities. Interleukin was off $0.02 to $0.40 on Tuesday. Sequenom was off $0.12 to $5.69.

Good times ahead?

What a beautiful weekend. Great weather, multiple gatherings at friends, and squeezed in a quick 5 mile run down the Huron River.

I happened to download the most recent PwC/NVCA MoneyTree Report in raw data format. A lot of interesting observations, but some are as follows:

• upward quarterly trend in total $ and # deals invested with slight dip in Q1 2010, resulting in a more favorable H1 2010 vs H1 2009 comparison.
• 2009 H1 vs 2010 H1, $ and deals:

Biotech: 35% increase, 24% increase

Financial services: 213%, 62%

Med Device/Equipment: 13%, 9%

All: 49%, 23%

• cleantech investments: higher # deals and $ invested, 64% and 203% respectively, 2009 H1 vs 2010 H1; already invested more $ as of H1 than total 2009 $.
• initial investments in 2010 H1 in Seed and Early Stage companies outweighed investments in Expansion and Later Stage companies by over 50%; there were also increases in # of deals and $ invested in Seed and Early Stage companies attracting initial investments.
• last quarter, 2010 Q2, biotech sector received the largest level of funding of all sectors- $1.3B.
• average initial investments in seed, early stage, expansion, and later stage companies in 2010 H1 were $4.5M, $3M, $7M, and $5M.
• initial investments in biotech increased by 60% and 79% in $ invested and # deals, respectively, in a 2009 H1 vs 2010 H1 comparison. 17% of the initial $ invested in 2010H1 went to biotech (at an average of $5M per deal), surpassed only by software where 18% of the initial $ invested went. Med Devices/Equipment and Healthcare services garnered 9% and 2%, respectively, of initial investments in 2010 H1.
• the largest number of deals to receive initial investments in the first half of this year were software (25%), followed by biotech (14%). Med Devices/Equipment and Healthcare Services comprised 6% and 1%, respectively, of the total number of deals to receive initial investments.
• Michigan data indicates declining $ and deals invested from 2009 Q3 ($36M; 9 deals) through 2010 Q1 ($14M; 4 deals) with an improvement in 2010 Q2 ($45M; 10 deals).

Some points to highlight:

• Quarterly trends are encouraging for early stage entrepreneurs
• Overall investment trends encouraging
• Biotech and Cleantech sectors are but 2 sectors with encouraging initial investment data; the former having particularly encouraging total investment $ data coming off of last quarter as the sector receiving the largest pool of investor $, and the latter finally getting the pickup it needs to really be impactful despite the dearth of exits in this space
• Greater investment $ and deals going to the seed/early-stage space
• Investments in Michigan remain tepid with encouraging growth in the first two quarters of this year; my assessment from speaking with investors and hearing exciting, yet-to-be-publicized news from a number of companies across the state is that we will end 2010 with many more $ and deals invested vs. 2009

Observations from an entrepreneurial pitch

Hope everyone had an exciting July 4th. Over the weekend, I had an opportunity to attend an entrepreneurial pitch event in Chicago. Now, there is a ton of credible material online on the proper mechanics and delivery of an elevator pitch, so I am not going to get into that here. What I will comment on here are common elements that I found missing in the pitches:

1. Rambling: Cut to the chase. Pin down a structure and stick to it. And, of course, practice, practice, and practice!

2. "I don't know": Nothing turns off investors quicker than an "I don't know" answer to an obvious question that an entrepreneur should know. For example, a technical term is utilized in a pitch and an investor requests a general clarification on that term. The entrepreneur's hands go up in the air accompanied with a "I am just the business guy; I don't know what that term means." (Actual quote from the event.)

3. Your "ask": Clearly enunciate your "ask". Are you seeking financing? If so, how much, what's the structure, and what do you hope to accomplish with it. Maybe you have money, but need management or advisory team members. Whatever the case, be specific and don't neglect the "ask" portion in the pitch.

4. Milestones: It's great to talk about the company, management, cool idea, and the focus market in your presentation. But what will make a presentation even more compelling is to highlight briefly the milestones you have achieved since the last round of funding or to date. Doing so conveys that there is a healthy development inertia, indicates a development strategy, and provides context to the "ask".

5. Accept feedback: Please do not argue or engage in a back and forth session with judges as they critique your pitch. To me, this conveys a lack of maturity on part of the entrepreneur; resistance to learning and change; and lack of coachability-- these are all attributes that are major dings to your company, even if the product/service concept is robust. No investor wants to put money into a company with a CEO or management team that will not be open to new ideas, advice, and business models.

NeuroNexus Technologies Plans to Expand

NeuroNexus Technologies, a six-year-old U-M spin-off, is doubling its physical footprint and hiring as many as eight new employees as it works to produce the next generation of deep-brain stimulators for clinical use.

Read more...

Tesla IPO: A Vote for Cleantech or the Auto Industry?

As you may know by now, Tesla Motors [NASDAQ: TSLA], went public earlier this week, on June 29, in a $226M IPO. In a day when the NASDAQ lost about 4% and the Dow ~2.7%, TSLA's shares closed at $23.89, a 40% gain from a $17 open. As of June 30, their market cap is a cool $2.2B. All this despite the fact that the company has registered profits only once (last July) and lost $26M in the first quarter of this year. Keep in mind that this is a company in which Toyota, Daimler, and the DoE have invested.

Like many people watching the IPO and post-IPO rally, I too am trying to figure out whether the market rally, which saw TSLA soar in a way that reminded me of the irrational exuberance of late-90s, demonstrates bullishness on clean tech or an appetite for and confidence in the American auto industry (the last IPO in the auto industry was Ford's IPO in the late 1950s). TSLA may claim its Silicon Valley roots to distance itself from GM/Ford while comparing itself to technology giants Apple/Google, but at the end of the day, it is a car company which will have to manufacture cars and contend with fierce competition from the incumbent auto makers who are poised to enter this market. To be fair, it is too soon to read too deeply into the market rally and discern if these are long-term investors who are betting on the success of the technology and company, or those who are simply riding the wave. Additionally, it would be naive for startups and VCs, particularly those involved in high capex ventures, to start betting on an IPO exit, particularly with the characteristics of TSLA, i.e. pre-revenue, first large commercial roll-out still 2 years away, and high capex.

I believe that innovation in cleantech should and will continue. It is encouraging to see the concerted and collaborative efforts of the public and private sectors to ensure that the cleantech sector continues to grow and mature. If TSLA is eventually a success, it will be an exemplar of what public/private partnerships can achieve and, perhaps more importantly, will encourage investors and entrepreneurs alike to pursue innovation even more rigorously in this sector.

Here we go... my first step into the blogosphere!

Here goes the first post...

After the past few years of penning thoughts and lessons learned in my corporate and venture capital career, and sending out blast emails to my contacts on my take on breaking topics or industry trends, I decided to aggregate these thoughts and perspectives into a blog.

I currently manage a state investment portfolio. My focus is in the healthcare sector (therapeutics, devices, diagnostics, and services).

This blog will be about my perspectives on entrepreneurship, innovation, venture capital, corporate strategy, economy, markets, and anything else that happens to tickle my intellect or pique my interest at a particular point in time.

The views expressed in this blog are my personal views alone and do not in any way reflect those of my current or past employers.