Last Thursday (March 11, 2010), ATI, the City of Austin, Central Texas Angel Network (CTAN) and the Central Texas Regional Center of Innovation and Commercialization (CenTex RCIC) held a presentation on funding sources in central Texas and discussed funding criteria for local entrepreneurs seeking seed stage and early stage funding.
The speakers were Mitch Jacobson – director of the Clean Energy Incubator at ATI, MK Holody – Director of Business Retention at CenTex RCIC, and Lance Adams – Board Member of CTAN.
Here is what we learned from Mitch Jacobson about Austin Technology Incubator
- ATI helps early stage technology companies access talent, capital, partners, and customers, trains UT students in technology entrepreneurship, and supports and grows the Austin entrepreneurial ecosystem
- ATI works directly with early stage companies through strategic coaching and mentoring from ATI staff, business plan development, ATI interns with diverse backgrounds (Law, MBA, finance, etc.) who help with strategic and tactical issues, ATI helps find funding sources and provides business infrastructure support
- ATI has incubated over 200 companies, provided learning opportunities for hundreds of UT students, and helped raise $750 million in capital for ATI companies who have created an estimated 10,000 jobs in Texas. In 2008, ATI incubated 24 companies, helped to raise $28 million, and ATI companies created 152 jobs
- ATI admissions process consists of two tests – a) venture risk: how likely is the company to succeed? (team, technology, market, evaluation) and b) can ATI add distinctive value to the company?
Key points from MK Holody’s presentation on Emerging Technology Fund
- MK Holody focused on the Emerging Technology Fund (ETF). The ETF was created by the Texas Legislature. The purpose of ETF is provide funding for development and commercialization of new technologies.
- Matching is important. The State is looking to fund projects where the ETF funds are coupled with additional outside investment.
- The total process consists of several application rounds and takes a total of about 8 months. If your company is rejected, you are welcome to reapply.
- The main criteria for obtaining ETF funding are an affiliation with an educational institution (which can take on different forms including involvement in students projects, or membership at ATI), the organization needs to be a c-corp, must be located in Texas, and the technology must be commercializable (not a science project, not a service)
And here is what Lance Adams, a board member of CTAN, said about getting funds from the Central Texas Angel Network:
- Lance started off with some interesting statistics: Less than 1 in 15 startups gets angel funding, less than 1 in 1000 startups gets VC money, and less than 1 in 20 angel funded companies also gets VC money.
- Lance continued with the application process for CTAN funding, which consist of several stages: prescreen the initial 20 companies (all members vote for 10 out of 20 applicants based on an executive summary). 10 out of those companies go to the next step – screening meeting (quick pitch in presence of all about 60 angels). Out of those 10 companies 4 make it to presentation room. Out of those 4, 2 will make it to the next step which is due diligence, the other 2 deals will receive contact information of interested investors and go from there.
- What angels look for in a deal
- Management: the CEO should be a driven/charismatic person with a lot of business/marketing acumen and the ability to raise money. He or she should recognize which pieces/skills are missing in the management team. The team should be passionate and coachable.
- Proof of market, compelling competitive advantage, realistic financial projection, intellectual property, scalability
- Requirements for CTAN funding: the company should have a prototype, have some customers, and be based in Texas. CTAN is not restricted to a certain kind of company.
- The typical CTAN investment is usually under $1.5 million.