Monday, April 28, 2014

CED VMS: Because “Startups are a tough business…”

Written by Ann Revell-Pechar as part of CED's Venture Mentoring Service: Stories from the Front Lines Series.

Charlie Farrell, Principal at 8 Rivers Capital and CFO for two of their companies, just returned to the Triangle in 2011, having retired from the role of CFO for in Los Angeles. He learned a lot about growing a business while he was there, starting as employee number 39 in a $6 Million company and leaving when it was a $150 Million, 400 person company. He was enjoying reconnecting with some of his former partners in Triangle, such as Judd Bowman, founder of Motricity and current CEO of Appia. Farrell helped raise the first $1 Million for Motricity and had stayed close to Bowman ever since.

And Bowman stayed close to and supportive of the entrepreneurial community in the Triangle. He strongly encouraged Farrell to connect with CED. And CED immediately connected Farrell to a series of ventures through the Venture Mentoring Service (VMS).

“What a terrific experience this has been for me,” said the veteran executive. “I think I may have worked with as many as six or eight different companies the first year. There’s something so invigorating about CED’s VMS process. You’re spending your time with enthusiastic and serious entrepreneurs who are absolutely committed to doing the right thing.”

As Farrell described it, he would see entrepreneurs really “crank up” with new ideas from mentors. Two or three mentors with different skill sets would go into meetings with founders and provide insights on a team basis. He brought his accounting and finance skills to the table, and applied his experience in internet and technology startups.

“More often than not, the coaching became a question of defining markets and marketing needs,” he said. “You have to get the product right before you can turn your company. Often it was just basic business planning that was needed to get the segment right.”

According to Farrell, having a team of mentors with a mix of backgrounds is valuable for the ventures. His teams included mentors from pharma, consumer goods, engineering -- diverse groups that brought something different to table so that input was never one-sided. Ventures might be raising money and building a pitch deck, so they need feedback on those 12 magic slides for a presentation to an angel.

“Startups are a very difficult business, with a 95% failure rate,” he noted somewhat resignedly. “Sometimes startups fail, and we have to help the company get to the point of shutting it down. One seemed like such a good idea: they had an endorsement from a major company, their pilot had the positive desired effect, yet they couldn’t get anyone to spring to pay for it. After a while, we had to say ‘if they’re not willing to pay, you need to think about doing something else.’ They gave it a good shot for six months before joining VMS. We worked with them for six or seven more months, but when they still weren’t successful, you had to suggest it might be time to fold.”

He tells a very different story about another venture, a company that had a model for converting marine engines from diesel to natural gas called Blue Gas Marine. “This was really fun because the founder, Miguel Guerreiro, is so passionate and embraced our feedback. We think he really got his business model right. We helped him with his pitch deck, and ultimately he raised enough to begin building prototypes to demonstrate that it works. I’m really hopeful for this company.”

Farrell has more stories about the companies he worked with prior to engaging full time with 8 Rivers Capital. One is about a group of materials science engineers at NC State looking for an industrial partner to help them commercialize their product. The team coached the partners ahead of meetings with large companies, offering hints on how to address questions that might arise. In one instance a joint venture contract was proposed, and the mentors helped the ventures through contracts negotiations.

"Our real world experience really came into play for them at that point. If they could have afforded lawyers, they probably would have turned there. But we gave them something of value without a price tag -- coaching from a group of experienced executives that had been thru co-development agreements. The experience we offered made a huge difference for them.”

For companies considering VMS, Farrell recommends that you come to the table with ‘a fully baked idea.’ He suggests founders be devoting themselves full time to their new company, and have enough money to survive without salary for 12 months.  Then he whole-heartedly recommends you dive into VMS. “What else is really available here? Mostly sandboxes, where you can work for three to six months with intensive coaching, but then you’re kicked out. VMS is great because of the experience of the mentors  and it costs nothing but your time."

“I love being a Mentor with VMS because it is so rewarding to see companies develop, succeed, and know you’re helping them to achieve goals and make it over hurdles.”

For more information on CED's Venture Mentoring Service, visit  Applications for ventures and mentors are available online.

1 comment:

  1. In writing my 3rd business plan this is helpful and relevant information. Thank YOU