Tuesday, April 21, 2009
Business Network Chicago Venture Capital Panel
April 7, 2009
Four interesting and innovative companies presented their concept pitches to the monthly Business Networking Chicago Venture Capital meeting. Hosted by Len Bland and David Carmen, the attendees included entrepreneurs, service providers, students and perhaps a half-dozen actual investors.
The companies presenting at BNC Venture Capital are generally early in the cycle of seeking investment, and both participants and audience have an opportunity to learn how to make their business case to potential venture capital investors. Each speaker is given ten minutes to present and fifteen minutes to answer questions from the crowd.
Moderator Bland asks them to make sure they answer three questions: 1) What is your product or service and why will customers buy it? 2) Why is the management team qualified to execute the business plan? 3) How will your investors make money?
Of the four companies that presented at the meeting on Tuesday, April 7, 2009, two were related to education; One was an innovator in sustainable (e.g. "green") transportation options; and one offered to transform the manufacture and distribution of a common retail product.
The first company, Lake Forest based INNOVATE2LRN, branded as QWK2LRN provides "thin client" computers to urban schools, with the objective that each student have a working computer at their desk full time. They provide hardware and infrastructure utilizing on-demand remote (or "cloud") server capacity.
It was interesting that the audience did not have a clear understanding of the Innovate to Learn's business model. That their service is related to providing computers and a "cloud-based" infrastructure to schools. This may be because QWK2LRN CEO Bill Lowe focused much of his presentation on the efficacy of having a dedicated computer workstation for each student in urban schools. He then recommended that the schools use web-based educational programs; the QWK2LRN solution does not provide software or teacher training, though they do have one person available to consult with teachers and administrators on selecting appropriate web-based educational programs.
A key to QWK2LRN 's business plan is that the management team works with school district superintendants to get access to already-allocated federal funds to pay for the hardware. The core team is made up of executives from Xerox, they bring Xerox's top-down approach to sales. The executive team has built strong connections with philanthropists who are active in urban and educational causes. This has given them access to school district superintendents rather than going in through the IT department. We note that, at this writing, their web site is "undergoing site maintenance".
The second education-related company to present at the BNC Venture Capital meeting, School Town, provides tools to help teachers, students, and parents communicate about school assignments and schedules. School Town also provides capabilities for teachers and parents to collaborate and share lesson plans and other educational information. School Town CEO Michael A. Kritzman also stated that School Town provides a platform for teachers to implement "differentiated learning" in the classroom.
Based out of the Chicago suburb of Glenview, they have had successes with their initial installations. The solution helps teachers and parents communicate with students, and helps students develop time management skills. One concern of the audience was whether competition in the education marketplace represented a good opportunity for the company to be acquired for integration or if the company could succeed as a stand-alone SaaS offering. Kritzman indicated that their strategy is to develop the product and be acquired. Another question from the audience was how much time School Town would save teachers versus the complexity it added to their jobs.
Parry Transit is an American subsidy of a British company that developed the hybrid trolly. They offer a sustainable ultralight rail solution. CEO Barry Seifer described ultralight rail as an affordable green transit technology. Light rail has a 10-year sales cycle, but ultralight is less expensive for both the track and cars and can go to market more quickly.
Despite Mayor Daley's repeated tries to build light rail in Chicago, this Chicago audience could not relate to the Trolly concept, asking if they could put tires on the cars. Unfortunately, that would eliminate many of the benefits of the Parry Transit system. Light rail has enjoyed success in other locations, including downtown Portland as an outstanding example.
On one hand, with federal stimulus dollars on the table, Parry's ultralight rail looks like an appealing investment. On the other hand, high-speed rail for the Midwest has been getting the PR buzz lately. A lot of Parry's success rides on managing all aspects of selling to government, including setting public expectations.
Chicago-based Novus Ice proposes to "redefine the distribution chain for bagged ice" in retail locations by placing automated systems in stores. The systems run quietly and have the same footprint of current ice vending systems, with added height.
The manufacture and distribution of ice is typically a local monopoly, with some 2,000 suppliers nationwide. There are two large public companies trying to roll up this market: Reddy Ice and Arctic Glacier. Novus' business model is to finance the placement of the systems and take a percentage of sales from each unit. They will guarantee the retail price of a bag of ice. Eliminating the manufacturing and transportation costs of ice should improve margins on ice to around 20%.
The machines use standard components, assembled for Novus by the hardware suppliers. The makers of the freezer units have an existing nationwide maintenance operation, which Novus says will minimize the exposure of the maintenance risk.
The use of standard components raised the question of competition. Novus said that there is no competition currently in the market and that their projections are to take 4% of the retail ice market, focusing on chains with larger stores. Their business plan showed 64% EBITDA at the end of five years. They are in the planning stages for a pilot with Walmart.
Note, however, that a later Google search for "in-store ice production" yields a February announcement from Arctic Glacier of their in-store ice production system, and another system from Louisiana based Ultra Pure Water Technologies, dating back to November, 2005. (see http://findarticles.com/p/articles/mi_hb5559/is_200102/ai_n22604092/ and http://www.upwt.com/icemakers.html ). It appears that there may be more to the story behind this innovation. If I were Ron May, I'd probably take up the space to also point out that the management team is not listed on the company's web site.
At the end of each presentation Bland polled the audience to vote their confidence in the presentation's investment potential on a scale of one to ten. Novus Ice Systems was the best received of the companies presenting. School Town received the most tepid support from the audience. Parry Transit appeared to have the widest dispersion of low-to-high votes.
The next Business Network Chicago Venture Capital meeting is Tuesday, May 5.
Four interesting and innovative companies presented their concept pitches to the monthly Business Networking Chicago Venture Capital meeting. Hosted by Len Bland and David Carmen, the attendees included entrepreneurs, service providers, students and perhaps a half-dozen actual investors.
The companies presenting at BNC Venture Capital are generally early in the cycle of seeking investment, and both participants and audience have an opportunity to learn how to make their business case to potential venture capital investors. Each speaker is given ten minutes to present and fifteen minutes to answer questions from the crowd.
Moderator Bland asks them to make sure they answer three questions: 1) What is your product or service and why will customers buy it? 2) Why is the management team qualified to execute the business plan? 3) How will your investors make money?
Of the four companies that presented at the meeting on Tuesday, April 7, 2009, two were related to education; One was an innovator in sustainable (e.g. "green") transportation options; and one offered to transform the manufacture and distribution of a common retail product.
INNOVATE2LRN – Dedicated Workstations for Urban Students
The first company, Lake Forest based INNOVATE2LRN, branded as QWK2LRN provides "thin client" computers to urban schools, with the objective that each student have a working computer at their desk full time. They provide hardware and infrastructure utilizing on-demand remote (or "cloud") server capacity.
It was interesting that the audience did not have a clear understanding of the Innovate to Learn's business model. That their service is related to providing computers and a "cloud-based" infrastructure to schools. This may be because QWK2LRN CEO Bill Lowe focused much of his presentation on the efficacy of having a dedicated computer workstation for each student in urban schools. He then recommended that the schools use web-based educational programs; the QWK2LRN solution does not provide software or teacher training, though they do have one person available to consult with teachers and administrators on selecting appropriate web-based educational programs.
A key to QWK2LRN 's business plan is that the management team works with school district superintendants to get access to already-allocated federal funds to pay for the hardware. The core team is made up of executives from Xerox, they bring Xerox's top-down approach to sales. The executive team has built strong connections with philanthropists who are active in urban and educational causes. This has given them access to school district superintendents rather than going in through the IT department. We note that, at this writing, their web site is "undergoing site maintenance".
SCHOOL TOWN – Web-based Teacher-Parent-Student Communication Platform
The second education-related company to present at the BNC Venture Capital meeting, School Town, provides tools to help teachers, students, and parents communicate about school assignments and schedules. School Town also provides capabilities for teachers and parents to collaborate and share lesson plans and other educational information. School Town CEO Michael A. Kritzman also stated that School Town provides a platform for teachers to implement "differentiated learning" in the classroom.
Based out of the Chicago suburb of Glenview, they have had successes with their initial installations. The solution helps teachers and parents communicate with students, and helps students develop time management skills. One concern of the audience was whether competition in the education marketplace represented a good opportunity for the company to be acquired for integration or if the company could succeed as a stand-alone SaaS offering. Kritzman indicated that their strategy is to develop the product and be acquired. Another question from the audience was how much time School Town would save teachers versus the complexity it added to their jobs.
PARRY TRANSIT – Ultralight Rail Using Hybrid Power
Parry Transit is an American subsidy of a British company that developed the hybrid trolly. They offer a sustainable ultralight rail solution. CEO Barry Seifer described ultralight rail as an affordable green transit technology. Light rail has a 10-year sales cycle, but ultralight is less expensive for both the track and cars and can go to market more quickly.
Despite Mayor Daley's repeated tries to build light rail in Chicago, this Chicago audience could not relate to the Trolly concept, asking if they could put tires on the cars. Unfortunately, that would eliminate many of the benefits of the Parry Transit system. Light rail has enjoyed success in other locations, including downtown Portland as an outstanding example.
On one hand, with federal stimulus dollars on the table, Parry's ultralight rail looks like an appealing investment. On the other hand, high-speed rail for the Midwest has been getting the PR buzz lately. A lot of Parry's success rides on managing all aspects of selling to government, including setting public expectations.
NOVUS ICE SYSTEMS – On-site Ice Production for Retail Locations
Chicago-based Novus Ice proposes to "redefine the distribution chain for bagged ice" in retail locations by placing automated systems in stores. The systems run quietly and have the same footprint of current ice vending systems, with added height.
The manufacture and distribution of ice is typically a local monopoly, with some 2,000 suppliers nationwide. There are two large public companies trying to roll up this market: Reddy Ice and Arctic Glacier. Novus' business model is to finance the placement of the systems and take a percentage of sales from each unit. They will guarantee the retail price of a bag of ice. Eliminating the manufacturing and transportation costs of ice should improve margins on ice to around 20%.
The machines use standard components, assembled for Novus by the hardware suppliers. The makers of the freezer units have an existing nationwide maintenance operation, which Novus says will minimize the exposure of the maintenance risk.
The use of standard components raised the question of competition. Novus said that there is no competition currently in the market and that their projections are to take 4% of the retail ice market, focusing on chains with larger stores. Their business plan showed 64% EBITDA at the end of five years. They are in the planning stages for a pilot with Walmart.
Note, however, that a later Google search for "in-store ice production" yields a February announcement from Arctic Glacier of their in-store ice production system, and another system from Louisiana based Ultra Pure Water Technologies, dating back to November, 2005. (see http://findarticles.com/p/articles/mi_hb5559/is_200102/ai_n22604092/ and http://www.upwt.com/icemakers.html ). It appears that there may be more to the story behind this innovation. If I were Ron May, I'd probably take up the space to also point out that the management team is not listed on the company's web site.
FEEDBACK FROM THE CROWD
At the end of each presentation Bland polled the audience to vote their confidence in the presentation's investment potential on a scale of one to ten. Novus Ice Systems was the best received of the companies presenting. School Town received the most tepid support from the audience. Parry Transit appeared to have the widest dispersion of low-to-high votes.
The next Business Network Chicago Venture Capital meeting is Tuesday, May 5.
Labels: BNC, business network chicago, chicago, innovation, venture capital
