Entrepreneurship in Utah: Blackrock CEO Andy Gotshalk (Part 4)

Andy Gotshalk: We started the business in 2008 and raised a little bit of money. Pretty soon, we became profitable. From 2008 to 2012, we grew our revenue from that million dollar starting point up close to $8 million or $9 million.

Sramana Mitra: From $7 million starting point, you said?

Andy Gotshalk: From $1 million. It’s from about $750,000 initially and we grew that to almost $10 million.

Sramana Mitra: Let me get the specifics there. That is the journey that we should be focusing on. The $1 million revenue was based on the work that you did before the spin-off?

Andy Gotshalk: Correct. That was based on the work when we were at Cyberkinetics. In 2008, we became Blackrock Microsystems.

Sramana Mitra: This revenue was transferred to Blackrock?

Andy Gotshalk: Correct. Revenue and some of the people were transferred. Back in 2008, we had 15 employees and about $1 million in revenue.

Sramana Mitra: How much money did you raise? From whom did you raise that money from? What were the specifics of the financing?

Andy Gotshalk: It was actually through private angel type investors. The professor from the University of Utah is originally from Germany and had grown some companies in Germany through his network of private investors.

Sramana Mitra: How much did you raise?

Andy Gotshalk: At that point, it was about $1.5 million.

Sramana Mitra: So you had about $1 million in revenue and $1.5 in financing. Is that the only money you raised to get to the $10 million?

Andy Gotshalk: Correct.

Sramana Mitra: Let’s now talk about the process of customer acquisition. What kind of customers did you go after? What was the nature of the revenue?

Andy Gotshalk: The typical customer for that business was a neuroscientist who’s doing research on some aspect of how the brain works at a university. Generally, these customers are all funded either through grants from the government or startup packages from the university. They are moving to a new university and the university is going to pitch in and help them set up their labs.

Sramana Mitra: How much are they paying to buy the hardware/software combo?

Andy Gotshalk: It depends on how many channels they need. In general, we have an average sales price of $60,000. It’s expensive equipment.

Sramana Mitra: How many universities were you working with? Initially when you did $1 million, how many universities were involved in that process?

Andy Gotshalk: Back then, it was probably 10 to 15.

Sramana Mitra: It was essentially direct selling, right? You were basically calling up universities and selling to them.

Andy Gotshalk: Correct. I actually have a lot of thoughts about sales channels. For this kind of product, I think it’s absolutely critical to have a direct salesforce. Some other distribution network is not going to be nearly as successful because of the nature of the product. These systems are basically the heart of the experiment. They’re sticking electrodes in the brain and they’re having the animal do some sort of a task. They need to collect all of the data. All of that comes into our system. Then, our system presents all that to the researcher. It’s very complicated.

You need to understand exactly what the pain points are of these customers and what they’re trying to do. It’s a pretty sophisticated sell. Our sales team is composed of a lot of high-level PhD types. Not all of them are PhDs but PhD type of people who can relate to these experiments.

This segment is part 4 in the series : Entrepreneurship in Utah: Blackrock CEO Andy Gotshalk
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