Business Incubator Series: John Richards, BoomStartup, Provo, Utah (Part 6)

By guest authors Irina Patterson and Candice Arnold

John: So, both years, one team in 2010 and one team in 2011, turned us down after we gave them the invitation.

Irina: Why do you think they turned you down?

John: The first year, they wanted to go out to Silicon Valley, and they did. They relocated their headquarters to Silicon Valley. The second reason is because the company didn’t want to give up 6% for the $15,000. They thought they were worth a lot more.

They both were strong teams and really strong deals. I think they’re both doing well. I still really like both of the companies. At both companies, the management teams, which is the number one thing to look at, are winners.

They’re the kind of people who will put their heads through brick walls to make their companies go. I think they’re going to be successful. We have nothing but great feelings for them. We wish them all the luck. We would have loved to have had them in the program, but that was their choice.

Irina: Why do you think they applied to your program in the first place?

John: I think they were interested, and it’s validation. In Utah, we’ve got a really good name. I think we’ve got a good name nationally, too. We’ve done a good job. I think having been invited and being able to say, “Yeah, we were invited, but we decided we were better than that. We were more advanced than that.” Whatever they want to say, they could wear that as a badge of honor.

I’m not saying they were planning that. I think they were sincerely interested, one foot in and one foot out, and they applied. They have strong teams and strong ideas, so they made our top 10. When they were offered it, they thought about it and decided, no, we’re going to move to Silicon Valley; no, I think that we’re worth more than the imputed valuation of $15,000 for 6%, and we’re not going to take it. This year, we spent a lot of time talking to them. They were in and out, in and out a couple times. They were really on the fence, and then they just ultimately decided not to come in.

Irina: When you select a company for incubation – and they accept your offer – what are the next steps?

John: All those who accept meet in a giant meeting with the attorneys to be introduced to the paperwork associated with being a part of the program. Most sign the paperwork as is – one or two need some customization. Some have annoying cap table problems that must be cleaned up. Once the paperwork is signed, they show up on the first day – orientation day – and we are off to the races.

Irina: At what stage of development do you prefer companies be when they apply?

John: Any stage. It’s more about the idea and the team. We can help with the rest. Of course, we love deals where there’s early traction and we get it to revenue with more traction by summer’s end.

Irina: Would you describe an ideal company that could benefit from your program?

John: The ideal company is game-changing software company that has a unique and sustainable competitive advantage with a strong team that comprises business development, operational, and technical/coder team members.

Irina: What kind of experience do you look for in founding teams?

John: I wish we had a magic test or evaluation tool to assess founders. We don’t. We look for that special x factor that is hard to describe, but you know it when you see it.

It is absolutely vital that the team has a skilled software engineer. That is a prime directive. We also want a strong CEO-founder, a leader who is clearly in charge. No rule by committee. We do not have any requirements on specific experience.

Irina: How do you conduct due diligence, and what areas do you focus on?

John: That is a huge question. Due diligence is actually taking all of our accumulated skills, experience, network, etc. and putting it to work to make sure we make good selections.

The process is not unlike what any angel investing group might do.  It’s almost all about the team and the strength of the idea or concept. If they have followed the Steve Blank, Alex Osterwalder, Eric Ries, or Nathan Furr methodologies and have pivots and customer development significantly underway, we are impressed, especially if it’s verifiable.

This segment is part 6 in the series : Business Incubator Series: John Richards, BoomStartup, Provo, Utah
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