Business Incubator Series: John Richards, BoomStartup, Provo, Utah (Part 7)

By guest authors Irina Patterson and Candice Arnold

Irina: What are your metrics for success?

John: Traction in the form of investment, revenue, profit and exits. We always have the companies report at every meeting (a) validated customers, (b) users, (c) true customers, and (d) revenue.

Six of our first 10 companies were funded, rather quickly. Some were oversubscribed within minutes of the conclusion of our first demo day.

Irina: How do you advise your entrepreneurs to do customer validation?

John: Get out of the building. Everybody now knows the principles of what you’ve got to do, but it’s harder to do than it is to say, to get out of the office, get away from your computer, get away from the phone.

Go visit in person and talk to prospective customers and find out what the marketplace wants in your product or service. It takes constant pushing to have these companies go do that.

I can imagine the legions of companies that aren’t in these programs, that don’t have strong mentors that guiding and pushing them, that just sit.

They do a token job of customer validation instead of a real good job. They’re not being checked on and validating their own validation process.

Even in this environment, we have to push them to do it thoroughly, to do it properly and deeply enough to nail that business model.

It’s so important. It’s fascinating. Last year, I saw it happen naturally, even though we didn’t understand the concepts as well as we do now.

This year, it’s interesting to see how quickly they pivot when they’re doing it right, and they find much better business models.

Every time it happens, and we see one of these companies take a major pivot and nail something where the client base now says, “Hey, when is that going to be available? I want to buy it now” – you even have some of the clients say, “I’ll fund that now.” – then you get excited.

Irina: How many of your companies are getting funded by generating revenues?

John: They’re getting revenues. I don’t think any of them are knocking the socks off of things and saying, “Oh, the revenues are just going crazy.”

We don’t have any of that, but they’re getting good, steady revenue growth, a few of them. We’ve even had one or two receive early buyout offers that they turned down.

One of them we thought should have taken it, but it’s not our company. We’ve only got 6% of it.

With the couple that have received buyout offers, it’s fascinating that that’s happened. I can’t say we have any that have hit any kind of hockey stick, steep growth phase. We haven’t had that happen, yet.

Nobody’s exited, yet. Two of them had opportunities. They both turned it down because they thought [the acquirers] were undervaluing their companies.

One of them I totally agreed with. One of them got an offer that was not much better than just selling the company for a token amount and getting a job with a larger company.

The other company we thought got a decent offer and they probably should have taken it. They didn’t think it was good enough, so they didn’t take it.

Irina: Do you engage with companies post-incubation?

John: While there is no formal relationship, our landlord partners let the companies stay in the space, sometimes for months afterwards. Many mentors continue to mentor. We are very interested in the companies.

Irina: How is your incubator funded? What is your own business model?

John: Robb Kuntz and I give our time for free to it. We have an executive director who gives his time for no salary. The executive director this year also happens to be one of the investor mentors, so he actually put in money. He also gets a little percentage of ownership.

Let me tell you how we’re structured.

We have an entity called BoomStartup, LLC. BoomStartup, LLC is an umbrella company, an administrative entity, that exists from year to year.

Each year, we create a new LLC for the investment dollars that go in and eventually go out to the companies. So, the administrative entity doesn’t receive any investment dollars or any money. It’s more of an administrative holding entity.

This segment is part 7 in the series : Business Incubator Series: John Richards, BoomStartup, Provo, Utah
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