Business Incubator Series: John Richards, BoomStartup, Provo, Utah (Part 8)

By guest authors Irina Patterson and Candice Arnold

John: So, Boom Startup Capital 2010, LLC was the exact name of the entity that took in money, and then invested in each of the 10 companies in the inaugural year, 2010.

We took in enough money for the investment and a bit more for expenses. That money goes into the entity, and the entity then writes the checks to the companies to make the investments and has a little money for administrative expenses.

As we went into 2011, we formed the entity Boom Startup Capital 2011, LLC. That took in the money from investors. This year we were a little different.

Last year, we just had investor-mentors put in the money. This year, we had investor-mentors plus we had passive investors. There were some investors who put in $25,000.

One guy even put in $100,000, and said “I don’t want to be an investor-mentor and give all that time, but I’ll put in the money because I want to get a small piece of each of these companies.”

So, we took in passive investment. We got a lot of interest this year.  We were so oversubscribed, we started the entity Boom Startup Capital 2012, LLC and put the excess into that entity. So, we’re already funded for next year.

We have nobody receiving compensation in the form of salary or wages. This is really a labor of love.

We have some sponsors, too. There’re some VCs and law firms and accounting firms that, for some reason, don’t make investments, but they’ll give us $2,000 or $5,000 sponsorships or fund a dinner.

Like, we had a dinner that Grant Thornton sponsored. We had about 40 people at it. Let’s say it cost $20 a person. I’m guessing that dinner could have been – with everything – $1,500.  They had their managing partner for Utah and about four other people there.

They’re just very supportive of our program. They want to get to know these 10 companies. We call that a sponsorship. We do a lot of things like that.

When we have to pay money out ourselves, we use the slight excess we get from investors. The way it works is money comes in from an investor. Most of it’s allocated to go to the companies for direct investment in them.

A bit is left over for our slush fund administrative expenses. That’s how we pay for pizza parties or how we do certain expenses.

Irina: What are some of your challenges?

John: The big problem that Utah has – and I don’t know if it’s everywhere – is we just don’t have enough tech founders. Whether they be 22-year-olds, 28-year-olds or 40-year-olds, we don’t have enough skilled tech people – whether it’s CTO or a software engineer – who can be co-founders with the business people with ideas.

We don’t have enough of those to go around. It’s important. Anytime we waffle on this or get weak on our decision making, we pay the price for it. If we accept a team that doesn’t have a strong tech founder, it’s not a good outcome. It causes problems.

If I could wave a magic wand and fix one problem, I would fix the problem of not enough quality startup tech people to be on these teams. That’s 90% of our problems.

[To give you a little more details about the process], when all 10 companies are accepted, they all go to our law firm. It’s a big meeting in a big conference room. They ask all their final questions. We put the paperwork in front of them and they get a chance to review it. They can have an attorney review it. Then we all get it signed.

Well, this year, we did a signing with a company and they had two business guys and one tech guy. That was their founding team. We signed the paperwork around 5 p.m. that day.

Sometime the next morning, the tech founder’s wife tells him, “This is nuts. You can’t go all summer without a salary. You can’t be in a startup company. I don’t want you to do it.”

He had to tell his two business partners that he couldn’t do it; so, the next day, he told them he was out of there. They’d signed everything with us, we’d announced them, and the tech guy quit.

It took us four or five weeks into the program to find a replacement for him. That was a problem. That was uncomfortable for everybody, and we didn’t like it. That hurts the team.

This segment is part 8 in the series : Business Incubator Series: John Richards, BoomStartup, Provo, Utah
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