Thursday, 9 May 2013

Building A Powerful Team

Tech entrepreneurs check in to Silicon Valley hoping to cash out

Johann Schleier-Smith
Age 32
Company Tagged
Description A social discovery site that connects people with shared interests.

Photo by Scott Council
Building A Powerful Team
In the tech community, the team often excites venture capitalists as much as the idea or individual. In fact, investors are more likely to pony up dollars for a talented tech squad than a lone prodigy.

“Investors are keen to see groups of smart motivated people who are going to do what it takes to make it through the company-building process,” says Johann Schleier-Smith, 32, co-founder of Tagged, a social discovery website for meeting people, playing games, and sharing interests. “You can’t do things alone, but if you get a nucleus of a team you can do great things.”

With more than 100 million users worldwide and $32.5 million in revenues for 2010, Tagged is now on track to generate $45 million in 2011. The company has been profitable since 2008 as a result of its three distinct revenue channels: virtual currency micro-payments, premium subscriptions, and advertising. They plan to boost staffing by the end of the year, for a total of 150 employees. But in the beginning there was only the dynamic duo, Schleier-Smith and his partner and childhood friend Greg Tseng. The two grew up in McLean, Virginia, working together on science projects in middle school. Eventually both would study physics at Harvard University. During their time there they developed several Internet companies, including a price comparison website to help students get the best deals on books at the student bookstore.

While in graduate school at Stanford University, they launched Jumpstart Technologies, an incubator for their business concepts, which in turn spawned Tagged in 2004—roughly the same time that other social network was being developed by another Harvard student. Later, in 2007, realizing they couldn’t outpace Facebook, Schleier-Smith and Tseng switched their objective from a social media company that connects acquaintances to one linking up new contacts.

As chief technology officer, Schleier-Smith figures out how to make ideas conjured up by the team functional. Tseng, CEO, provides the business development, vets acquisitions, and oversees product development. They realized, however, their combination of talents represented two-thirds of a whole, and tapped their mentor Reid Hoffman, co-founder of LinkedIn and a former PayPal executive critical to financing efforts, to serve on Tagged’s board of advisors.

Both Tseng and Schleier-Smith have a double-digit, controlling percentage ownership in Tagged, with venture capital firm the Mayfield Fund as the other principal owner. Obtaining funding requires that founders of startups not only spend hours toiling in the lab but dedicate sufficient time to promoting their products and pressing the flesh with prospective investors. This summer Schleier-Smith and Tseng mentored participants in the NewMe Accelerator by helping them navigate the rocky terrain of making connections and forging alliances as an outsider in the Valley.

Protecting Your Concept
While it’s important to collaborate, new startups must be careful not to disclose their “secret sauce” when pitching ideas to investors. “If you have what you feel is going to be a killer product, first lock down your patent,” says Michelle Fisher, CEO of Berkeley, California-based Blaze Mobile, a developer of mobile commerce solutions. The inventor recently received a patent for the 5-year-old payment sticker idea she invented to help consumers make purchases and payments and keep track of retailer’s rewards points via cell phone. “You have to walk a fine line. You have to put enough detail in there so that you can get a patent granted but at the same time you can’t give away too much so that you make your patent a complete blueprint for others to steal. As a small company you are very vulnerable.”

Fisher maintains that about a half dozen companies she pitched her idea to have tried to copy her technology, which embeds a near field communication microchip into stickers that attach to the back of smartphones. When held up to a NFC receiver that accepts MasterCard, the sticker debits funds from bank or credit accounts or loads retailer information such as coupons. Fortunately, her patents will protect the idea as well as allow her to collect licensing fees and royalties from companies that continue to use her intellectual property. Blaze Mobile has received roughly $7 million in funding over the past six years from angel investors to further develop the technology. Maintains Fisher: “Your intellectual property is a form of revenue that will attract investors.”

Clayton Redmon, CEO of Dallas-based StreamVenue Healthcare L.L.C., says: “Getting a patent only costs about $10,000, but enforcing your patent is what costs millions of dollars.” His main product, StreamingOR, uses software and instrumentation that plugs into the endoscopy, X-ray machine, and other auxiliary equipment in operating rooms to securely stream video, photos, and vital information in real time anywhere in the world. StreamVenue is able to install its technology in hospitals for $5,000 with a monthly fee ranging from $1,500 to $2,500, while installation for its competition can start at $35,000 and top $2 million in some instances.

StreamingOR uses H.264, a common video-encoding technology needed to view high-definition video if an Adobe Flash plug-in is not loaded. This is useful on iPhones, iPads, and newer browsers. H.264 is a codec standard licensed by MPEG LA, a consortium of tech companies that licenses patent pools for use in video technology. As a licensee, MPEG LA agrees to legally protect StreamVenue from poachers who try to steal his concept, says Redmon, who owns 55% of StreamVenue Healthcare with the remaining stake in his company held by independent surgeons, management groups, and banking executives. The company recently signed a nonexclusive channel development agreement with Ausmedical L.T.D. in the Netherlands and Australia.

“I couldn’t be an island out there alone,” says Redmon, who is not a part of the NewMe group, but who believes entrepreneurs benefit from collaborative experiences and team input. “I’ve found the only way to survive is to have a bodyguard. If you don’t have a bodyguard big enough, you most likely are not going to survive.”

For innovators to gain traction in this sector, they must protect their concepts as well as successfully execute their business models. “In order for the ecosystem to accept African Americans as a viable source for talent to build meaningful ventures, we have to have evidence of repeatable success,” says Syncom’s Smith. “The burden is on entrepreneurs who have received capital to create valuable and meaningful institutions. Despite historical and contemporary examples of unfairness and inequity in accessing capital, success is often the great equalizer.”

Source: Black Enterprise

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