Reflections from Interim Demo Day at AlphaLab

By Matt Pross, Staff Writer

As part of its Startup Project, TEQ magazine has embedded itself at local startup incubators to gain firsthand experience into the world of tech entrepreneurs working to get companies off of the ground. I attended Interim Demo Day at AlphaLab on March 5 and listened to several investor pitches and subsequent feedback from the crowd, which included AlphaLab alumni, experienced entrepreneurs who have received funding in the past, and executives from Innovation Works, the most active seed stage investor in the country. Here are some thoughts from my experience at Interim Demo Day:

After sitting through Interim Demo Day over at the AlphaLab startup incubator on the South Side, I’m very glad that I haven’t attempted to start a company. Before I was privy to the entrepreneurs’ practice pitches and the subsequent feedback from the mentor-packed audience, I just didn’t know the types of questions investors ask themselves before they pull the trigger on a relatively high-risk venture investment.

After getting about 15 minutes to present their pitch, each entrepreneur fielded questions like:

1) Who is your target customer(s)?

2) What is your exact market focus?

 3) Do you have any customers yet?

The mentors in the crowd really forced the novice entrepreneurs to think how an investor thinks. In hindsight it makes perfect sense: Why would a savvy investor throw money at an idea or an entrepreneur without a proper level of vetting?

Besides the necessary practice each entrepreneur gained from the Interim Demo Day experience, I’m sure that each one took away at least one piece of invaluable advice from the mentors’ feedback. In particular, I remembered one mentor’s comments as being especially eye-opening. He said pretty much the same thing to each entrepreneur that presented: “What pain does your solution solve?” and “Is your product a nice to have or a ‘gotta’ have?” After listening to this feedback, it was quite clear to me the kinds of questions investors ask themselves before pulling out the checkbook. Both of these questions must be easily answered for an idea to be fundable.  That’s reality. Consumers and investors alike will pay for something that solves an important problem. If someone is not willing to pay for a product or service no matter how cool the technology behind it may be, it does not have market value.

With the real Demo Day less than two months away (it’s tentatively slated for either May 14 or 15), I’m sure all of the entrepreneurs in this spring’s AlphaLab class are hard at work honing their value propositions and investor presentations to succinctly answer the tough questions mentioned above. Exercises like Interim Demo Day are a great example of the value that incubator programs like AlphaLab add to Pittsburgh’s burgeoning startup ecosystem. Allowing entrepreneurs to practice and receive feedback before they have to pitch to investors could mean the difference between a successful startup and a nice idea that was never funded. With the national venture capital community paying more and more attention to Pittsburgh’s growing startup scene, having more fundable companies in the marketplace can only help our technology industry and regional economy.

Making the Switch: Sean Ammirati Goes From Serial Entrepreneur to VC Principal @ Birchmere Labs

Sean Ammirati is leading up Birchmere Labs.

Serial entrepreneur Sean Ammirati made headlines in March when he switched gears from building successful tech startups to now sniffing out start-up opportunities as a partner at the newly created Birchmere Labs studio fund.

Ammirati has a proven track record of building startups, having started mSpoke and then selling it to LinkedIn. Most recently as COO, he grew ReadWriteWeb to 25 employees and sold it to Say Media in San Francisco last December.

Now, Ammirati is moving to the venture capital (VC) side of the startup equation with his new gig at Birchmere Labs.

“The timing was right to make a move,” Ammirati says. “So far, it’s been a lot of fun. The reaction from colleagues and friends here and across the country has been very positive and heart-warming.”

“As our core Birchmere investment model has increasingly focused on tech-heavy companies, we felt we were missing many great investment opportunities outside our space.  Serendipitously, Sean Ammirati became available after his recent sale of ReadWriteWeb just as we were contemplating how to address the consumer internet space,” said Birchmere Partner Sean Sebastian.  “The chance to launch Birchmere Labs as a new initiative under Sean’s leadership was just too good to pass up.”

Working with Birchmere is not a new relationship for Ammirati. In fact, he first met Birchmere Ventures Partner Ned Renzi, of all times, during 9-11. They started their relationship during a 40-hour drive from Arizona to Pittsburgh. Ammirati’s move to Birchmere made local headlines of course, and even managed some coverage in TechCrunch.

Ammirati explained that Birchmere has been a great investor with a well-known reputation, here and around the country. The VC has found its success with a focus on IP-driven innovation, especially around clean tech and medical fields.

Birchmere Labs will be much different than the classic VC firm, Ammirati explains.

“Birchmere Labs is focused on a different type of startup,” he says. “We focus on startups where the barrier to entry is an active social community. So while companies are easy to start, when they get to scale that is the moral equivalent of a patent portfolio for those companies.”

Ammirati says Birchmere Labs will focus on two things: starting actual companies that are community-driven, commerce initiatives; and it will make investments into these types of companies, as well as web and mobile ventures.

Birchmere Labs is based in Pittsburgh, but has a focus any place it sees the right opportunity. “We don’t have a bias for or against Pittsburgh,” Ammirati notes.

Local entrepreneurs, fear not!

“I’ll spend time in Pittsburgh. I’m an active advisor in AlphaLabs and Adjunct Professor at Carnegie Mellon,” Ammirati says. “I’ll continue to be very involved in the tech community in Pittsburgh as Birchmere has always been.”

“Ultimately, we’ll be judged by the quality of our portfolio,” says Ammirati. “I’m excited to help people build some valuable companies.”

Listen to a TechVibe Radio Podcast with Sean for more details.

Words by Jonathan Kersting jkersting@pghtech.org

Photos by Sandi Fairbanks sfairbanks@pghtech.org

 

Carnegie Learning Acquired by Apollo Group, Inc.

Draper Triangle Ventures is pleased to announce the acquisition of one of its earliest investments, Carnegie Learning, Inc, by Apollo Group, Inc. (NASDAQ: APOL), the largest for-profit educational institution in the world. The agreement also includes the acquisition of related technology from Carnegie Mellon University in a separate transaction, bringing the total deal value to $96.5 million.

Carnegie Learning, a developer of research-based math curricula for middle school, high school and post-secondary markets, including the adaptive Cognitive Tutor® math software, is a shining example of how the unique Pittsburgh ecosystem of academia, entrepreneurialism and early stage investment strategy works in concert to produce an environment rich with possibilities for start-up technology companies.  The Company was founded atCarnegieMellonUniversityand worked closely with Draper Triangle and other investors to grow to become a market leader in providing education solutions.

Jay Katarincic, Managing Director of Draper Triangle notes, “The collaboration between the private sector and Carnegie Mellon produced a world leading education company and will continue to serve as a blueprint for future successes.  It further validates our confidence in the wealth of resources available for early stage companies in and around this Midwestern region.”

Mark Kamlet, the Provost of Carnegie Mellon University and the Chairman of the Board of Carnegie Learning added, “The close working partnership between the University, the Management of the Company and Draper Triangle and the other investors is a perfect example of how technology transfer should work.  Everyone involved came out a winner, including the region, given Apollo’s commitment to the future.”

Carnegie Learning is the outgrowth of 20 years of research in the field of cognitive science at Carnegie Mellon and ten years of use and refinement in the classrooms across theUnited States.  As a wholly-owned subsidiary of Apollo Group, Carnegie Learning will continue to service the K-12 space from its Pittsburgh office, leveraging the broad resources of a Fortune 500 company to expand the philosophy and technology upon which the company was founded in 1998.  The company’s products are in use today across theUS, including state-wide implementations inWest VirginiaandKentucky, as well as district-wide implementations in major urban districts such as Miami-Dade, Cleveland, Atlanta,Richmond and Chicago.

“This is an exciting time for Carnegie Learning,” CEO Dennis Ciccone told his employees. “Our perseverance and belief in the promise of Carnegie Learning has enabled us to re-invent the way we teach math and to build a transformative technology that has been recognized as such in the marketplace. We are fortunate to have a great group of talented employees, and the backing of investors such as Carnegie Mellon and Draper Triangle, and to be located in a region primed for the success of growing companies.”

The transaction is subject to customary closing conditions and is anticipated to be completed during the first quarter of the Company’s fiscal 2012.

East Wind Advisors acted as exclusive financial advisor to Carnegie Learning in this transaction and McGuire Woods is serving as legal counsel to Carnegie Learning.

Dynamics Receives $35 Million from Bain Capital

Dynamics Inc. nailed down $35 million in venture capital from Bain Capital in Boston to perfect its fraud-proof credit cards.

A card-carrying member of the Pittsburgh technology Council, Dynamics produces a paper-thin, flexible computer with high processing capabilities and low power requirements.  The computer can be laminated into a number of different card-based products, like credit and debit cards.

Dynamics’ first product is the Dynamic Credit Card.  The card periodically changes a portion of a user’s credit card information – both visually and magnetically.  In doing so, the Dynamic Credit Card annually eradicates more than $20 billion in credit card fraud and associated costs.

For more details on the deal read it at the Pittsburgh Tribune-Review.

 

PTC “Venture In” Event Series Connects Tech Companies to Capital

The Pittsburgh Technology Council, in collaboration with the Pittsburgh Office of Morgan, Lewis & Bockius, is pleased to announce the formation of  Venture In, a new series of programs  aimed at strengthening relationships between Pittsburgh’s entrepreneurial community and the nation’s leading venture capital organizations.

The first session, scheduled for Friday, March 4, 2011, will focus primarily on the life sciences industry, with featured speakers from Bain Capital Ventures and Triathlon Medical Ventures. Bain Capital Ventures is the venture capital arm of Bain Capital, which has more than $65 billion in assets under management.  Focused on seed through late-stage growth investments, Bain Capital Ventures targets investments in business services, healthcare, internet & mobile, and software companies.

Triathlon Medical Ventures is a Midwest-based venture capital firm that invests exclusively in the life sciences. They provide equity capital to early and expansion stage companies with proprietary biomedical technology platforms or products addressing significant human healthcare needs.

Finally, this panel will also include participation of John Manzetti, President and CEO of the Pittsburgh Life Sciences Greenhouse, who will serve as the moderator, and Eric Kline, a leading business and finance partner at  Morgan, Lewis & Bockius.

If you are interested in learning more about this program, please contact Brian Kennedy at bkennedy@pghtech.org.