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Small Business & Entrepreneurship

Jeff Nicol, SBDC Director, CGCC

21‐Aug‐14

About Jeff Nicol, SBDC DirectorA resident of Hood River since 2006, Jeff is highly engaged with the Columbia Gorge business and tech communities.

With academic degrees in business administration and economics, his background includes rich professional and entrepreneurial experiences including: a dozen years at Intel, starting his own Oregon‐based data protection consultancy, serving as chief financial officer to a Bingen‐based cable and wire harness manufacturer, serving as vice president of operations for a Stevenson‐based software startup, co‐founding a Gorge‐based painting tool manufacturing company, and most recently jumping into the rapidly evolving Northwest hard cider industry.

Jeff has served on in appointed board, member, committee or councilor roles with various entities including: The Better Business Bureau Online, Hood River Planning Commission, Hood River City Council, Mid‐Columbia Economic Development District, Columbia River Gorge Technology Alliance, the Gorge Chapter of the Oregon Entrepreneurs Network, and the Regional Solutions Advisory Committee for the North Central Region.

221‐Aug‐14 NWEDC ‐ Small Biz & Entrepreneurship

Jeff’s Goals

1. Teach something new2. Have fun doing it!3. Give ‘em their money’s worth 3.5 days @ 8 hours/day = 28 hours $950/28 = $33.93/hour $0.565/minute


Disclaimers/Notices

• This presentation is for illustrative and general educational purposes only. This presentation is not intended to substitute for your own due diligence on the viability and applicability of any options to your organization or your respective clients.

• The presenter is not a licensed attorney or tax advisor. Accordingly, no legal or tax advice is presented herein. Always consult with licensed, suitably qualified attorneys and tax advisors for specific guidance.

• Images, trademarks and brands contained herein are the property of their respective owners.


Agenda

• ‘Small’ businesses, entrepreneurs• SBDCs, SBA, SCORE and other resources• Gap funding• Accredited investors• Crowd‐funding: Equity & non‐equity• Incubators, accelerators and boot camps• Cultivating entrepreneurial ecosystem• Stretch Goal: Crowdfunding Videos


What is an “entrepreneur”?

“A person who organizes and operates a business or businesses, taking on greater than normal financial risks in order to do so.”

21‐Aug‐14 NWEDC ‐ Small Biz & Entrepreneurship 6

What is a “small business”?

“SBA has established numerical definitions of small businesses, or ‘size standards,’ for all for‐profit industries. Size standards represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business concern.”


More Info: http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf

*** QUIZ TIME ***Small businesses comprise ______% share of the US

economy?


99.7

http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

*** QUIZ TIME ***The Office of Advocacy defines

a small business as an independent business having fewer than ______ employees.


500

http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf

RESOURCES FOR STARTUPS AND ENTREPRENEURS


Help/Need: Stage Dependent


Pre‐Venture

Startup / Early Stage

Established

START GROWPLAN


Biz Resources: Know ‘em, Use ‘em!

Local SBDCState

Fed

*** QUIZ TIME ***What does “SCORE” stand for?S______ C____ O_ R_____ E________


ervice orps f etired xecutives

*** CHALLENGE ***Raise your hand if you are on a

first name basis with your SBDC, SCORE or SBA contact.



A Look at the Many Available Tools Business plan templates Program and technical information Counseling / mentoring

1:1 business counseling Business plan help (Templates, LivePlan) Research (RMA, BizMiner, ReferenceUSA, SOU MRI) SBM (Small Business Management program) Classes (BOL, in‐person, on‐demand) CAT (Capital Access Team) TIP (Technology Improvement Program) Commercial Kitchen Incubator

Boot Camp Demo Day Investor Intros Gust.com 1 pager; Angelist; TechCrunch; Keritsu; OAF; et al Startup Weekends; Pitch Contests Reality/sanity check – but we’re not career counselors…

Growth Wheel


What SBDCs See: Startup Gotchas

• Financing on credit cards• Biz degree ≠ knowing how

to run a business• Patent ≠ money• Starting too complex; KISS• Passion is important, as

investment often is in the person/team

• Not being agile – need to practice lean (fail early)

• Typical causes of failure:– Cash flow– Undercapitalized

• Lack of working capital• Capex issues

– Skills gaps– Divorce; bad partnership– No market– Competitors


GAP FUNDINGWho might help when banks can’t/won’t?


Gap Funding Resources

• FFF• Crowd‐funding (non‐equity vs. equity)• Micro‐loans• RLFs• Seed• Angels – Usually investing own money as individuals or group of individuals (e.g. OAF, GAINx, Bend Venture Fund, Keiretsu)

• VCs – All stages of pre‐IPO


Expert: Eric Nerdin, MCEDD


Would be great if you can develop some sort of PSA campaign to get the word our on RLF resources. Can’t and don’t want to compete with banks, but message is key.

Would be great if you can develop some sort of PSA campaign to get the word our on RLF resources. Can’t and don’t want to compete with banks, but message is key.

I see too many people tapping credit cards to start or run their businesses, then coming to us for a loan. Don’t do this.I see too many people tapping credit cards to start or run

their businesses, then coming to us for a loan. Don’t do this.

Lots and lots of issues where people enter into leases or other real estate deals with no idea regarding what they are signing. Presents big issues that can be hard to fix. Get a legal

review and have EVERYTHING in writing before signing.

Lots and lots of issues where people enter into leases or other real estate deals with no idea regarding what they are signing. Presents big issues that can be hard to fix. Get a legal

review and have EVERYTHING in writing before signing.

Some of the best stuff we do is just helping people understand what types of financing options are available,

how they will look to a lender, and how to get help from the SBDC or other sources to be better positioned for success.

Some of the best stuff we do is just helping people understand what types of financing options are available,

how they will look to a lender, and how to get help from the SBDC or other sources to be better positioned for success.

“Lack of awareness is a big issue. Many

people don’t seek help from the SBDC or

MCEDD until they are in trouble.”

Warning – Warning – Warning!

• “Accredited Investors”


*** QUIZ TIME ***“Accredited Investor” hasminimum net worth of: _____(Excluding: ________________)

*or* Annual income of: ______


$1MPrimary Residence

$200K

http://www.sec.gov/answers/accred.htm

CROWD‐FUNDING: EQUITYRapidly evolving…


JOBS Act

• “Jumpstart Our Business” Act of 2012– Title II: Access to Capital for Job Creators

• Can now generally solicit and advertise publicly, but…– Only accredited investors can actually invest…– File Form D with the SEC before you begin soliciting…– Disclose details the SEC within 15 days from first solicitation…– Strict verification of each investor’s “accredited” status…– SEC penalty if non‐compliant: One year fund‐raising ban…

– Title III: Crowdfunding• Path for fund‐raising from non‐accredited investors• Stuck in SEC rule‐making… Fall 2014?


States not waiting for SEC… e.g.

• Chapter 460‐99C WAC– Raise up to $1M in 12 month period– Accredited & non‐accredited– Requires DFI filing & pre‐approval– Bad actors excluded– Don’t need audited financials– Investor cap depends on net worth

• <$100K annual income $2K max• >$100K annual income 10% max


CROWD‐FUNDING: NON‐EQUITYRapidly evolving…


Small amounts of money?

• 2013 KS pledges: $1.3M/day [$913/minute]• Q2’14 average successful Kickstarter: $25,229

– No data on median… Beware of unicorns!

21‐Aug‐14 27NWEDC ‐ Small Biz & Entrepreneurship

Celebrity Projects ‐ Skews Data…


Big Biz Use / Proof of Concept


Muddy Waters? Trolls and more…


CROWDFUNDING: SMALL BUSINESS EXAMPLES


Reverend Nat’s Cider: Tasting Room

• Who: Nat West• What: Space to consume hard cider• Angle: Community; local• Raised: $16,317 vs $14,500 target• Backers: 165• Unforeseen: Fulfillment costs & overhead• Biggest benefit: Rabid fans and promoters


Blue Shift

• Who: Sam Beck• What: Capacitor‐powered wireless speakers• Angle: Green; hip; tech• Raised: $46,246 vs. $35,000 target• Backers: 9,493 pledges*• Unforeseen: FCC compliance and difficulty in ramping up manufacturing

• Biggest Benefit: Crowd paid for first run

34

“Pledges” “Unique Supporters” on CrowdSupply.com platform*21‐Aug‐14 NWEDC ‐ Small Biz & Entrepreneurship

Dirt Hugger

• Who: Pierce Louis & Tyler Miller• What: Commercial Compost (move to WA)• Angle: Green; community; local• Raised: $66,579 vs. $65,000 target• Backers: 276• Unforeseen: TBD; just closed campaign• Biggest benefit: TBD, but clearly community has rallied support of firm and mission


Solstice Pizza

• Who: Aaron and Suzanne Baumhackl• What: Wood‐fired pizzeria (move to OR)• Angle: Community; local; kids; farms• Raised: $57,647 vs. $50,000 target• Backers: 456• Unforeseen: ?• Benefit: Rabid local fan base expanded• Related: Portland copycat also found success


Pocket Fuel (new line)

• Who: Mark & Heidi Ribkoff• What: Packaging for cold coffee shots• Angle: Expand offerings of company you know• Raised: $11,688 vs. $20,000 target• Backers: 238 backers• Opens: Did not meet this goal, but may still be consider success(?) Awareness, proved demand and still went ahead with product


Crowd‐Funding: Comparing PlatformsKickstarter Indiegogo GoFundMe Crowdsupply

Monthly Traffic 5.5M U.S. 919K U.S. 2.3M U.S. ?

Funding All or none Get all pledges Get all pledges All or none

Fees 5% if goal hit,plus 3‐5%

credit card fee

4% if goal hit or 9% if missed, plus 3% credit card fee, plus wire for intl.

7.9%, plus $0.30 per transaction

5%, plus 2.9% credit card,

plus $0.30 per trans./ 10%

preorder fee / Fulfillment & Logistics

Project Duration

30‐60 days Up to 40 days None, unless you choose “All ‐or‐Nothing” campaign

45 days? (Has “pre‐launch

option” as well)

SBDC (Biz Client) Target?

Yes Yes No Yes


Crowd‐Funding: Why People Pledge


Description Old Example New Example Appeal (Why )?

Outright Donation Paddle raise at an auction

Online $ towards a an effort that personally appeals to your interests

Community; Ego; Get to critical mass to make project a “go”; FFF

Overpay for G&S $100 charity dinner $50 for bag of compost

Community; Ego; Early access to G&S; FFF

Commit to pre‐purchase

Groupon offer Pre‐paid order for Bluetooth Speaker yet to be produced

Community; Ego; Early access to G&S; Earlybird pricing; FFF

Lending Individually vetted loan

Crowd lending platform (e.g. Kiva)

Community; ROI; Diversify risk; FFF

Equity Accredited investordirect or with group

Still TBD as JOBS Act rules pending

Easier for little guy to invest; ROI; FFF

Crowdfunding: Forecasting & Measurement

Kickstarter Stats KickTraq


Crowdfunding Tips It’s a visual medium; have

a great video! OK to include kids/family

and community in pitch Be sure to ask for the

amount of $ needed Cost out all rewards, fees,

fulfillment, postage, etc. Devour stats from

Kickstarter & KickTraq Social media and

traditional PR a must!

Don’t just put up offer –keep pitching and updating everyone!

Cool new stuff still needs to be sold! Think F.A.B.

Premiums may result in hit to future cash flow

Understand fulfillment and logistics overhead

Think about strategy if oversubscribed… Add more rewards? Scaling?


INCUBATORS AND ACCELERATORSMany models out there…


Portland Incubator Experiment

• Physical space• $20K financing, 3 months in accelerator program, plus 6 more months rent‐free in downtown workspace– Small hit to equity– “Access to the other startups‐in‐residence, successful alumni, Wieden+Kennedy’s top creative minds, investors, hundreds of mentors, and usually, really good food and beer.”

– Competitive application process; limited entry– http://www.piepdx.com/


• Physical space– Membership model (tiered)– Low cost place for mentoring, workshops, temporary office space, networking, boot camps, introductions to investors

• No hit to equity

– Generic, fungible office space– No hoteling– http://www.gorgeinnoventure.com/


ADX Portland• Physical space

– Membership model (tiered)• No hit to equity

– ADX is a hub for collaboration where individuals and organizations make and learn.

– “By sharing tools, knowledge, and experience, we’re doing things better – working together. Our makerspace, learning center, and custom fabrication shop allows anyone to bring their idea to life. In our 14,000‐square foot facility, high‐profile designers work alongside students, retirees share their knowledge with novice builders, and entrepreneurs collaborate with hobbyists.”

– http://www.adxportland.com/


Oregon Technology Business Center

• Physical space + virtual– Membership model– A non‐profit tech startup incubator that provides coaching, networking events, entrepreneurship programs, and shared office space to help tech start‐up ventures succeed.

– http://otbc.org/


PWW Incubators

• Physical space for “wineries”– 5 buildings– 6 year escalating rent – Coopetition – http://portwallawalla.com/


PSBA

• Physical space (membership model)– 30+ tech & science startups, including spinouts from Oregon universities

• Office and lab space plus a menu of services• “Accelerator draws the region's top science and technology startups with turn‐key affordable work space; conference room access; monthly CEO meetings and topic‐related brown bags, plus ready information on business basics, raising funds and managing people. Informal socials, pitch practice and office hours by skilled mentors and investors round out the exceptional offerings at PSU Business Accelerator.”

– http://www.pdx.edu/accelerator/


OSU FIC

• Expert resource to assist businesses– Food Innovation Center (FIC) Agricultural Experiment Station ‐ Portland, OR

• Product and Process Development, Packaging Engineering and Shelf Life Studies, and Consumer Sensory Testing. Research work is conducted to develop innovative Processing and Packaging Technologies.

• Get Your Recipe to Market (class)

– http://fic.oregonstate.edu/


Tech Stars

• Physical space (multiple sites)– $118K seed funding in exchanges for mentorship, and access to network of mentors and alumni

• 7‐10% equity hit• Claim: “After 90 days with Techstars, companies average over $2M in follow on investment and more than 35 of them have already been acquired”

– http://www.techstars.com/


More resources…

• NBIA– http://nbia.org/– NBIA training conference: October in Portland

• OTBC’s Virtual Incubation Program (2014)– http://www.otbc.org/vip


Startup Boot Camps

• OTBC Online Startup Summer Camp (2012)– http://otbc.org/CampAgenda

• Gorge OEN Accelerator Boot Camp (2014)– http://www.gorgeinnoventure.com/

• UP.co – “Startup Weekends”– http://www.up.co/communities/usa/portland


Want More? Suggested Reading


NURTURING A SUPPORTIVE ECOSYSTEM FOR ENTREPRENEURS

How we do it in the Mid‐Columbia River Gorge…


Infrastructure and Community

• Utilities (water, sewer, power)• Transport (road, rail, water, airport)• Broadband & wireless• Educated workforce (K‐20, STEAM)• Higher education (community college, 4‐year universities & research)

• Quality of life (arts, culture, food, restaurants, recreation, etc.)


Community Partners


Community Partners, continued


WRAP UP


Agenda Recap

• ‘Small’ businesses, entrepreneurs• SBDCs, SBA, SCORE and other resources• Gap funding• Accredited investors• Crowd‐funding: Equity & non‐equity• Incubators, accelerators and boot camps• Cultivating entrepreneurial ecosystem• Stretch Goal: Crowdfunding Videos


Expert: Rick Turoczy, Silicon Florist


PDX in greater Portland has transitioned focus to be more open to early stages in a variety of clusters. Used to be comfortable only with established companies with office space. Move upstream and the downstream follows.

PDX in greater Portland has transitioned focus to be more open to early stages in a variety of clusters. Used to be comfortable only with established companies with office space. Move upstream and the downstream follows.

Portland Seed Fund, City of Portland and City of Hillsboro all put money at risk, but at a lower level of risk…$25K per each.Portland Seed Fund, City of Portland and City of Hillsboro all put money at risk, but at a lower level of risk…$25K per each.

Early adopter program created by Technology Association of Oregon and Portland Development Commission. Portland

simplified RFP process allowing startups to bid.

Early adopter program created by Technology Association of Oregon and Portland Development Commission. Portland

simplified RFP process allowing startups to bid.

I3PDX project (Innovate, Include, Invest). Goal: Change the demographic of the startup scene. Connect with established professional groups already working with target players.

(In‐kind services, rent, utilize buildings, etc.)

I3PDX project (Innovate, Include, Invest). Goal: Change the demographic of the startup scene. Connect with established professional groups already working with target players.

(In‐kind services, rent, utilize buildings, etc.)

“Rethink the way you are doing things!

Many approaches that work for startups can work for economic development orgs, state orgs, et al.”

Jeff’s Goals – How’d I Do?

1. Teach something new2. Have fun doing it!3. Give ‘em their money’s worth


QUESTIONS?


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