Garrett Sheehan, Economic Development Specialist
The United Illuminating Company

These are challenging times to do business anywhere. Connecticut, however, has always offered many resources and programs to help businesses, especially startups. But unless you know where to look, these programs and their dollars can be difficult to find, because they are sprinkled throughout state government.

Looking to save your business money on electricity? Ask about the programs available through the Connecticut Energy Efficiency Fund and the Connecticut Clean Energy Fund; the former is managed by the utilities, the latter by Connecticut Innovations.  Looking for financing? The Connecticut Development Authority and the Connecticut Department of Economic & Community Development can get you started. Technology startups can also apply for Connecticut Innovations’ venture funds.  Do you need assistance in developing or training your workforce? Speak with the Connecticut Department of Labor, your regional workforce board and your local community college. 

These are just a few examples of the various organizations that can help your business grow. Each has specific programs or funding to deal with certain issues your business may be facing. With so many organizations trying to help, it can take a lot of time to find the right person. Luckily, Connecticut has an organization for that, too.  The Connecticut Economic Resource Center (CERC) operates a one-stop business phone service.  Call 1-800-392-2122 and speak to a representative who can point you in the right direction.  The resources are there for you to take advantage of.

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Posted under Tech Community / VC World

On June 17, I attended the 2009 New York Venture Summit with my colleagues Patrick O’Neill, Anil Vasagiri and Gladys Rivera. CI was a first-time sponsor of the event, and we were very impressed with the quality of the panel speakers and the presenting companies. We saw more than 50 companies from three different tracks: technology, life science and clean technology. The event was well attended by many VCs and other industry professionals. 

Anil Vasagiri participated on behalf of CI on the Clean-Tech Innovation panel with other VCs from Sail Venture Partners, BP Alternative Energy Ventures, Element Ventures, L Capital, Harris & Harris Group and Emerald Technology Ventures. Although the participants represented funds of varying sizes, capital efficiency and business model efficiency were the dominant themes at the event. Most participants indicated that they were increasing the reserves for their existing investments – which means fewer deals and investments this year. Although most of the funds did not expect to see big exits in the next few years, I was encouraged to hear that they remain bullish about prospects in clean tech space.

Pauline Murphy
Managing Director, Investments

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Posted under From the Deal Team

Connecticut Innovations and Clean Energy Fund staff members devoted their time on Friday, June 5th, to beautifying the grounds of the Veterans’ Home and Hospital in Rocky Hill.  The staff raised funds through luncheons, a proven way to get people to donate, to purchase both perennials and some annuals and then rolled up their sleeves and raked, dug and planted.  The day was perfect for our efforts – cool, cloudy with a light rain.

Many veterans stopped by to chat and to thank us for our efforts.

Catherine Cook, director of community affairs and volunteer services, wrote:

“Thank you for caring about our neediest veterans and helping us do something we could not have accomplished alone.  We were overwhelmed at the volume of the donated plants and materials you were able to obtain!  Our veterans in the Special Care Unit and the other hospitalized vets are so appreciative of the gifts you have given them.”

On a personal note, both as a veteran and a member of a Marine Corps League Detachment that also has regular activities for the residents, I am taking this opportunity to thank the staff for helping my brothers who have given so much.

Russ Tweeddale
Sgt, United States Marines
Managing Director, Investments

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Posted under From the Deal Team

If you are launching a business and operating on a limited budget, you may want to read this article.  A fellow investor recently brought it to my attention, noting that it contains some good advice.  I agree.  The article, which appeared in the May 2009 issue of Entrepreneur magazine, offers entrepreneurs who are unable to raise money tips on bootstrapping. 

Here is a link to the article, entitled “10 tips for successful bootstrapping.”

Peter Longo
President and Executive Director

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Posted under Message from the President

Susan Hertzberg
President, Ipsogen Inc.

I remember hearing a story that goes like this…  During the time of the Apollo Space Missions and prior to one of the early launches, the President showed up at Mission Control for a tour and to meet the staff.  When he entered the room he encountered a man, and he shook his hand and asked him his name and what his job was.  The man responded with his name and said simply, “Mr. President, I am here to put a man on the moon!”  Later, the President asked what that man did, and he was told that he was the janitor!

I spent most of the past 25 years working in multi-billion dollar companies.  When I moved to Ipsogen, I was employee number four of the U.S. subsidiary.  Many former colleagues told me that I would throw out most of what I had learned and what had worked for me in those large companies, as start ups are just “so different.”  Eighteen months into this assignment, I realize that on the contrary, many of the management techniques I employed over the years are every bit as relevant in a company of four as they are in a company of 40,000. 

In the end (and the beginning) it’s all about people – and creating not just a satisfying work environment but an engaged one, which is especially important in a small company where you must do more with less.  Employees give you their absolute best when they feel they play a vital role in reaching goals and “buy into” the overall mission.  Here are some things you can do to create an engaging work environment:

• Take the time to talk (repeatedly) about vision, mission and values.
• Set clear expectations and realistic but stretch objectives and measure and share outcomes.
• Ensure each employee is clear what his or her role is in the company and how it contributes to overall company goals.
• Openly communicate successes, challenges, risks and opportunities and provide and accept ongoing feedback.
• Listen and solicit suggestions.
• Give trust outright; it shouldn’t have to be earned.
• Expect the best.
• Treat everyone with dignity and respect.
• Walk the talk

I think it is easy to forget or feel like we don’t have time to do some of these things in a structured way.  Or we don’t do them under the guise of “I don’t want to replicate the corporate environment I left.”   However, there is something in between bureaucracy and too much process and just good overall business effectiveness.  Employees appreciate when their leaders make the effort.  Ensuring that every employee feels like a contributing and important member of the team is very good business, but it does take effort, repetition and some structure to the communications process.  Perhaps even more important, incorporating these behaviors early into the life cycle of the company helps fuse them into the fabric and lasting culture of the firm far beyond the start-up phase.  And this may just be the thing that helps you to reach your moon!

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Posted under Portfolio company guest article

Elon Boms
Managing Director, LaunchCapital, LLC

A comparison of New Haven and Palo Alto may not be as ridiculous as it sounds.  On the surface, both cities appear to have little in common aside from top-tier university programs.  Unlike New Haven, Palo Alto has warm weather, average salaries greater than $100K, billions of dollars of capital, Fortune 50 technology companies and a vibrant start-up community.  Palo Alto’s success is partly due to an infrastructure of talent that draws new people, fresh ideas and forward-thinking companies that spin off products, services and philosophies, in an effort to fuel the local economy and create self-perpetuating growth for the city.

However, the core ingredients (and history) of this infrastructure – the flavor of the city, if you will – look very similar to the distinct components of New Haven.  These ingredients include but are not limited to:

Ingredient 1:  Smart people with an incentive to stay
New Haven is a breeding ground for smart people, with a number of public and private universities within an hour’s drive of the city (Yale, Quinnipiac, Southern, UCONN, Trinity, Wesleyan, Conn College, etc.).  Students who graduate from these schools, however, often leave for more attractive cities that offer more opportunities for career advancement, financial gains, and the chance to live in a “hip” community.

New Haven is changing, though. Some recent informal polling of graduate students from Yale (friends, mostly) indicates that the city has become more desirable as a long-term residence.  My own experience has shown me that many Yale graduates, especially more recent ones, reminisce fondly about their time in New Haven – and could be convinced to move back to the city for the right opportunity.  I contend that with the right jobs locally, New Haven would offer a compelling environment to retain the top talent that leaves for “greener pastures.”

Ingredient 2: Capital
New Haven is situated between two of the most prominent capital centers in the world.  NYC and Boston are less then two hours away and rank #2 and #11 in the top 15 richest cities by GDP (ahead of San Francisco at #15), and they are in the top 15 fastest-growing cities through 2020¹.   Granted, the picture was much brighter before the financial crisis and economic meltdown, but these cities are known for financial innovation, as well as the large amounts of capital flowing through the funds and companies that exist there.  Attracting capital from these locales, as well as Connecticut sources, should be a top priority for New Haven’s entrepreneurial development.

Ingredient 3: Strong Industry
Connecticut has long been known for its strength in attracting insurance companies into the Hartford area, but insurance is not the only thriving industry in the state.  According to Manta.com, over 250 pharmaceutical, biotechnology and medical device companies have offices in Connecticut.  Industry leaders such as Pfizer, Becton Dickinson and Bristol Myers Squibb have research and/or manufacturing facilities within 45 minutes of downtown New Haven.  Plus, Yale Medical School was ranked in the top 10 medical schools overall for research, while UCONN landed in the top 75².

Ingredient 4: Large Companies Actively Promoting Start-Ups
The opportunity for acquisitions in Connecticut is growing, due to Connecticut’s strong presence in the pharmaceutical market and the fact that the industry as a whole is restructuring its development model.  Taking a page out of Palo Alto’s history, acquisitions beget more acquisitions, which cause people to become more interested in starting companies that will ultimately be acquired.  In fact, any activity in the entrepreneurial ecosystem begets activities that help the whole – whether it is a new fund launching in the community, a start-up getting funded, or a successful exit.

This dynamic is, perhaps, the most important aspect of Silicon Valley’s success.  It is a self-perpetuating model of innovation.  Tapping into the strategic dollars of the pharmaceutical industry is critical to gaining traction for an entrepreneurial-driven New Haven.

Ingredient 5: Government and Local Leaders with a Desire to See the City Prosper
After four years of exposure to the New Haven business community, it is my opinion that the residents of this area are more dedicated and excited than those in any other city I have lived in, especially with regard to the future prospects of the region (note: I have lived in Washington, DC, Danbury, Atlanta, Chicago, Boston).  The atmosphere is exciting, the people are motivated and the local universities and government officials are on board.  The proof can be seen many times over:  the support for the restoration of downtown New Haven, Connecticut Innovations’ investment activity (vis-à-vis other state funds), the support of the CTech business accelerator and Yale’s support for the Yale Entrepreneurial Institute.

My hope is that LaunchCapital’s involvement in the community – and our investment in six local start-ups over the past 12 months – will help provide the impetus to make New Haven’s entrepreneurial community as strong as Palo Alto’s.  The actions of LaunchCapital demonstrate the confidence that I have in New Haven’s future as a top-tier city for start-ups to succeed.

 ¹www.citymayors.com  ²US News and World Reports Rankings (2009)

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Posted under Tech Community / VC World

I recently spoke with Hartford Courant reporter Lynn Doan about the state of entrepreneurship in our lovely Nutmeg state. She has since published an article about local entrepreneurship: “Tough Economy Churns Out New Microbusinesses.”  

One of the things we discussed was how the barriers to entry for a startup have been reduced or almost eliminated by the advent of Web 2.0 and Shared Services. Using my personal experience as a reference, when my partners and I started NeuVis in 1997 (a company that CI subsequently seeded in 1999), we burned through almost $200,000 in startup costs – investing in hardware, software, development tools, services, storage, bandwidth, marketing, and so on.

Most of these services are now available online as free or low-cost resources.  You can:

• Use Web 2.0 development tools such as frevvo (www.frevvo.com) to create easy-to-use forms/applications for free
• Get up to 10 GB of free storage from Google, Yahoo, etc.
• Use marketplaces such as www.elance.com and www.topcoder.com to engage with programmers and service providers in the next town or across the world.
• Use companies such as Gevity to outsource your HR, insurance and benefits management.
• Find affordable office space in incubators at local universities or in Connecticut’s business accelerator, CTech, which is sponsored by Connecticut Innovations.
• Get local marketing and lead generation services from companies such as Yodle  (www.yodle.com) – funded by my good friend Alex Ferrara at Bessemer Venture Partners.

This was also the gist of my recent talk at the local Y in Darien.  There, I spoke to members of the Darien Entrepreneurs Group, some of whom have gone from being former “masters of the universe” to being entrepreneurs.  Two entrepreneurial companies which have been launched during this recession by forward-thinking individuals are FanDistro (www.fandistro.com), started by recovering Wall Street guru and practicing musician Michael Penfield, and OptiBank (www.Optibank.com) which is focused on allowing consumers to achieve the highest yields on their bank deposits and to recapture lost interest income in a number of areas, such as bill payment, tax payment, mortgage payment, payroll withholding, stored value products and consumer rebates.

So, with all of these readily available no-cost and low-cost resources, starting a new business has never been easier.  Onwards and upwards !

Maneesh Sagar
Managing Director, Investments

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Posted under From the Deal Team

He launched his first company, Perimeter eSecurity, from the basement of his home in 1997 and grew it into a successful Internet security services firm with more than 300 employees and over 5,000 customers. Applying lessons learned from this venture, he is now launching his second company, Continuity Engine, Inc. – which has developed the industry’s first SaaS-based operations, management, and governance platform for community financial institutions. The repeat entrepreneur I am alluding to is Andrew Greenawalt. 

To help spur the growth of his latest venture, Connecticut Innovations last week made a seed investment in Continuity Engine. The company’s software platform simplifies regulatory reporting for community banks, credit unions and other financial institutions. Our investment will enable Andy and his team to expand the platform functionality and initiate product marketing efforts. 

We have great confidence in Andy and look forward to working with him again.

To learn more about Continuity Engine and our recent investment, please click through to our press release.

Anil Vasagiri
Director, Investments

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Posted under From the Deal Team

Oil Purification Systems (OPS) is on a roll. Not only was the company’s product recently dubbed the 2009 Best Available Environmental Technology, but Governor Rell and Connecticut Innovations announced this week that OPS has received CI’s first investment through the Connecticut Clean Tech Fund.

With this investment, the Connecticut Clean Tech Fund has now officially “lifted off.” We are delighted that such a deserving company is the first client of the fund. OPS boasts a remarkable engine oil cleaning technology and growing customer base.

There are a number of additional clean tech investment opportunities in our pipeline – and we are in the process of evaluating them. We are hopeful that many will warrant investments from the fund and bring to market worthwhile new innovations that conserve energy and resources, protect the environment or eliminate harmful waste.

Read more about the Connecticut Clean Tech Fund and this investment in OPS in press releases from the governor’s office and CI.

Peter Longo
President and Executive Director

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Posted under Message from the President

Frank Marco
Partner, Wiggin and Dana

In positioning your company for sale, there are many strategic and tactical business, legal and accounting issues to consider. Advanced planning is important as it can improve value, make the offering process more efficient (also increasing value) and prevent impediments during due diligence and closing. I’d like to focus primarily on privately held companies that are venture capital or private equity financed.

Continue to Build Value - You should focus on continuing to build the company’s value by positioning it in its industry segment and continually increasing the company’s exposure to industry partners, potential acquirers and others at trade shows and in liaisons with those parties.

Corporate Structure – If your company has more than one product or business line, consider whether an individual product or business line, rather than the company as a whole, would be attractive to a buyer. If so, it may make sense to reorganize the company into a holding company with two or more subsidiaries. Also, consider in advance of the sale process whether the company has unwanted assets. If so, consider whether those assets should be sold or spun off.

The Balance Sheet - The strength of the company’s bargaining position will often depend on the strength of its balance sheet. Does your company have enough resources not only to sustain its operations through a point of sale but beyond as well? Is it clear to potential buyers that this is the case?

Manner of Sale - You should determine whether the company intends to manage the process of soliciting buyers itself or to use the help of an investment bank. In any case, as a general rule the company’s value should be maximized by an intensive process that reaches the appropriate universe of buyers, and you will want to consider whether a more formal auction process is in the company’s best interests. The company’s board of directors will want to be sure that it is fulfilling its fiduciary responsibilities. You may need to prepare an offering memorandum or other documentation to facilitate the process; investment banks often assist in this preparation.

Manage Expectations/What Are You Worth? – The company’s board of directors and management will likely want to have extensive discussions on the best time to sell the company, based on achievement and projected achievements of milestones (with corresponding increases in shareholder value), balanced against risk and other timing issues. It is often useful for the company’s board of directors and management to have frank internal discussions of “the number” that they are targeting, and in their discussions with investment banks to obtain their analysis of the market (recognizing that the bankers may be in the “sell mode”). Reviewing comparable companies is generally part of this analysis. This iterative process may be useful so that you know in advance whether an arrangement would be acceptable to the company’s constituents.

Are You Ready for “Prime Time”? - It is never too early to assemble all material that will be required for due diligence, using a good due diligence checklist, and at the same time resolving any disputes or entanglements, cleaning up paperwork and working with the company’s accountants and lawyers regarding any tax, legal or accounting issues to be resolved. Doing so will help the company’s board of directors and management better understand the company’s risks that may become significant negotiation points with a potential buyer. If a Hart-Scott-Rodino filing will be required, you should check with your lawyers regarding guidelines to be observed to minimize the risk of anti-trust issues.

Employee-Related Matters - Are all employee agreements in order, including severance agreements? It may be appropriate to consider “stay” or “transaction” bonuses for key employees in order to retain them and motivate them toward a sales transaction, especially if there is a significant preferred stock liquidation preference relative to the expected transaction value. Review the company’s option plan and potential “golden parachute” issues to determine any tax issues and begin advance planning (such as exercise of options in advance of closing, providing for acceleration upon change of control and related matters).

Director Indemnification Agreements - Check to be sure that these are in effect and up to date.

Employee Personal Planning - Encourage employees to check with their personal advisers as to their personal tax planning, as the lower pre-sale equity value may facilitate some desired planning to minimize tax consequences upon the sale.

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Posted under Sponsor Guest Article