Google for Startups has awarded Austin-based Omaiven, which does workflow automation for clinic operations, $150,000 in cash and additional support services.
It also awarded $150,000 to DataScope, a San Antonio-based startup that leverages mobile technology to revolutionize data collection and deliver real-time insights to any industry.
“Google for Startups Latino Founders signifies a validation of our efforts and mission,” Nicolas Serrano, co-founder, DataScope, said in a news release. “We will utilize this support to enhance our safety and quality assurance solutions.”
The grants are part of Google for Startups Black Founders Fund and the second Latino Founders Fund.
Altogether six startups in Texas received grants totaling $900,000.
“In 2020, we launched our first Google for Startups Black Founders Fund to help Black tech entrepreneurs overcome the disproportionate hurdles they face when raising capital,” Lisa Gevelber, VP of Google for Startups, said in a news release. “Over the past three years, we’ve significantly expanded the scope of our work, expanding our Black Founders Fund to Europe, Africa, and Brazil, and to Latino founders in the US.”
Google for Startups has now provided $45 million in cash awards to 547 promising entrepreneurs through its Black and Latino Founders Funds.
In addition to the cash awards, entrepreneurs will receive up to $100,000 in Google Cloud credits, and they will also receive mentorship from Googlers, along with other resources such as sales training, investor proper, mental health coaching, and community offerings at no cost.
The support from Google will accelerate Omaiven’s growth and deepen collaborations with clinic and hospital partners to develop new AI-powered workflows that unlock time for healthcare teams, according to Jerold McDonald, CEO of Omaiven Health, said in a news release.
Corrily, a price optimization software startup used by subscription-based companies, won the global pitch competition at Saastock Austin on Friday.
The San Francisco-based company beat five semi-finalists to claim the top prize, including Oneup, Userflow, Uspacey, Laxis, and Forged.
Saasgtock, based in London, held its inaugural SaaStock Austin conference last week with more than 800 software as a service companies attending at the Marriott downtown. The event, including many nighttime parties and happy hours comprising Nightstock, was a huge success, said Alex Theuma, SaaStock Founder and CEO.
SaaStock Austin already plans to return to Austin in 2024, Theuma said.
SaaStock featured live podcasts with Alex Theuma and guests, exhibits, and two stages with speakers providing content tailored to Saas companies.
Jason Cohen, Founder and Chief Innovation Officer of Austin-based WP Engine, spoke about creating a realistic mission statement with employee input. Then, he advised startup founders to write everything down in brainstorming or “write-storming” sessions.
“It’s fun to plow through and figure out stuff,” Cohen said. “It’s forensic.”
Co-creating a mission statement with employees is essential, he said.
“If they were part of making it, they defend it themselves,” he said. “It’s so much better when not handed down from up on high.”
Cohen uses brainstorming and write storming methods with Individual product teams to the entire company’s strategy and choices. WP Engine has about 50 product developers and 1,200 employees overall.
Chris Walker, Founder and CEO of Refine Labs, based in Austin, gave tips to Saas founders on ways to grow and drive more revenue. One way is to add a direct link on the company’s website for a meeting or demo.
“97 out of 100 SaaS companies do not provide a direct link,” Walker said. Companies can double their sales pipeline by fixing this process, he said.
Companies dramatically overspend on organic and paid search, Walker said. Content creation and distribution are driving demand today, he said.
Companies also need to focus more on creating short-form videos like YouTube shorts or TikTok videos posted to LinkedIn, Walker said. He’s also bullish on Reddit paid ads targeted based on threads the company’s customers follow.
From a creative standpoint, meme content is working best, he said. However, he noted Quora’s paid and organic content is also performing well.
Social media, podcasts, word of mouth, and community are driving sales for companies today, Walker said.
The Greater Austin Chamber of Commerce, in collaboration with Opportunity Austin and SXSW, hosted a spectacular event last week at the Long Center for the Performing Arts to announce the winners of the highly anticipated 2023 A-LIST Awards.
Dedicated to recognizing and honoring local tech and innovation companies of all sizes, the A-LIST Awards showcases visionary founders and their groundbreaking ventures. The event shed light on the immense talent and ingenuity emerging from the Austin ecosystem, catapulting these companies onto the global stage.
During the award ceremony, Roland Pena, Senior Vice President of Global Technology and Innovation at the Austin Chamber and Opportunity Austin, said, “The A-LIST Awards serve as a testament to the exceptional entrepreneurs and investors propelling Austin’s ecosystem to unprecedented heights. These visionary founders and startups are revolutionizing industries through innovative technologies, solidifying Austin as a beacon of innovation.”
The winners received various benefits, including networking opportunities with A-LIST mentors and multiple prizes. Winners were granted coveted 2024 SXSW Platinum Badges, Austin Technology Council memberships, three months of co-working space at the renowned Capital Factory, Oracle Cloud credits, and a Central Texas Angel Network application fee waiver.
A special moment of recognition was reserved for Hugh Forrest of SXSW and Joshua Baer of Capital Factory, who were applauded for their instrumental partnership with the Austin Chamber and Opportunity Austin. Their unwavering support for the local startup and scaleup ecosystem was pivotal in nurturing innovation and fostering an environment conducive to entrepreneurial success.
The pinnacle of the evening was a fascinating keynote discussion featuring industry luminaries Bill Gurley, general partner at Benchmark, a Silicon Valley venture capital firm in San Francisco, and Van Truskett, executive director of the Texas Innovation Center at the University of Texas at Austin. Their profound insights on sustaining innovative companies resonated with the audience as they emphasized Austin’s status as one of the world’s premier launchpads for startups.
Eleven years ago, Alex Theuma was selling software, but he had entrepreneurial aspirations and was fascinated with software companies like Slack and Evernote.
Theuma started a Software as a Service (SaaS) blog called SaaScribe. Next, he launched a podcast, The SaaS Revolution Show, in 2015 and created the first SaaStock in Dublin, Ireland, in 2016.
Today, Theuma is the founder and CEO of SaaStock, an events and media company focused on supporting business-to-business SaaS founders to gain traction, grow, and scale their businesses.
From May 31st through June 2nd, SaaStock Austin will kick off the augural North American conference in downtown Austin. In addition, SaaStock hosts local meetups across the globe, an exclusive founders-only membership program, educational content, and more.
Theuma recently discussed running SaaStock and expanding to Austin for the inaugural Austin SaaStock conference on the Ideas to Invoices podcast. (The conference is 95 percent sold out; some tickets with a 20 percent Silicon Hills News discount are still available here.)
From 2016 to 2018, SaaStock grew 100% yearly, Theuma said.
“I was very much seduced by 100% growth and trying to attain that year over year because I’ve done it for three years in a row,” Theuma said. “And so I set the goal next year at 100% growth as well. I was also then seduced about going international and doing that fast, and I thought about SaaStock being the most global SaaS conference on the planet, having a SaaStock conference on every continent… and growing them all to the size of our Dublin event.”
But he didn’t have the systems and processes to scale the company that fast, and the expansion sucked a lot of cash out of the business. At the end of the year, the company wasn’t profitable. Then the Pandemic struck in 2020, and it was all about survival, Theuma said.
“We lost two-thirds of our revenue, and we reduced our team from 24 to 9 people, and it was very difficult,” he said.
There were tough times, but the business survived through 2020, and in 2022 SaaStock Dublin launched again, with 5,000 people attending from more than 70 countries.
“We had our best year ever,” Theuma said.
He built his team back to 21 people and made the business profitable.
“Part of our growth plan moving forward is bringing Dublin to Austin and scaling up the event, making Austin our home in the US. The US is the biggest market for SaaS, and Austin seems to be the hottest city for tech and SaaS companies,” Theuma said. “So we feel that we’ve made a great choice to not only be in the US but to be in Austin and make that our home for the long haul. Dublin in Ireland has been our first home since 2016, and we want the same longevity in Austin. There’s a lot of synergies between Dublin and Austin.”
SaaStock chose Austin because the city is quirky, and buzzing with startups.
“It’s a fun city with a great vibe,” Theuma said. “It’s inclusive.”
“I want the conference itself to be fun,” he said. “I don’t want it to be a boring business conference, but I want people to have fun in the evening as well. Some of the best moments are not when you’re listening to the talks, or you’re speaking or selling your product at the conference, but it happens in the bars at 10:00 at night: you make your new best friend that might become a long term customer or future employee.”
The Austin SaaStock conference is attracting attendees from all over the world.
“Austin is going to be very relevant wherever you are from, whether you are from the US, Austin itself, or flying over from Europe,” Theuma said.
SaaStock is for B2B SaaS founders and their teams and investors, Theuma said.
“It’s a three-day event, but attendees can also get what they need from it,” Theuma said. “On May 31st, we run something called SaaS.City. It’s a one-day accelerator for your SaaS company led by industry experts.”
SaaStock Austin speakers include Nathan Latka, Founder, and CEO of Founderpath; Chris Walker, CEO of Refine Labs; Meghan Keaney Anderson, vice president of marketing at Jasper; Noah Kagan, Co-Founder and Chief Sumo at AppSumo; Godard Abel, Co-Founder and CEO of G2, Jason Cohen, Founder, and Chief Information Officer of WPEngine and others.
For more on Saastock and Alex Theuma’s entrepreneurial journey, listen to the podcast posted below or on iTunes, Spotify, Amazon, or wherever you get your podcasts.
Alex Theuma is the Founder & CEO of SaaStock, an events and media company focused on supporting B2B SaaS founders to gain traction, grow and scale their businesses. In 2015, Alex began SaaScribe, a blog focused on all things SaaS, which quickly developed into a podcast, The SaaS Revolution Show, and eventually launched SaaStock, the world’s only SaaS festival.
Setpoint, founded in 2021, is a fintech and proptech startup that raised a $43 million Series A round in December 2022. Setpoint’s capital and technology platform enables real-estate, auto, consumer, and other asset-backed borrowers to offer credit options to consumers
Ben Rubenstein, Setpoint’s President and Co-Founder, said that its acquisition of Resolute strengthens Setpoint’s technology platform for asset-backed lending. The companies did not disclose the financial terms of the deal.
“They were a competitor to us,” Rubenstein said. “They are the largest in both what’s called SFR single family rental, so those are companies who are buying lots of real estate and renting them out or RTL residential transition loans, also known as fix and flip companies who are buying real estate, fixing it up, and then quickly selling it after it’s been fixed.”
“They have lots and lots of customers, but they only have one specific product, and we have a phenomenal product that has a lot of pieces but not as many long-term customers as they do, so coming together, it’s going to be great for their customers to have more products and it’s going to be great for us to have this huge customer base,” Rubenstein said.
In addition to asset verification, Setpoint’s software and platform also manage portfolios with real-time monitoring forecasting and optimization, collateral management to track data, documents, lender requirements, operational workflows, and valuations management to automate and streamline BPO, appraisal, and AVM fulfillment.
“It’s tough to track the whole portfolio of what’s changing, and so they use our software to track the entire process and their entire borrowing base because it’s constantly changing and to make sure that they’re in compliance with their facilities and that they’re being kind of optimal with their capital,” Rubenstein said.
Rubenstein said that Resolute Diligence is a third-party due diligence company that builds trust in lending transactions. Resolute Diligence Solutions evaluates and verifies each deed, title, or lease is verified and reported accurately against financial statements.
“Resolute is highly complementary to the Setpoint platform and, when combined, is far and away the best-in-class solution for capital markets borrowers and lenders. A clear example of 1 + 1 = 4,” Setpoint Co-Founder and CIO Michael Lam said in a news release.
Brent Taggart and Richard Lundbeck founded Resolute Diligence Solutions in Park City, Utah, in 2019. It offers transportation financing, home rental, and loan services and is known for its customer service, which will continue to be the mainstay of the combined Stepoint and Resolute offerings.
From buying a home to using a credit card, billions move daily between warehouse lenders and companies that originate loans. These transactions are powered by email, Excel, paper documents, and software developed in the 1980s. Unfortunately, errors and friction drive up the cost of lending or borrowing. As a result, consumers and businesses need equal access to trust and credit. Setpoint and Resolute restore it, Rubenstein said.
Setpoint’s customers include Homeward, Orchard, Ribbon, and Single-Family Rental companies like Amherst.
“All these companies are borrowing capital to do asset back lending and have complex facilities, and we help automate that entire process,” Rubenstein said.
In December, when it closed its xxx round of funding, Rubenstein said the company plans to branch outside of real estate into auto loans and credit cards, and it has since done that.
“They’re very similar,” Rubenstein said. “At a high level, you have a large bank whose lending capital is based on assets where those assets are homes or autos, or you know credit card receivables whether they need to know that those assets are real and have someone verify them.”
“I think one issue with credit is all about trust, and if we are making trust easier by being the third-party diligence agent, that means the credit can be cheaper and be more accessible to more people,” Rubenstein said.
Setpoint has 30 employees between offices in Austin and New York and plans to keep all of Resolute’s 20 employees and its office in Utah. Both companies also have employees who work remotely.
“This is going to lead to much more hiring,” Rubenstein said.
“I think this is a shining light,” Rubenstein said. “We have been growing steadily throughout this current recession.”
Editor’s note: This story incorrectly reported Ben Rubenstein’s title. He is the company’s president. Stuart Wall is CEO.
The applications can be drug development, virtual reality, artificial intelligent humanoid robot assistants, flying cars, or something else.
According to Google, an organization or company might be an excellent candidate to test a symmetrical 20 Gig connection if it is downloading or uploading massive datasets, conducting research that needs significantly more bandwidth, or doing future-focused technology that needs lots of bandwidth.
“We are interested in finding firms that are doing things I haven’t even thought of yet,” said Nick Saporito, head of Multi-gig & Commercial Product.
Google launched a test for its 20 Gig product with the University of Missouri-Kansas City’s School of Science and Engineering.
“They’ve been doing a lot of things at their School of Science and Engineering from tackling big data sets to making virtual reality less virtual and more reality,” Saporito wrote in a blog post.
“But we know that’s just the beginning (like our recently launched 5 Gig and 8 Gig products),” Saporito wrote. “That’s why we’re looking for eight more organizations — businesses, non-profits, educational institutions — to help test 20 Gig in Austin, Huntsville, Raleigh-Durham, and Salt Lake City.”
Austin currently has 1 Gig and 2 Gig products, and Kansas City has 5 Gig and 8 Gig available, Saporito said.
“Texas markets will get them later this year,” he said.
Google Fiber is currently available in Austin and San Antonio. Google began offering Google Fiber in Austin in December of 2014, and a year later, it announced plans to bring Google Fiber to San Antonio.
“We are very aggressively expanding the market in San Antonio and Austin and in Texas,” Saporito said. “We are very happy with how our Texas markets perform.”
“The 20 Gig is really a nice experiment for us,” Saporito said. “We have the technical capability to do it so why not test it out.”
The 20 Gig experiment is designed to generate as many technical learnings as possible, Saporito said. The second piece is understanding what future-looking use cases are for 20 Gig. Markets, he said.
“What’s coming down the pike in terms of Internet usage?” he said. “That’s really what we’re after here.”
Eagle Eye Networks, specializing in cloud video surveillance, and Brivo, which provides cloud-based access control and smart space technologies, Wednesday announced it received a $192 million investment from SECOM CO., LTD.
SEACOM, a security integration company, is investing $100 million in Eagle Eye Networks and $92 million in Brivo. Both Austin-based companies are majority owned by Dean Drako.
Drako founded Eagle Eye Networks in 2012 and serves as CEO. He acquitted a majority stake in Brivo in 2015 and is its chairman.
“The SECOM investment underscores that cloud and AI are the future of physical security,” Drako said in a news release. “Both Eagle Eye and Brivo will use a significant portion of the investment to further develop AI that dramatically improves the security of enterprises and businesses globally.”
Eagle Eye Networks and Brivo integrate with many third-party technology providers, including the leading property management and Proptech platforms.
In addition, Eagle Eye and Brivo provide a fully integrated solution that global businesses use to manage risk, identify threats, and respond. The companies’ joint capabilities deliver real-time AI-enabled video and access control events analysis, optimizing safety and security.
Eagle Eye Networks will use the investment for continued development of its AI-based analytics capabilities such as Eagle Eye Smart Video Search, Smart Alarms, and Vehicle Intelligence, and to expand its worldwide operations.
Brivo will use the investment to grow sales and marketing, accelerate product development, scale support and operational functions, and evaluate strategic acquisitions. Brivo will also use the additional investment to continue expanding in Europe, Latin America, and Asia Pacific. It will also enhance the smart spaces and AI functionality in the Brivo Access Platform for its enterprise, multifamily, and commercial real estate customers.
“SECOM has a proud history of innovation going back to Japan’s first online security system for commercial use in 1966,” Sadahiro Sato, SECOM Managing Executive Officer. “We’re committed to delivering services and systems that deliver safety, peace of mind, and business efficiency. Our investment in Eagle Eye Networks and Brivo, the market leaders in cloud physical security, is an investment in our three companies’ mission: to provide the best technology possible to keep businesses and communities safe.”
By Laura Lorek, publisher and senior writer of Silicon Hills News
Newchip entered into bankruptcy liquidation last week.
The Austin-based company rebranded as Astralabs, doing business as Newchip and Newchip Accelerator, filed for Chapter 11 bankruptcy reorganization on March 17th, listing $1.7 million in total assets and $4.8 million in total liabilities, according to its filing. But last week, the bankruptcy judge forced the company into Chapter 7 liquidation, according to a letter posted by its co-founder and CEO, Andrew Ryan.
“I deeply regret to inform you that our company Newchip Accelerator after 6 + years of supporting startups globally, has faced a series of unfortunate events which have significantly impacted our operations,” said Ryan, formerly known as Ryan Rafols.
Among its top unsecured creditors, the company lists Apex Funding Source of Miami with a $536,000 claim, Clear Finance Technology Corp. of Ontario, Canada, with a $1.5 million claim, and Iruka Capital of New Jersey with a $594,000 claim. All of those were listed as “merchant cash advances,” alternative financing for small businesses where the borrower pays the interest upfront, and the lender takes a percentage of the company’s future revenue until it’s paid back.
In addition, Newchip received more than $776,000 in taxpayer funds under COVID-19 relief programs. It lists the U.S. Small Business Administration as a top 10 unsecured creditor with a claim of $500,000 for a COVID-19 Economic Injury Disaster Loan.
Newchip also received two Paycheck Protection Program loans for $141,289 in March of 2021 and $135,100 in April 2020, which were both forgiven.
Newchip raised $7.9 million in funding from accredited and nonaccredited investors, according to Crunchbase. However, the company has a history of losses. It filed documents with the SEC reporting a net loss of $197,884 for 2016 and a $748,999 loss in 2017. And in 2020 financial filings, it claimed $4.5 million in tax loss carryforwards.
In 2020, Newchip reported earning $2.6 million in revenue from selling its accelerator program to startups and $781,000 in 2019, according to its consolidated financial statements.
Silicon Hills News has been in contact with more than a dozen startups that claim the company took their money and didn’t deliver on the promises of the accelerator program. And one startup founder, Angela DiMarco, co-founder of Uniquely Phenom Collaborations in New York, said she paid $7,500 to go through Newchip’s accelerator and was pleased with the program.
“The education part of it was like getting an MBA, and where can you get an MBA for $7500, you know,” DiMarco said. “I went from not knowing what a KPI was to now being very comfortable that I can walk into a room full of investors and negotiate a term sheet.”
But DiMarco said she wouldn’t get that chance with Newchip to pitch to investors. She was supposed to do her three-minute elevator pitch to investors last week, which didn’t happen. She said she paid an additional fee for that opportunity and would try to get her money back.
In Vancouver, Washington, John Laine is not a happy customer.
In 2020, Laine gave a testimonial in favor of the company during the accelerator’s onboarding process. He hadn’t yet started the program, but when he did, he was hugely disappointed. Laine has asked the company numerous times to remove his name and testimonial from its marketing materials, but they have not.
At the time, Laine had a fintech startup and wanted to learn about crowdfunding. So he paid $3,800 of a $20,000 fee to participate in the accelerator.
“I did the program for less than a week and a half, and I realized I was duped,” he said. “It’s the crappiest version of online education you can produce.”
Laine contacted his credit card company and canceled the rest of the installments.
“Every business owner I’ve ever known is an optimist, and they prayed on that optimistic personality,” Laine said.
Newchip promised him that they would commit a minimum investment of $100,000 into his startup and that they did that for every startup that went through its program. But, unfortunately, he never got an investment.
Laine said they prayed on a particular avatar, a founder looking for a solution to bring their company forward.
Jari Kemppinen, the founder of Soulbotix, based in Australia, which builds custom ChatGPT-powered metahumans, joined the Newchip accelerator in February and paid $6,000 for the “courseware that gets you nowhere.”
“Seeking funding in Australia is a hopeless endeavor,” Kemppinen wrote in an email. However, he was attracted to Newchip because it was based in the US and offered remote learning and participation without relocating. He also liked the company’s promised connections and introductions to Newchip’s extensive VC investment portfolio. Unfortunately, once Kemppinen joined the program, he found little help from Newchip.
“I found that they lacked one-to-one communication, and I was left alone to navigate an enormous amount of content without any help,” Kemppinen said. “They just seemed to rely on founders looking after themselves.”
Kemppinen has yet to get any introductions to investors and would like a refund.
This experience disheartens him. “I am beginning to think the startup funding ecosystem is corrupt and not worth it,” he said. Too much work needs to go into creating so much documentation to gain some funding, he said. “Making solid partnerships, being honest, and working with your customers and partners is easier. That is what will make you money.”
A former Newchip employee said the company hired Garibay Ventures, based in Austin, to send spam emails to thousands of startup founders worldwide to recruit new startups for its paid program with the promise of investor introductions.
Ahmed Zobi, CEO and founder of Syntr Health Technologies, based in Irvine, Calif., received one of those emails from Anthony Garibay, CEO and Founder of Garibay Ventures, who claimed to be an investor.
Garibay Ventures said it recently partnered with Newchip’s accelerator to “get extra exposure to their investors (which I am a part of),” according to the email. The email included a link to the Newchip accelerator application.
In November 2020, Zobi paid $4000 to participate in the Newchip program. Newchip told him the actual cost of the program was $30,000, but they were granting him a scholarship for $26,000. But when he got the 12-page contract from Newchip, it included a clause that gave Newchip warrants or the right to buy a certain number of shares in the startup at a set price. Zobi showed it to his lawyer, who advised him not to sign. He didn’t. And Newchip never followed up to make sure the contract got signed. Zobi participated in the program but got little value out of it. His assigned mentor emailed him and said he was traveling to London. He ghosted him after that. The mentor never responded to follow-up emails or meeting requests, Zobi said.
“At the end of the day, I knew something was off because they never even asked for the contract back,” Zobi said.
“I think they just cared about getting as many startups signed up as possible,” Zobi said.
Other startups that paid to participate in Newchip’s global accelerator program are complaining on social media, primarily LinkedIn, that the company took their money and left them without resources. In addition, some former employees are alleging harassment in the Newchip workplace and a hostile work environment, according to a former employee.
Newchip started in 2016 as a marketplace aggregating the best deals from various equity-based crowdfunding platforms. It also was selected to participate in the Sputnik ATX accelerator program in Austin.
Newchip was not an equity crowdfunding platform itself. But it billed itself as the “kayak of funding,” Its website allowed nonaccredited investors to invest in deals for as little as $100 at a time.
The company said it made money from deal listing fees, investment commissions, exchange transaction fees, data analytics, and partners.
Travis Brodeen co-founded Newchip with Ryan Rafols, who has since changed his name to Andrew Ryan.
In 2018, Newchip raised $647,000 from more than 160 nonaccredited investors at a $15 million valuation on the equity crowdfunding platform Wefunder. Its goal was “to be the NASDAQ for the alternative investment market.”
But somewhere along the line, according to a former employee requesting anonymity, things went wrong.
The Newchip Accelerator has an F rating with the Better Business Bureau and two complaints from 2022 claiming the company lied to them. One complaint stated the startup paid $6,000 to participate in the program with a money-back guarantee that if they didn’t raise funds through Newchip, the accelerator would refund their money. However, the startup did not raise funds, and Newchip refused to repay its money.
Every startup in the world has one thing in common: a dream. From humble beginnings in a basement or garage, entrepreneurs set out to build the next big thing. It’s a tale as old as time and has always been part of the American dream.
For most entrepreneurs, there’s inevitably one major obstacle blocking the path to making this a reality – funding. No matter how great the offering is, growing a business without money is hard. But how far are you willing to go to make it a reality?
One Austin man is betting the house on his success – literally. Michael Ramirez, the founder of SEO technology company Evisio.co, has decided to forgo the traditional route of seeking funding from venture capitalists. Instead, he has listed his home on the market to secure the cash he needs to scale his business.
Rather than sacrificing equity in the company he has painstakingly built from the ground up with outside investments, Ramirez decided to grow his startup via “bootstrapping” (i.e., pulling yourself up by your bootstraps).
While venture capital, or VC, tends to get a lot of attention, largely thanks to the success of companies like DoorDash, Airbnb and Uber, many founders are unaware there are non-traditional ways to fund their startups.
Before we provide some alternative methods for VC funding, let’s take a closer look at the traditional role VC has played, the recent impact events have had on the field, and discuss other ways entrepreneurs like Ramirez are finding ways to finance their startups – without giving up a chunk of their business.
What is Venture Capital?
Venture capital is a form of private financing in which an investor, investment bank, or other financial institution puts capital into a startup or small business in exchange for a piece of equity. This investment can come in many forms, including operational capital, technical expertise, or management experience.
In many cases, VC is used as a short-term investment, where investors provide cash for startups to grow and build infrastructure and then exit once the company has reached a position where it can be sold to a corporation or receive equity in institutional public-equity markets.
While shows like Shark Tank and movies like The Social Network have reaffirmed the romantic image of a group of unknown entrepreneurs taking their business from the basement to the peaks of Silicon Valley remains, in reality, less than 1% of startups receive outside investment capital.
What has led to this more cautious approach? And what does it mean for aspiring business magnates? Let’s find out.
The State of VC Investments in 2023
On Friday, March 10, 2023, one of the world’s most prominent VC institutions, Silicon Valley Bank, fell victim to panic, resulting in the third-biggest bank failure in United States history. It was a problem that caught many investors off guard – but it shouldn’t have.
Investopedia estimated 97% of the bank’s deposits were not federally insured, which was particularly problematic for the tech sector, which has been hard hit by the aggressive rise of interest rates in an attempt to offset inflation.
The total damage of the fallout remains to be seen. Still, the highly interconnected nature of VC could lead to far-reaching concerns for both investors and the companies they have invested in, including the risk of companies being unable to pay employees or investors being unable to secure funds.
As a result, it seems likely that VCs will become less risk-tolerant, which means startups will find it more challenging to secure funding as VC investors become more selective.
This is far from the only issue with using VC to fund business growth. The field is also a largely insular community. According to a study by Richard Kerby, more than 80% of U.S. venture capitalists are men, and 70% are white. The study also indicates that nearly half of all VC investors studied at either Harvard or Stanford.
This has had the unintended consequence of creating what is known as “pattern matching,” in which investors make decisions about future investments based on past experiences.
In other words, because VC has typically included a lack of diversity in race, gender, and alma mater, it has created a cycle where white men from top universities continue to dominate the field.
This landscape makes it challenging for founders to secure funding and successfully scale once it has been secured. That’s why some entrepreneurs are thinking outside the box when it comes to financing their businesses.
Why a Local Entrepreneur is Selling His Austin Home to Bootstrap His Startup
Many founders are looking for ways to avoid the VC model and instead are seeking ways to bootstrap their startups, which is considered one of the safest and healthiest ways to scale. The primary means of accomplishing this depends on either the business generating enough revenue to fuel its growth or the founders successfully securing another type of investment, either from their assets, via their friends and family, or finding another traditional source of capital like a bank.
But there’s the issue – most people don’t inherit a fortune from a distant uncle, win the lottery or have some other source of behind-the-scenes funding. Solving this problem requires outside-the-box thinking to find nontraditional ways to secure financing – exactly what Evisio’s Michael Ramirez has done.
A self-described “serial entrepreneur,” Ramirez was not born into the lap of luxury. Growing up in inner-city San Antonio, he saw his share of financial and social struggles and made it his mission to change his family’s economic status.
“Despite our economic hardships, my parents taught me how to be resourceful, fight through tough times and see opportunities where others don’t,” he said. ”For example, when I was laid off from my first job out of college, I asked one of the company’s owners if he’d hire me as a contractor. Most people wouldn’t think to do that, let alone have the guts to ask.”
His hustle mindset led him to move to Austin, where he graduated from The University of Texas at Austin, started his marketing agency, became an SXSW speaker, and now bootstrapped his own marketing Saas company in Evisio.co.
“Starting with my SEO agency (which I still operate), I was constantly seeking ways to streamline the process of getting webpages to the top of Google rankings,” Ramirez said.”That’s when an idea struck me like a thunderbolt, and Evisio was born.”
A platform designed to streamline every aspect of search engine optimization and improve results, it’s suitable for every level of SEO expertise, from old pros to absolute novices. Ramirez was immediately confident this was a winning idea.
“But that brought me back to the funding problem,” he said. “I first wanted to prove the concept before taking on debt and giving away a lot of equity. But I didn’t have the cash to fund it myself, and unfortunately, my family is not independently wealthy. So, I had to get creative.”
This didn’t happen by chance, however. Ramirez worked multiple jobs to save money as he researched properties in Austin that would make a good investment. He then used his savings to build the first MVP (most viable product) and update the home. Once satisfied that he had improved the house’s value, he listed it on the market with the idea of using the proceeds to scale this venture.
“Is it risky? Sure. But if I’m not willing to go all in for this, why should I expect anyone else to?,” he said. “But by the way, if you know anyone looking for a beautiful 4-bedroom, 3-bath home in the heart of South Austin, send them my way,” he added with a smile.
Why Some Entrepreneurs Don’t Want VC
Despite making the headlines, most startups aren’t using venture capital. In some cases, this is because of shaky business models or over-saturated markets that make a business unappealing to investors. In others, it’s a conscious choice.
Some of the more common reasons why founders may choose not to seek VC include:
A loss of control – By surrendering equity to investors, founders can lose a portion of control over where their business is headed. Venture capitalists are not usually silent partners, which means they will have a share in how the business grows.
Forced timelines – Rapid scaling is not something every business is suited to, but the clock starts ticking when an entrepreneur accepts money from VC investors.
Unnecessary distractions – Securing VC funding takes a lot of time and energy. This can take you away from other equally important tasks during the crucial first two years of a business’ life.
A poor fit – Things like geographical limitations, scalability issues, and the need for physical inventory can make VC a poor fit, particularly for companies not in the tech world.
So, how do the 99% of startups that fall outside the realm of VC investors grow? By bootstrapping, of course.
Alternatives to Venture Capital
Entrepreneurs will go to extreme lengths to fund their dreams and retain company equity. But not everyone is a gambler. Some people are naturally more risk-averse. Luckily there are still lots of funding opportunities – without sacrificing control.
Here are some ideas for financing your business:
Selling assets – You don’t have to sell your house to fund your company as Ramirez did, but if you have other assets you don’t mind parting with, this is a route to consider. This could be anything from the mint condition Mickey Mantle rookie card your dad left you, your summer home, or your stock in Microsoft. Just remember you’re gambling on yourself here.
Government loans – While the U.S. Small Business Administration (SBA) only makes direct loans to help businesses recover from declared disasters, it does back loans designed to help small businesses get the needed funding.
Government grants – The SBA provides limited grants to small businesses and federal funding to states and eligible communities to promote entrepreneurship.
Programs for minorities – With a commitment to supporting the development of minority-owned businesses, the SBA has funding and resources earmarked for businesses owned and operated by African Americans, Asian Americans, Hasidic Jews, Hispanic Americans, Native Americans, and Pacific Islanders.
Incubators – Business incubators provide specialized programs to help new entrepreneurs learn and grow their businesses. These come in many forms, including academic institutions, nonprofits, and for-profit property development companies. These programs do not generally directly provide funding, but they can point you in the right direction.
Bank loans – Most banks offer small business loans and financing to provide startups with a cash infusion. However, many business owners have found approval challenging, as traditional banks are unwilling to issue high-risk loans.
VC is Not for Everyone
Venture capital funding can be a godsend for certain companies. Companies we know and love, like Facebook, Amazon, and Apple, were all backed by VC. But it’s not the right choice for every business. In his book Lost and Founder, author and entrepreneur Rand Fishkin provide honest advice about when a startup should consider taking VC money based on his experience building Moz.com.
With the constant threat of a recession looming, investors are taking a more careful approach to startups, which may lead to some businesses being left out in the cold.
Luckily, there are options. Work through yours and make a careful decision about your next steps. Ramirez does not doubt that selling my house will provide returns many times over. But if you’re not as bold as he is, there are still many sources of funding you can employ.
Hypergiant Galactic Systems has received a $61.4 million Small Business Innovation Research Phase III contract from the U.S. Air Force.
The company, based in Blanco, received the contract to provide user interface and user experience development services for cloud-based command and control.
Hypergiant will perform the work in Blanco by May 4th, 2026. Hypergiant Galactic Systems is a subsidiary of Hypergiant, based in Austin. Mike Betzer, Hypergiant’s president, and CEO, lives in Blanco, about 50 miles South and West of Austin, where Hypergiant Galactic Systems is based.
Air Force Life Cycle Management, Wright-Patterson Air Force Base, Ohio, is the contractor.
In 2021, the U.S. Air Force named Hypergiant Galactic Systems and 28 other companies as awardees on a potential $950 million contract. The contract is to build and operate systems across land, air, sea, space, electromagnetic spectrum, and cyber domains as part of the Joint All Domain Command Control program. In addition, the companies will compete to provide software and other solutions to the Department of Defense. The contract runs through May 2025.
Founded in 2019, Hypergiant’s customers include Sumitomo Corporation, Boeing, Schlumberger, Booz Allen Hamilton, and the United States Department of Defense. In addition, Hypergiant sells AI services, software, and solutions. The company has raised undisclosed venture funding from Sumitomo Corp. of America, Perot Jain, and other investors.
