GUEST BLOG: TBKC Speaker, Fred Coulson

Think Big Kansas City speaker and founder of Five Elms Capital, Fred Coulson, writes about his experience in the capital-raising industry and the importance of entrepreneurship, innovation, and technology in Kansas City.  To learn more from Fred Coulson, be sure to purchase your ticket for Think Big Kansas City to hear him speak live!



Fred Coulson,
Five Elms Capital

I started Five Elms Capital with the goal of providing capital and strategic support to entrepreneurs whose businesses are experiencing exponential growth.  Since 2006, we have made thirteen investments, six with a presence in Kansas City.

While most growth-oriented investors focus on coastal technology innovation, we believe a huge, yet more subtle, opportunity exists for us to partner with Midwestern service-based businesses that are users of both technology and the Internet to change the way services are sold and delivered, resulting in accelerated growth and often industry disruption.

Why Services?  

Services are a huge part of the United States economy, representing 47% of GDP compared to technology which accounts for 6% of GDP.   There is a tremendous opportunity for service-based businesses to use technology and the internet to improve their value proposition to consumers, lower infrastructure costs and accelerate sales.   Investing in service-based businesses has lower risk given the pre-existence of the industries yet high growth given capital efficiency and scalability of their business models.  

Why the Midwest? 

Talent.    4 of Forbes’ 10 “smartest cities” in the U.S. are located in the Midwest.  4 of the top 8 strongest metro economies are located in the Midwest.  Kansas City has more engineers per capita than Boston, New York, and San Francisco.   Kansas City was recently cited by StartUpDigest.com as the third fastest growing startup community in the world.

Lower Cost.  Services have a labor requirement.  We believe the Midwest’s highly-educated labor pool, low cost of doing business, and “right to work” mentality positions us to take advantage of this shift in power and support industry experts in their use of technology to solve problems and even disrupt entire industries.

Shortage of Capital, Not Opportunity.  The Midwest represents 25% of US GDP, yet receives only 7% of U.S. venture capital (compared to California which represents 13% of GDP and receives 50% of venture capital).

Why Now? 

Technology Has Been Democratized.   Starting a company is cheaper than ever, allowing those with an idea to start a company, bootstrap it to profitability, and proceed to disrupt antiquated industries.  As recently as ten years ago, access to technology was limited to larger companies who had the capital to invest in racks of servers and fleets of programmers.  In September, Fortune Magazine compared the cost to start a business today vs. ten years ago:  given technology advances and the emergence of social media, it costs less than $40,000 to start the same company that cost more than $1 million to start 10 years ago:

	2000	2010
Incorporation	$1,500	$250
Branding	20,000	7,000
Marketing	75,000	1,000
Employee Costs	792,000	19,800
Rent	175,000	9,672
	$1,063,500	$37,722

Source:  September 6, 2010 FORTUNE: “Building a Faster, Cheaper Startup”

*Industry* Knowledge is Now More Important than *Technical* Knowledge.  Given the democratization of technology, the balance of entrepreneurial power has shifted to include those with deep industry backgrounds as well as those with deep technical backgrounds. 

Our six portfolio companies in Kansas City are great examples:

BuildMyMove is the first truly "asset light" residential moving company and the first to provide real-time, binding quotes online.  BuildMyMove utilizes its network of prequalified, fully-licensed and insured movers to provide low cost, highly-secure moving services to consumers across the United States.  The company’s technology manages its network of moving providers and gives consumers online access to photos of their goods throughout the move process.

Catapult International provides cloud-based rate management software and services to the international shipping industry.  The company manages its clients’ ocean, air, and trucking contracts and assists with quoting and decision-making by using its decision-matrix in a similar manner to consumer travel sites.

Mission Peak Capital is an independent capital markets company dedicated to providing transparency, risk solutions, and investment guidance to holders of RMBS and CMBS securities.  Mission Peak has an analytical infrastructure and is data-driven in its analysis of highly-structured securities.

SelectQuote is a pioneer in direct response marketing via TV, radio, and the Internet to sell term life insurance.   The company’s technology ties directly into the underwriting systems of more than fourteen insurance carriers to provide real-time transparency and comparison shopping for consumers.   SelectQuote sells more than 70,000 term life policies each year.

Smart Warehousing is a technology-enabled warehousing and logistics firm managing approximately 2 million square feet of warehouse space nationwide.  Using internally developed, cloud-based software in conjunction with its warehouse management services, Smart Warehousing gives small and medium-sized businesses “Walmart-like” visibility into their inventory and replenishment needs.

United Medicare Advisors is a comparison shopping exchange for Medicare supplement insurance (also known as MediGap).  United Medicare Advisors simplifies the shopping process by comparing pricing across eighteen of the highest rated Medicare supplement insurance carriers allowing customers to focus on finding the best coverage possible knowing they are receiving the best price available.

The entire Five Elms team is excited to be part of Think Big Kansas City.  Please look for us during the event.   

Written by Fred Coulson.  Fred Coulson is the founder of Five Elms Capital, a venture capital firm focused on providing growth capital to high-growth businesses.  Prior to founding Kansas City-based Five Elms Capital, Fred was a senior investment professional with TH Lee Putnam Ventures, a $1.1 billion growth equity firm in New York, and an investment banker with Morgan Stanley, working in mergers & acquisitions, media banking, and firm management in Morgan Stanley’s New York offices.  Fred began his career in asset management with Citibank in London. He holds a B.S. in Business Administration from the University of Kansas, where he currently serves on the Finance Board of Advisors for the School of Business.

Entrepreneurship: If You Wait Until You're Ready, You'll Never Do It

Vern Cushenbery of Cush Capital says that entrepreneurship is a lot like parenthood: “If you wait until you’re ready, you’ll never do it!”  So dive in, entrepreneurs.

Vern Cushenbery,
Cush Capital

Just before he was leaving for the Berkshire Hathaway Annual Shareholders Meeting in Omaha with clients, I caught up with Vern Cushenbery, chief executive officer of Cush Capital Management, LLC.  As an owner of his own capital management firm, a finance guru, and a big thinker, Cushenbery has launched a successful business after a decade of experience in investment analysis and research.  So how did he do it?  Read my Q&A with Cushenbery himself: 

TBP (Think Big Partners): What ignited the spark to start Cush Capital? 

Vern: I majored in finance in college because I had an interest in the way the stock market works.  I had an attraction to thinking about investments in terms of relative advantage.  One of the common traits of investors like myself is that we are attracted to solving problems.  I thrive in that environment.  Putting the puzzle pieces together in finding that next great investment opportunity is what keeps me going.

TBP: When did Cush Capital launch?

Vern: Cush Capital launched in August of 2008, but our performance dates back to my prior firm beginning November of 2007.  It’s a meaningful date because it was within 2 weeks within the absolute peak of the market.

TBP: What types of success have you seen so far at Cush Capital?

Vern: So far we’ve been able to make it through the second worst downturn in 100 years.  That’s pretty remarkable in itself.  During that period we’ve been recognized by MorningStar as a standout manager.  They awarded us their 4 star rating.  That’s significant.  We are one of only two managers in our category that can make that claim over the past three years.

TBP: Explain to me what makes Cush Capital different than any other capital management firm.

Vern: We are a research organization—that’s what we specialize in and thrive on.  We market ourselves based on a better brand and a better caliber of research.  Most of our competitors in the registered investment advisory space are in the business of identifying and recommending a diversified lineup of mutual funds.  Each mutual fund has a portfolio manager based out of New York, Chicago or LA.  The client never gets to meet the person making the decisions with their money.  We use a different model because we’re a research organization.  We do the research here in town and we can back those decisions up and sit down with our clients and tell them why we are making the moves we are.

TBP: What is your main goal for Cush Capital?

Vern: Our main goal is to grow the firm through better research.  We have goals and price targets for every investment we make, we have milestones for every client we do business with.

TBP: What is one piece of advice that you would give an entrepreneur looking to start a business?

Vern: The first thing that comes to mind is the same advice I would get from parents when my wife and I were thinking about having children, which was ‘if you wait until you’re ready, you’ll never do it.’  That’s also applicable to entrepreneurship!

TBP: How do you Think Big? 

Vern: My biggest aspiration for this firm would be to accumulate enough assets to influence the management teams of companies we invest in.  We want to do business with morally-minded, ethically-minded people of extremely high integrity.  To the extent that we see certain companies engaging in practices that are less than admirable it would be nice if, on the basis of our size, we could influence their behavior for the good of the financial marketplace and for the good of society. That would be tremendous.

Written by Allison Way.

@AllisonThinkBig

Think Globally, Act Locally: Entrepreneurs & Investors Celebrate the Launch of the Think Big Partners & Angel Capital Group Partnership

In January, Think Big Partners and the Angel Capital Group partnered to create a nationwide entrepreneur network.  But what does this mean for entrepreneurs, investors, and the startup community, exactly?

It means big things.

The Angel Capital Group, an angel network of investors with five locations nationwide, links together its many networks so that entrepreneurial resources such as startup and seed capital can be effectively utilized to best aid entrepreneurs.  The company’s collaboration with Think Big Partners means that entrepreneurs now have better access to pertinent resources like startup and seed capital, while investors have the ability to see more opportunities and ideas. 

In other words, it’s every startup’s dream come true.  

The partnership between Think Big Partners and the Angel Capital Group was launched on Tuesday as the two companies, as well 42 leaders and professionals within the Kansas City community came together for an informative luncheon about what the partnership can do for entrepreneurs, investors and the community. 

With the launch of the TBP-ACG partnership, entrepreneurs now have the opportunity to be funded by investors across the nation.  Investors can now fund any idea from anywhere in the country.  The nation now has a stronger entrepreneurial and startup base, generating a more small businesses and improving the U.S. economy, one idea at a time.  It’s all part of the “think globally, act locally” approach.

According to Rachael Qualls, founder of the Angel Capital Group, the partnership between ACG and TBP is off to an incredible start.  Between answering investors’ questions and socializing with attendees at the luncheon on Tuesday, Qualls took time to sit with me to talk about what the partnership.

“The partnership is going very well,” she said.  “This is every entrepreneur’s opportunity to get startup help from Think Big Partners and prepare for Angel Capital Group.”  And with handfuls of people already interested in getting involved in investing or starting a business under the guidance of ACG and TBP, it’s not hard to see that the partnership will provide much-needed opportunities. 

During her presentation, Qualls noted that “just because a company has money, does not mean that it will absolutely be successful.”  She later commented that this is the main reason why the Angel Capital Group needs groups like Think Big Partners—to ensure that the entrepreneurs that are being invested in become a success.  Now, because of the partnership, entrepreneurs can obtain startup advice, networking opportunities, and vital connections all while being funded on a nationwide basis from anywhere in the country. 

One thing is for sure: the partnership between TBP and ACG has people talking.  Upon the luncheon’s conclusion, many attendees of the event were curious to learn more about how to get involved in investing or starting a business under the guidance of Think Big Partners and the Angel Capital Group.  With the buzz spreading from Kansas City to Nashville, from Memphis to Jackson, Mississippi (and soon to New Orleans!), the TBP-ACG partnership is growing—all in the name of thinking globally and acting locally.  

The Angel Capital Group, with five locations nationwide and growing, is an angel network of investors that links together its networks so that entrepreneurial resources, such as startup and seed capital, can be efficiently utilized to best aid entrepreneurs.  In addition, ACG provides education and support to various communities in order to aid in establishing more angel investor networks. 

Written by Allison Way.  Allison is a writer for Think Big Partners, Kansas City's mentorship-based startup accelerator and business incubator.  To read more of Allison's work, check out the Kansas City Entrepreneurship Examier as well as her articles on Helium, eZine and BrooWaha.  Follow Allison! @AllisonThinkBig

WARNING: Non-Competition Agreements & the Entrepreneur

There are many challenges that an entrepreneur may face—raising capital, sustaining the business, hiring effective employees—the list goes on and on.  And although you may be focused solely on your business, your sales, your employees, your success, as a result, you may lose sight of another important aspect: the competition.

As an entrepreneur, it’s important for you to understand the notion of non-competition agreements.  Believe it or not, this may be the one thing that is standing in between you and your small business.  If you have signed a non-competition agreement (often referred to as a “non-compete”) with a former employer, you may find a few roadblocks on the way to self-employment.

Non-competes are often signed at the beginning of a term of employment and kick in at the end of the employer/employee relationship.  They are for the protection of the employer’s trade secrets, business plans, marketing strategies, customer lists, etc.  Most non-competes specify a specific time and geographic area that the former employee is to refrain from engaging in activities that will place him or her in direct competition with the former employer.

Generally speaking, in states where non-competes are legal, they will be enforceable if, at a minimum, they are:

1)     Designed to protect the former employer’s legitimate business interests;

2)    Limited both in duration and in geographical area; and

3)    Not contrary to the public interest.

Courts generally disapprove of non-competes that are so broad that they unfairly impede a former employee’s right to earn a living.  If a court finds a non-compete overbroad, it may narrow the duration and/or scope of the agreement or refuse to enforce it all together.

So if think you may be covered by a non-compete, here are a few things to think about:

1)    Non-competes must be reasonable in duration.  Generally, the time frame ranges from one to two years, but may be as high as five.  If the former employer’s restriction prevents you from doing business for an excessive amount of time, it is probably too broad. 

2)   The geographical area covered by the non-compete must also be reasonable.  Generally, courts will not allow a non-compete to prevent you from working in a geographic area where the former employer does not do business.

3)   Even if you think your non-compete is overbroad or unreasonable, seek out some legal guidance first to discuss your rights and risks.

Enforceable non-competes are about the balancing of interests.  Employers have a legitimate right to protect their customer relationships and confidential information, but former employees also have a right to earn a living in their chosen endeavor.  If you have questions about your non-compete, consult a business attorney.

With all of the challenges of launching a startup, it is easy to miss something like non-competes.  Don’t let this important factor sidetrack you from Thinking Big!

 

Written by: Donald R. Simon, J.D./LL.M., is president and CEO of Simon Business Consulting, Inc., a firm providing consulting services such as business and marketing plan development, incorporations, intellectual property advising, franchising regulatory assistance, and presentations on the basics of starting a small business.  Send questions or comments to don@simonbizconsulting.com.  This blog is provided as a source of information and is not to be construed as legal advice or opinion, or to form an attorney-client relationship.  For legal advice, please consult an attorney.

Edited by: Allison Way.

The Top 3 Things Kansas City Entrepreneurs Want in 2011 (And What We're Doing About It!)

Throughout 2010, we listened to a lot of people—entrepreneurs, community partners, investors, CEOs, startup companies, successful small businesses, and the civic community to hear what they wanted to see happen to the Kansas City entrepreneurial community.  But guess who else we listened to?  You.

You spoke and now we’re acting! 

We are taking the top 3 things that Kansas City entrepreneurs want in 2011 and doing something that has never been done before—we are actually doing something about it!

We have narrowed down the top 3 things Kansas City entrepreneurs want this coming year.  They include:

1.  More opportunities to meet the movers and shakers of the startup scene and meet key decision makers in the Kansas City community.

2.  A better connection to resources.

3.  Better access to capital.

So if you’re looking for a stronger, faster, more effective, more collaborative, more interactive entrepreneurial community in 2011, look no further than Think Big Partners.  With our collective expertise, we are taking what you want and turning it into a reality.  And we’re starting with two major announcements in mid-January.

Join us on January 12^th from 4:00-6:00pm at bizperc (located at 1800 Baltimore) for a sneak peak to hear what Think Big Partners and Think Big Kansas City have in store for 2011.  Herb Sih, Senior Partner and Co-Founder of Think Big Partners, will be making two very important announcements that will get every Kansas City entrepreneur talking.  The event is open to the public, but please let us know if you’re coming by emailing info@thinkbigpartners.com. 

What’s more, the Think Big Kansas City blog is opening its doors to other writers, bloggers, and journalists.  We would like to invite guest bloggers to write up about what’s happening in their own communities—whether it’s in Kansas City or not—or to help us give entrepreneurial advice and suggestions.  To become a guest blogger for Think Big Kansas City, please contact Allison Way at away@thinkbigpartners.com.

Finally, Think Big Partners asks you to stay tuned tomorrow as we will unveil an announcement on this blog that answers the question: “How can Think Big Partners help entrepreneurs gather news about the business community?”  You’ll find out tomorrow!

Keep Thinking Big and tuning in! 

Written by Allison Way.  Allison is a writer and videographer for Think Big Partners.  To read more of Allison's work, check out the Kansas City Entrepreneurship Examiner or her articles on Helium, BrooWaha, and eZine. 

peerbackers: A New Small Business Helps Entrepreneurs Raise Capital and Achieve the American Dream

Andrew Rachmell's life has been an adventure.  And with an ambitious lifestyle that is all about trying something new, finding inspiration in life experiences, and of course, thinking big, it’s no wonder Rachmell wound up as a serial entrepreneur and co-founder of startup company, peerbackers.




peerbackers is an online funding platform that helps entrepreneurs
achieve that sought-after American Dream.



When Rachmell met Sally Outlaw, a partner from their previous production company in the mid 90's,the two found that their experience with producing television shows transformed into an obsession with entrepreneurship.  The two went on to create other businesses only to find themselves back together recently when they each realized a need to support the entrepreneurial community in light of the economic climate.   Only a year ago, Rachmell was involved in discussions with Florida Atlantic University’s Adam Center for Entrepreneurship for the production of a TV and web series profiling successful entrepreneurs.  At the same time, Outlaw had found that the process of raising capital from angel investors or venture capitalists tend to consume precious time that could be better spent on building a businesses.  After discussing the growth of startup companies and new small businesses, Rachmell and Outlaw put their heads together and created a business to help entrepreneurs raise money through a crowdfunding model by utilizing social networking.  peerbackers was born with the goal of saving entrepreneurs significant time and reducing the awkwardness associated in asking for money from family, friends, and even angel investors. 

  
peerbackers is an online funding platform that allows business owners and entrepreneurs to raise capital from their “peers” in small increments in exchange for tangible rewards for those who contribute.   peerbackers can save entrepreneurs significant time in raising growth or startup capital, not to mention the awkwardness that is, at times, associated in asking for money from family, friends and one’s professional circle of contacts.   For many entrepreneurs, the amount of money being sought after does not even meet the minimum level that angel investors or VCs require.  Most entrepreneurs start their business with $25,000 or less, making peerbackers a more viable solution for this type of startup company.

   

Within peerbacker’s first week of business, every entrepreneur featured on the site had obtained at least one “backer”, and most had anywhere from two to four.  With the smart utilization of social media marketing, peerbackers hopes to help thousands of entrepreneurs on a yearly basis reach their own dreams of owning a business by successfully reaching their fund raising goals.  In order to prove peerbacker’s future success, the company actually utilized its crowdfunding initiative utilizing a "mock up" information site in order to raise money for the launch of the peerbackers’ website.  The company raised several thousand dollars to build the current site and became one of twelve finalists in the Miami Herald Business Plan Challenge.

 

As a serial entrepreneur with companies such as NetViews Inc. and peerbackers under his belt, Andrew Rachmell attributes much of his startup success to the passion he has for adventure and exploration.  His many life-changing experiences, such as biking across the country at the age of 20 and hiking up Mt. Whitney through a snow storm, have led him to think “if I can do that, I can do anything.”  This is exactly how the mind of an entrepreneur works.  According to Rachmell, an entrepreneur must maintain a vision for the business, continue to accomplish one small goal after another, and be passionate, persistent and patient.  All of these attributes are instilled into peerbackers as well as Rachmell’s own entrepreneurial life.  Congratulations to Andrew Rachmell and the launch of peerbackers – an entrepreneur and a company that are here to help others Think Big!

Allison Way is a writer and videographer for Think Big Partners and bizperc, two of Kansas City's newest entrepreneurial resources.  To read more of Allison's work, please visit the Kansas City Entrepreneurship Examiner.