Before you approach investors you should know enough about your startup to answer these five questions.

1.     What is your value proposition? The answer points out what your company provides and why people want it.

2.     Will customers pay for the solution?  nvestors want to know if customers will pay for your solution.  Free usage is not hard to achieve but paying customers is required.

3.     Who is on the team? About half of an investor’s decision comes down to believing in the team and knowing they will be enough to reach the goal.

4.     Why is now the right time? Is there anything in the deal that suggests now is the right time to start this business.  Why hasn’t someone done this before?

5.     What is your exit? This is one of the hardest questions to answer – how will the investor get their money back.

Best regards,

Hall T.

When I was growing up, they had a saying in business.  There’s the product you market, the product you sell, and the product that makes money.  The example was McDonalds which marketed the Big Mac.  When you bought a meal they would ask “want some fries with that?”  They made almost all of their profit off the coke drinks.  At the time it was rumored to be around 90% profit margin.

In today’s business you need three products:

The product you market – your brand, your mantra, your flagship product that everyone wants.

The product that generates cash—this is basically a service business that pays the bills now.

The product you build to sell as a business unit later–this is typically a SaaS business model that provides recurring revenue.

It can be hard to build a SaaS business when the only thing you are building/selling is the SaaS product. Consider adding more products around it to make the business easier to grow.

Best regards,

Hall T. 

There are several basic rules of fundraising that all startups should keep in mind

1. Know your investors—it’s important to know what kind of investor you are looking for and what those investor wants to see in your deal.  Many startups fail to understand what the investors are looking for and end up without a followup meeting after the pitch. 

2.  Educate your investors--after you pitch the investor it’s important to educate the investor through updates about your deal.  It’s often the case the investor is unfamiliar with your application or space.  

3. Build trust—demonstrate that you can be trusted by showing examples of how you’ve performed  in the past.

4. Respect your investors—show respect to the investor and don’t take their time and advice for granted.  When investors see their feedback and advice is not followed up, they turn their attention elsewhere.

5. Focus on current supporters—make sure you keep your current investor and investor prospects updated on your startup. If you don’t articulate progress in your deal, the investor will most likely not know.

Best regards,

Hall T. 

Successful fundraisers demonstrate key habits that others can learn as well.  Here are five more habits that will help you hone your fund raising ability:

1.  They practice their pitch—the successful fundraisers know their pitch cold and have it well honed.

2.  They create a plan and then work the plan—they have a list of prospective investors and continually work investors through the process.

3.  They focus on metrics—they keep track of the numbers in their campaign.  They know how many prospects they have and how many they need to achieve their goal.

4.  They ask investors for feedback—they are open to feedback from investors and others on their pitch and campaign.

5.  They demonstrate appreciation—they show appreciation to those who help them in their fund raise.

Best regards,

Hall T. 

Some entrepreneurs are quite good at raising funding. They know what to say to investors and they do the right things.  Here are five habits of successful fund raisers:

1, Set goals—know what you want from the overall raise and break it down into stages.  The entrepreneur who vaguely requests $1M has not yet thought through the use of funds and most likely needs less to get started.

2. Stick to budgets—setup a time budget for raising funding and then stick to it.  It’s a daily/weekly exercise – not a some time thing.

3. Consider the calendar—starting a raise in the middle of summer or just before Thanksgiving is going to be difficult.  Plan the launch of your fundraise with the investor’s schedule in mind.

4. Know the target audience—understand the target investor and what they are looking for.  It’s a good idea to see what they have already invested in and approach them from that angle.

5. Spend time preparing documents—make sure your documents –executive summary, pitch deck, and financial projections are ready to go so when an investor expresses interest you can provide tem.

Fund raising is a skill just like most other aspects of running a business.  These skills can be learned and honed.

Best regards,

Hall T. 

Investors see many deals and can spot glaring holes immediately.  Here are five more reasons an investor will take a pass on your deal:

1.     Lack of plausible financial projections—some startups use the excuse that they can’t predict the future and therefore they have no financial projections.  Most investors see this as a lack of knowledge about the business and the market.

2.      Lack of focus in the business plan—some plans are filled with future possibilities and great opportunities but fail to define the core product and how it will be built and sold.

3.      Not knowing the use the funds raised—the phrase “I’m raising $1M often triggers the bull meter because the fundraiser rarely knows how they’ll apply  the funds.

4.     No validated business model—there’s no evidence of a business either in product or customer activity.

5.     Lack of followup – an investor will express interest and then never hear from the entrepreneur again.

Best regards,

Hall T. 

Investors see many deals and can spot glaring holes immediately.  Here are five reasons an investor will take a pass on your deal:

1.     There’s no traction—there needs to be some evidence of market validation.  Even without a sales team and a marketing budget there should be some demand for your product. 

2.     There’s no social proof—there needs to be some evidence the product works.  

3.     The team doesn’t fit your company—if there are major holes in the team or you’ve filled the secondary roles and left the primary ones empty, then it’s going to be a problem. 

4.     Your company doesn’t fit their criteria—many funds are clear about what they invest in (SaaS, Healthcare IT, etc). Your deal needs to fit into one of those criteria. 

5.     You don’t know your market/customer well enough—those with a vague or fuzzy knowledge of the market or customer will have difficulty raising funding.   Ability to site numbers (market size, growth rates, customer spend, etc) helps demonstrate your knowledge.

Best regards,

Hall T. 

There are several signs indicating the investor invested in the right startup.  Here are my top five. The startup is:

 1.     Focused on core products and processes—you see a strong focus on the core       product/service and everyone is pushing in the same direction.

2.     Revenue and results—you see the team focused on revenue and hard results and not secondary metrics such as likes on Facebook or user downloads.

3.     Customer focused – you see the team more worried about what their customers think than what their competitors think.

4.     Numbers – the leadership knows their numbers well including sales, cash spend, and runway.

5.     Updates and information—you receive updates and news that includes bad news as well as good news.

Best regards,

Hall T.  

1.       The vision is still fuzzy and hasn’t come into focus yet—if you’re still sorting out the market and your position in it then you need to gain more clarity on the space and your company’s position.

2.      The team isn’t in place yet—if you still have major holes in the team that you are seeking to fill, you need to find candidates for those positions before funding.

3.      You haven’t identified the repeatable business model—if you’re still pivoting from one business model to the other then you’re not ready for funding.  You need to have a business model that is predictable at some level.

4.      You don’t have your financials under control—if you don’t know how much to budget for expenses or what the impact of a sales increase on your bottom line may be, then you’re not ready for funding.

5.       There’s no clear path to profitability—if you don’t see how you can grow to a profitable position with your current business model, then you’re not ready for fund raising.

Best regards,

Hall T. 

The appointment-based event is gaining popularity with those who want to raise funding as it turns a conference into a series of dealflow meetings. Both investors and entrepreneurs are making more use of the One-on-One conference to find prospective matches.

For those not familiar with a one-on-one conference, the venue offers the participants the ability to see who will attend the event and schedule meetings at the event.  The conference also offers panels, keynote speakers, and workshops.  In a one-on-one conference, one participant invites another for a meeting.  If the invite is accepted, the scheduler provides a date/time/location for a meeting.  The meetings are typically 15 to 30 minutes in length. The objective is to meet as many qualified contacts as possible.  Detailed follow up comes after the event.

In running several of these events I’ve seen how some find better results than others. Here are some tips on how to make the most of your next one-on-one conference:

Preparation—a one-on-one conference takes a great deal more preparation than the typical panel/speaker filled conference in which the participants find contacts through general networking.  The conference will provide a scheduler system with profiles of attendees.   You must log into the scheduler system several weeks in advance of the conference to setup appointments.

Fill out your profile – most schedulers offer a place for the participant to fill out their profile.  It’s important to make it compelling to others so they will accept your meeting invites.  

Make it interesting—give the others a reason to accept your meeting invite or to initiate an invite. Show the values in your business and make clear what you have to offer.

Indicate who you are seeking to connect with—it’s fair game to include what you are looking for as others can determine if they fit.

Research the other candidates -–in addition to scheduling, it’s important to research the other participants.   Since some conferences have hundreds of participants, this could take some time so start early.

Login daily to see who else has just joined—new participants join the conference every day in the run up to the event so you have to check back to see who joined recently.

Know the network—it helps to know the community and network as it will help narrow down your list of contacts to pursue.

Best regards,

Hall T. 

The Wilco Funding Portal provides funding for Williamson County businesses and those businesses seeking to relocated to Williamson County in Texas. 

Readers receive hundreds of emails every day.  How do you make sure a reader opens your email?  Here are 5 techniques to make sure your email gets read:

1.     Make the subject line intriguing and provocative.   Make it short – no more than 30 letters or 6 to 10 words.  Tell the reader what they are going to learn in a short amount of time.

2.     Use numbers – numbers show specificity which comes across as concrete and definitive.

3.     Use the person’s name -- make it a person to person to communication.  Avoid the use of Mr, Investor, All, or other generic terms.

4.     Use your name in the ‘from’ line -- it should come from you and not your company.  Ideally, they should recognize your name and know who you are.

5.     Use an easy to read font in text layout -- avoid brochure style emails as it looks like it was generated from a corporate marketing machine. In preview mode the reader will judge the email by its format and length.   Using bullet points will make it faster to read.  

The key is to offer a great deal of value in a minimum amount of time.  I’ve scanned longer articles looking for the core concept and then passed on reading the article when I couldn’t find it.  Make your message easy to find and you’ll gain more readers.

Best regards,

Hall T. 

Pitching investors in person and online is a skill one can learn.  Here are some key steps in reaching out to potential investors through email to pitch your deal. 

Choose investor prospects carefully – don’t spam an entire list but rather use lists to research and identify qualified candidates.  Search for connections to those candidates and topics of interest.  Then devise strategies for how to reach out to them. 

Indicate why you are reaching out to them—show why that person and company could be interested in your deal. This could be based on a past investment, a network connection, or a group affiliation.  Answering the "why" will keep them reading. 

Show your connection to the reader – finding a common connection will greatly improve your chance of a response so it’s worth looking for someone who is in their network that can provide social proof that you are legitimate.

Show the problem you solve, the solution you offer and the market you target—do this in one or two sentences and not one or two pages of text.

Show indications of traction—show 3 to 5 examples of traction such as leads generated, sales closed, number of users in a beta program, etc.

Introduce yourself and show social proof – there’s a tendency to start the email with this information but showing your position in the community and credibility comes after you have established a topic relevance to the investor.

Close with a one sentence ask—make clear the next step such as a conference call, a meeting, advice, etc.

Also remember these following points:

Write in a conversational but business-style tone--not marketing-speak.

Keep it short and to the point avoiding long blocks of text.

Use numbers to make your pitch stronger as it shows specificity.

Remember to attach the executive summary or pitch deck.

Best regards,

Hall T. 

The HealthCare Texas 2016 annual technology and venture capital conference in Austin, Texas was a rousing success, bringing together 109 companies and 65 investors and holding 270 one-on-one capital matching meetings. The massive turnout from the health care and business community at the two-day conference sent a loud and clear message that Austin is quickly becoming a major force in the health and life sciences and venture capital landscapes.

The conference, which was held May 3 and 4 at Brazos Hall, a chic turn-of-the-century warehouse in downtown Austin, featured keynote speeches and panel discussions on a variety of cutting-edge health care topics and trends, including information technology, informatics, and value-based reform.

“The turnout for HealthCare Texas 2016 was outstanding,” said Matt Black, director of the Texas Growth Capital Forum. “The conference definitely furthered our goal of maintaining a lasting ecosystem of funding for technology growth companies here in Austin.”

“HealthCare Texas 2016 was proof positive of Austin’s standing as an emerging biotech and life sciences hub,” said Hall T. Martin, Founder/CEO of Texas Entrepreneur Networks. “As indicated by the hundreds of one-on-one meetings, the interest from entrepreneurs and investors in Austin’s health and technology spheres has been awe-inspiring.”

Austin Mayor Steve Adler clearly and succintly explained the appeal of the city to investors during the panel “Austin 2020” on Day 2 of the conference.

“I really do think that this a magical place,” Adler said of Austin. “We’re the fastest growing metropolitan area in the country and have been for the last five years.”

Adler said the fact that Austin creates more startups per capita than any city in the U.S. is driven by its “entrepreneurial, creative and innovative core.”

Austin’s life science cluster is currently at a launch pad, the mayor said.

“The infrastructure is here and growing,” he said. “This is a pivotal moment.”

Important partners, including the University of Texas and the city’s business community, have brought research dollars to the city.

This fall, UT’s Dell Medical School will open its doors to its first class.

“Austin is the place where ideas become real,” he said. “Launching the Dell Medical School provides an opportunity for us to meet the challenges of minimal capital, a trend of the future.”

Dr. Mark McClellan, former commissioner of the U.S. Food and Drug Administration, spoke to a packed audience during his keynote address on health policy that it’s critical companies’ business plans align with government policies.  

“Being aligned where policy is heading is important,” McClellan said. “There’s a lot of interest in getting better treatment to patients faster.”

McClellan, who was hired as a faculty member for the new Dell Medical School late last year, said health care companies need to be able to change quickly and adapt to government policies as needed.

“What you do matters as innovators,” he said. “But you’re dealing with very important consequences while dealing with very scarce resources.”

The Dell Medical School, which welcomes its first class of students in August, presented the conference.

Christopher W. Kersey, managing partner of Camden Partners, a prominent Baltimore-based venture capital firm, delivered a keynote on global health care.

“It’s fascinating what’s happening out there,” said Kersey, who also serves as chairman of the board of Johns Hopkins Medicine International. “I often say we’re in the third inning of an extra inning baseball game in terms of the extent to which health care technology can transform the continuum of care.”

Kersey said health care expenditures make up 15 percent of the GDP of the United States. Globally, it’s around 7 percent.

Many countries around the world have experienced double digit growth in private health care sectors, Kersey said, with Australia and India being notable examples of nations that have seen significant growth in recent years.

Kersey discussed three major trends in health care technology: cyber security, personalized medicine, and biopharmaceutical development.

That’s been health policy expert Mark McClellan’s mantra for years. Finding ways to get payment and regulatory policies to support better care and a lower cost is what McClellan does.

“That’s very much part of the current expansion of efforts to move to payment models that are based more on results and value,” he says.

McClellan will discuss the transition toward value-based health care delivery in his keynote speech “The State of Health Policy” May 3 in Austin at HealthCare Texas 2016, an annual conference bringing together more than 300 leading innovators in healthcare information technology, life sciences, and therapeutics.

“A lot of these payment reforms are about giving health care providers more flexibility in doing what they think is working with their patients and is best for their patients’ outcomes, but at the same time, since resources aren’t unlimited, having more accountability for results,” McClellan says.

Last December, McClellan, who served as head of the U.S. Food and Drug Administration from 2002 to 2004, joined the faculty at Dell Medical School at The University of Texas at Austin to advance the school’s mission of redesigning health care around value.

McClellan says that while his primary basis with UT is its new health policy center, he’s working with Dell Medical School on an ongoing basis as they take steps to implement new health care trends and ideas into the curriculum.

“One advantage of being a new medical school is that you don’t have to do things the old fashioned way,” McClellan says. “The leadership of the medical school has undertaken a tremendous effort to ask fundamental questions like ‘What kind of education do physicians need to practice in a future medical system that is hopefully going to be much more about better care at a lower cost?’”

Dr. Clay Johnston, inaugural dean of the Dell Medical School, said McClellan’s work will support efforts to revolutionize the way people get healthy and stay healthy.

“Mark has been a national leader in conceptualizing how to build a better health care system, and now he can really accelerate the pace in putting that system in place,” Dr. Clay Johnston said of McClellan after he was hired at UT.

Another one of McClellan’s objectives has been to help provide better information on the quality of care. McClellan says in recent years there has been much support for more transparency regarding prices and quality health care.

“I think there’s a lot promising work going on, including by some early stage companies, to help turn all of this health care data into information that’s really useful for patients and physicians and other health care providers that are guiding their decisions,” McClellan says.

McClellan notes that its very difficult to take raw information from claims data and convert it into a confident, accurate measure of the total cost of care that a patient faces.

“It’s not just a matter of what shows up on an insurance claim but things like: ‘Did a patient have a better functional outcome after surgery? What was the outcome of cancer treatment for a patient with an advanced cancer?’”

McClellan says the good news is we’re making progress.

“It’s an area where there’s been a lot of recent investment by health information companies providing patient-oriented and actionable analytic information on quality and cost of care,” he says. “I hope we continue to make further progress there.”

Texas is home to one of the country’s leading biotech industries with more than 3,700 biotech manufacturing and research and development firms and more than 93,800 biotech-related jobs. (The average salary of these jobs is around $90,000). Dozens of global biotech companies, such as Novartis, Medtronic, and Abbott, have major operations in Texas. In 2012, Texas ranked No. 2 in the nation for the number of life scientists and physical scientists employed, with nearly 48,000, according to the National Science Foundation.

Austin, the state capital, is home to state-of-the-art research facilities and has one of the country’s most educated populations. Austin’s creative and entrepreneurial landscape is bolstered by the availability of funding, research collaboration, clinical trials, and highly-skilled workers.

This combination of factors begs the question: Could Austin become the next biotech hotspot?

This very question was posed in a recent article in STAT, an online health, medicine, and science publication.

The article points out that, within a 25-mile radius of downtown Austin, nearly 200 life science companies have sprung up, many of them startups that launched within the past few years.

The University of Texas at Austin currently brings in approximately $60 million in grants from the National Institutes of Health each year. This June, UT’s new Dell Medical School will welcome its first class of students. Dell Medical School promises to bring even more intellectual property and grant money to the region.

“We seem to have all the right components in play,” Tom Kowalski, president and CEO of the Texas Healthcare and Bioscience Institute, told STAT, when asked if Austin could become the next major biotech hub. “It all seems to be a wonderful harmonic convergence.”

Last year was a big one for the city’s biotech industry as Austin-based companies Mirna Therapeutics and XBiotech both went public with initial public offerings that raised $44 million and $76 million, respectively. Aeglea BioTherapeutics also filed for an IPO after receiving more than $80 million in private funding and grants in less than two years.

For biotech companies looking for a more affordable area than Silicon Valley, Austin makes a lot of economic sense. There’s no state income tax in Texas, and the state offers sales tax credits for some research and development expenses.

Ask a realtor what matters most in a property and you’ll hear “location, location, location.”

Ask Christopher W. Kersey, Managing Member of Camden Partners, what matters most in an investment strategy and you’ll hear “people, people, people.”

“Venture capital and private equity are very relationship-based businesses,” Kersey says. “Camden has raised many funds in the last 20 years, and we’re now backing folks whom we’ve backed before. We work with business builders with whom we have previous relationships, whether they’re the CEOs, the founders, co-investors or deal sourcers.”

Kersey says “serial relationships” are the key driver for what he does at Camden Partners, a Baltimore-based private equity firm providing capital to companies in health care, education, technology and business services.

“The best entrepreneurs and executives - the people who have been in this business for multiple cycles - know how they want to build their next operating company and they know which trends are important and I think we likewise have a good sense for how industries evolve over time,” Kersey says. “There’s some trend recognition and predictive skills needed in our investing industry, but much of the success is attributable to people.”

On May 3, Kersey will give a keynote speech on global health care and technology at HealthCare Texas Conference 2016, an annual innovation and growth capital conference in Austin that brings together the greatest minds in health care technology from across the U.S.

Kersey serves as the Chairman of the Board of Johns Hopkins Medicine International, the development branch of Johns Hopkins Medicine with hospital management and clinical education services in North America, South America, the Middle East, Europe and Asia.

“It’s a honor to be a part of the leading academic health care brand in the world,” Kersey says of the position, which he has held since July 2011. “We have a stellar team representing an amazing institution globally.”

A major focus of HealthCare Texas Conference 2016 will be on how health care is being transformed through information technology, big data, and value-based reform.

In Kersey’s view, the top two technological trends in health care today are point of care technologies that enable mobility and revenue cycle management companies that improve CFOs’ management of cash in terms of how providers and payers are paid and when they’re paid.

Kersey says the infusion of technology into how health care is delivered makes health care an exciting sector to invest in. And it’s only the beginning.

“When I talk about the future of health care, I frequently say that we’re in the second inning of an extra inning baseball game in terms of how technology can transform the delivery of health care.”

Camden Partners’s assets under management are approaching $1 billion.

“We anticipate gradually increasing our fund sizes with each subsequent fund,” Kersey says. “Serving as a steward of capital - our own capital and our investors' capital - is a real honor. I’m very proud of the current portfolio, but perhaps most importantly, my partners and I have the opportunity to work with some of the country’s best CEOs.”

Two of Camden’s most successful companies in the portfolio are Essence Group Holdings and PatientSafe Solutions. Essence is the leader in population health management, evidenced by a recent No. 1 KLAS ranking in population health services, and PatientSafe is a top mobile clinical communications company specializing in point-of-care medication management and barcode scanning. 

The success of Camden’s relationships with Essence and PatientSafe are “excellent examples of prior relationships with management team members,” Kersey says.

So what is it Camden looks for in a management team?

No. 1 is character and integrity. No. 2 is a proven track record of success with institutional capital.

“Backing previously successful CEOs is a big deal,” Kersey says. “Regarding our investment strategy, we also place a real premium on what we call technology-enabled service companies that possess hybrid business models that differentiate based on great customer service on the front end combined with proprietary technology on the back end that helps the business scale.  This is a very powerful front end-back end combination.”

Each year medical devices continue play a vital role in people's lives. These products are revolutionizing medicine with groundbreaking advances in both the treatment and the detection of diseases.

A medical device is defined by the FDA as "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory…intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease.”

The U.S. is the largest medical device market in the world with a market size of approximately $110 billion. In 2012, the U.S. market value represented around 38 percent of the global medical device market. There are nearly 7,000 medical device companies in the U.S., most of which are small and medium-sized enterprises (SMEs).  More than 80 percent of medical device companies have fewer than 50 employees. Medical device companies are mainly concentrated in regions known for other tech industries, such as microelectronics and biotechnology. 

Many of the biggest players in the medical device industry have corporate facilities in Texas. More than a dozen Fortune 1000 medical device companies have manufacturing or management operations in the Lone Star State, including Abbott Laboratories, Agilent Technologies, Baxter International, Becton Dickinson, GE, Johnson & Johnson, Medtronic, St. Jude Medical, Stryker, Zimmer, among others.

These companies have developed a large medical device workforce in the state. Over 740 firms employ more than 15,400 workers in this sector, making Texas one of the top states in the country for the number of medical device workers.

A wide variety of medical products are developed and manufactured in Texas, ranging from surgical sutures and bandages to medication delivery systems and molecular biology kits. While a broad spectrum of medical specializations are served by Texas device companies, the state has developed several unique clusters, including ophthalmology, orthopedics, cardiology, diagnostics, and wound care.

Venture capital has played a major role in the development of Texas’s medical device industry. Since 2005, the state’s Texas Emerging Technology Fund (TETF) has invested more than $88 million in medical device-related deals, and, from 2009 to 2014, venture capital firms invested more than $526.7 million in 82 Texas medical device deals.

Public investment in biotech R&D is complemented by Texas’s significant concentration of private sector R&D activity. More than a thousand private R&D firms, employing nearly 20,000 workers, call Texas home. Many of the world’s largest private biotech R&D firms have operations in Texas, including PPD, Covance, Quintiles, and INC Research.

In addition to R&D centers, Texas has more than 1,600 medical and testing laboratories. These laboratories employ nearly 40,000. Major lab firms in the state include LabCorp’s Esoterix subsidiary, Spanish biological product firm Grifols, and Sonic Healthcare’s Clinical Pathology Laboratories subsidiary.

Over the past decade, the state’s Texas Emerging Technology Fund (TETF) has invested more than $142 million in some of the state’s major higher education institutes for biomedical research-related deals in areas ranging from genetic engineering to pharmaceutical manufacturing.

The Lone Star State is also among the leaders in cancer research. Major Texas institutions in cancer research include MD Anderson Cancer Center in Houston, Scott & White Cancer Institute in Temple, and Texas Oncology and Mary Crowley Cancer Research Centers in Dallas. Furthermore, the Cancer Prevention and Research Institute of Texas (CPRIT), a $3 billion initiative based in Austin, has played a major role in expanding Texas cancer research. 

Can you tell me a little bit about the history of Escalate? Where it came from and how long it’s been around?

We started in 2005 as a spin out from Austin Ventures, where I had been for 10 years. My partner, Tony Schell, was running the Comerica tech lending practice here in Austin. We had known each other since our time together at UT Business School in the mid-‘90s. We have raised 3 funds totaling $625M in capital with our most recent closing in late 2014 at $235 million. We’ve been executing pretty much the same strategy since day one, which is to provide mezzanine capital to expansion and later stage tech and healthcare companies. We invest all over the country and have made 75 investments to date as a firm.

Typical structure is in the form of subordinated debt, where we are coming into companies’ later rounds of financing, providing a little more leverage than is traditionally available from banks. We work a lot with SVB, Comerica, Square One, writing $3M-$15M checks into software, tech enabled services, and Internet companies.

Profile-wise, we look for companies with a fair bit of stability and low wipeout risk. Since we are not making as much on the upside, we typically try to underwrite for credit first and equity appreciation second.

So this is mezzanine debt, correct? How would you define mezzanine debt?

We brought what had been a fairly popular financing solution in traditional PE, real estate, and other asset classes to IT, which was a novel concept 10 years ago and we had to do some evangelizing early on. When I came up in the venture business, there was a traditional playbook that said you went out and raised multiple series of equity, maybe layered in a little bit of bank debt, start-ups were largely all equity financed. We are offering another financing solution for certain types of companies looking for additional growth capital or to make acquisitions.

What size company and what criteria does a business have to meet in terms of revenue to get in your door at Escalate Capital?

Companies that we invest in are typically in the $10-$50 million revenue range with a fair bit of granularity in the business. We are not interested in making bets around technology standards or in customer or channel concentration. We invest in a fair bit of B2B software, and companies that utilize software in offering solutions.

Do you do much with Healthcare IT?

We do, we’ve invested in probably 12 Healthcare IT companies.

Any management buyouts?

Selectively, where we come in alongside equity to help finance a recap, but that’s not the primary use of funds in our typical situation.

Have you made any Texas deals?

Early on we invested a lot in Texas: HomeAway, RetailMeNot, LDR, and SailPoint are some of our Austin deals, and we’ve been fairly active in Dallas and Houston as well. All told we’ve invested in around 20 companies based in Texas.

Do you syndicate deals, and how does that work?

We are generally the only provider of capital within our portion of the capital structure. It’s been pretty rare for us to have opportunities syndicate. You could say we syndicate with senior lenders, which are good partners of ours and great sources for deal referrals.

So you partner with the banks on the debt side, not with other firms?

We have and we would, but it’s pretty unusual.

Tell me more about the management team.

Besides me and Tony, we a third partner who covers the East Coast for us named Chris Julich. With a total headcount of seven, we are a fairly small shop; that can certainly be an advantage for companies that are looking for speed and the ability to work directly with principals.

From the last Texas Venture Growth Forum, did you find any groups interesting?

Yes, you guys did a terrific job, especially for the first time. It seemed well attended by companies and investors alike. We try to have a pretty good grasp on what is going on in our backyard, but it’s awesome to meet new companies and I had a chance to do that for sure.

What’s your take on putting Limited Partners out there at the next conference?

If those guys are interested, I think that’s fantastic. I’ve never seen that before combined with these kind of events. That would be another awesome connection to make and a great way to potentially increase attendance among investors

What is the history of Updata Partners?

Updata is a technology-focused growth equity firm based in Washington, D.C. The firm was founded in 1998 and was an early leader in the growth equity category. We have invested in more than 60 industry-leading companies and have built and sold businesses exceeding $3 billion in shareholder value.

What do you invest in?

As a growth equity investor, we invest in businesses that have reached between $5 to $50 million in revenue, that are growing greater than 25% per year, and that have a proven and capital efficient business model. Within the technology market, we focus our efforts on software, internet / digital media, and technology-enabled services companies. Our capital is used to accelerate growth by investing in sales and marketing, expanding into new geographies, developing complementary products, and / or financing a potential acquisition. We generally target bootstrapped or lightly capitalized companies and are flexible when it comes to deal structure. We invest between $5 and $20 million into companies in the form of both primary and secondary capital, and we partner with other investors on larger transactions. 

What do you not invest in?

Within technology, we stay away from hardware-based businesses.

How do you handle syndication deals?

We are typically the lead investor, but we welcome the opportunity to invest with partners that can add value. We are not typically part of large group deals. We also have strong support from our LPs, who actively look for co-investment opportunities and help support us on larger transactions.

Where do you invest geographically and have you invested in Texas deals?

We invest across the U.S. and internationally. We have had success targeting geographies with a strong technology ecosystem, talent pool and early stage capital sources, but lack a growth equity capital pool. We have experience investing in Texas, including Alert Logic, based in Houston, which was acquired by Welsh Carson, and Merlin Technologies, based in Dallas, which was acquired by Trident Capital.

What do you think about the Texas-based deals?

Texas has a strong history in our core software markets, producing leaders like BMC Software, i2 Technologies, Dell and others. We have been very impressed with the quality of the investment opportunities in Texas, and since raising a new fund, we have focused closely on enhancing our presence in Texas. We are excited about the opportunity to further these efforts and continue to evaluate the great opportunities in the region.

What kind of operational support do you offer your portfolio?

All of our GPs are former operators and entrepreneurs, which is a great benefit our portfolio companies can leverage. Having been in the seat before, we understand how to add value and develop a successful management team / board of directors / investor dynamic. Also, we open up an extensive network of industry contacts, experts, and companies our portfolio companies can access. We view our involvement as a true partnership and do everything we can to set up our portfolio companies for success. 

What is the history of Updata Partners?

Updata is a technology-focused growth equity firm based in Washington, D.C. The firm was founded in 1998 and was an early leader in the growth equity category. We have invested in more than 60 industry-leading companies and have built and sold businesses exceeding $3 billion in shareholder value.

What do you invest in?

As a growth equity investor, we invest in businesses that have reached between $5 to $50 million in revenue, that are growing greater than 25% per year, and that have a proven and capital efficient business model. Within the technology market, we focus our efforts on software, internet / digital media, and technology-enabled services companies. Our capital is used to accelerate growth by investing in sales and marketing, expanding into new geographies, developing complementary products, and / or financing a potential acquisition. We generally target bootstrapped or lightly capitalized companies and are flexible when it comes to deal structure. We invest between $5 and $20 million into companies in the form of both primary and secondary capital, and we partner with other investors on larger transactions. 

What do you not invest in?

Within technology, we stay away from hardware-based businesses.

How do you handle syndication deals?

We are typically the lead investor, but we welcome the opportunity to invest with partners that can add value. We are not typically part of large group deals. We also have strong support from our LPs, who actively look for co-investment opportunities and help support us on larger transactions.

Where do you invest geographically and have you invested in Texas deals?

We invest across the U.S. and internationally. We have had success targeting geographies with a strong technology ecosystem, talent pool and early stage capital sources, but lack a growth equity capital pool. We have experience investing in Texas, including Alert Logic, based in Houston, which was acquired by Welsh Carson, and Merlin Technologies, based in Dallas, which was acquired by Trident Capital.

What do you think about the Texas-based deals?

Texas has a strong history in our core software markets, producing leaders like BMC Software, i2 Technologies, Dell and others. We have been very impressed with the quality of the investment opportunities in Texas, and since raising a new fund, we have focused closely on enhancing our presence in Texas. We are excited about the opportunity to further these efforts and continue to evaluate the great opportunities in the region.

What kind of operational support do you offer your portfolio?

All of our GPs are former operators and entrepreneurs, which is a great benefit our portfolio companies can leverage. Having been in the seat before, we understand how to add value and develop a successful management team / board of directors / investor dynamic. Also, we open up an extensive network of industry contacts, experts, and companies our portfolio companies can access. We view our involvement as a true partnership and do everything we can to set up our portfolio companies for success.