This week’s roundtable had some very interesting businesses. Three out of the five that presented are going to be featured on the 1M/1M Incubation Radar shortly, and a fourth will be featured on Deal Radar. Here’s a brief recap, before we do comprehensive profiles on them.
First up was Avinash Gavande for Hospitality Star, an e-learning SaaS vendor for the hospitality industry. Avinash has several customers in the mid-market in India and South East Asia. They’re doing about $200,000 in revenue, and presented a plan to do a comprehensive SaaS solution for the hospitality industry including ERP and Procurement.
The company’s entire client-base, however, is in e-learning, an industry pain that is recognized and acknowledged by customers. Most importantly, the revenues are coming entirely from that business. My read on this company is that they should stay focused on e-learning for hospitality as a core focus, and skip ERP and Procurement for now. For small companies, focus is critical. No need to waste precious resources – engineering, marketing or sales – in building ERP and Procurement solutions at this stage.
Rapid Tissue Processor
Next Leonardo Marcovitz discussed his Rapid Tissue Processor, laboratory equipment for histology labs, of which there are about 5,700 in his target market. At $60,000 per unit, the product is substantially cheaper than its various competitors. It is also faster, making tissue processing more efficient for labs that have significant volume, and can translate to a core business benefit.
Leonardo has validated the premise with several labs and has built a prototype. He needs about 10-12 months to get through the regulatory process, and also funding to manufacture the product. Funding for early stage biotech ventures has become very, very tight. I was talking to someone at San Jose State University’s biotech incubator last night, and he said they were having a really hard time.
I suggested to Leonardo to explore possible service projects with Quest Diagnostics and Labcorp, two of the largest companies in his target market, and see if they can generate some revenue with which to fund the project. An alternative would be strategic investment from Quest or Labcorp.
Chris Salter then presented Music Wizard. The company has been around for a while, and sells various digital games and educational products around learning to play music. A $500 educational product is selling well for them right now, and they also have a variety of distribution deals and so forth.
Music Wizard has raised $10 million dollars, but the revenue levels have fluctuated. With a burn rate of about $80,000 a month, the company is just about close to break even. Chris is trying to raise money while protecting his current shareholders. My sense is that any investor coming into the deal today will severely dilute the older investors, and that may simply not be the best route forward.
Recapitalization deals are very complicated and often end up ugly. Instead, Chris should try to bootstrap the company going forward, and build organically. There may be some small amounts of working capital financing that can be used, but otherwise, at this stage, the business needs to grow from internally generated cash.
Then Rani Wemel with LTT Global spoke about an authoring tool for e-learning that enables educators to deliver their educational content on mobile phones. Rani has a couple of pilot educational institution customers in Malaysia and Indonesia, and hopes to help them deliver their material to students in a scalable way.
The institutes have committed to paying about $.80 per student per month, and one of the pilots will be with 120 students. Not a bad start to be able to get customers to pay for such pilots, and if Rani can get another 20 pilots going in the educational institutions, she will learn a lot about what is needed to really and truly bring this authoring tool to market: What functionality? What usage model? What kind of professional services? All these are open questions. But with a steady set of pilots in swing, Rani should be able to answer these questions.
I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. In addition, we are offering entrepreneurs access to investors and customers through our recently launched our 1M/1M Incubation Radar series. You can pitch to be featured on my blog following these instructions.
Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies, writes a business blog, Sramana Mitra on Strategy, and runs the 1M/1M initiative. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon.
Photo by Pierre Amerlynck