Business Partners | “Speed date before giving them your kidney”
Gera Grinberg provides a checklist of discussion points before entering into a business partnership.
Each month, a start-up founder takes the “hot seat” at the Knoxville Entrepreneur Center’s (KEC) “In the Room” series. This month, that founder is Don DeRosa of Eonix. The company designs custom chemistry lithium-ion batteries that solve industry-specific pain points.
DeRosa was a part of Cohort 2 of Innovation Crossroads at the Oak Ridge National Laboratory (ORNL), a participant in the Spark Incubator program at the University of Tennessee Research Park, and recently opened a new laboratory in the Zeenah Building on campusof UT, Knoxville.
Part of the “hot seat” is getting questioned by Gera Grinberg. He has years of experience working on high-level business growth as an executive and attorney. Grinberg also has worked on dozens of deals with Fortune 100 companies, mega healthcare firms, and international media companies like Pixar. During his career, he has managed mergers and acquisitions, totaling more than $1,000,000,000,000 (yes, trillion). He’s tough.
DeRosa kicked off the hot seat by sharing the long list of grants and deferral funding he has received to develop designs and projects for the U.S. Military – specifically the Army and AirForce. These are service-based projects.
Grinberg stopped him there. “So, tell me how you’re generating money now.”
“We have about $5.1 million in purchase orders for services,” he shared. “But, we are starting a campaign to raise $5 million in capital to launch a pilot line of batteries.”
“So, what am I investing in?” Grinberg asked.
“Right now, we are in our architect phase. The government pays us to design the house (or in this instance the chemistry for the battery), but we want to be in the business of building and selling the house,” DeRosa said.
DeRosa currently has five employees but said Eonix could grow to hire 10 more people in the upcoming years, which would be high-paying tech positions. With the expected growth, he believes that Eonix’s valuation is around $24 million.
The second half of this month’s “In the Room” session was dedicated to tips for entering and exiting partnerships.
“In the early stages of looking for a partner, you should be speed dating,” Grinberg said. “For example, if you are dating a love interest, you may ‘fast fail’ by asking them about finances, kids, religion, politics, and in-laws off the bat to weed out if they’re a potential match or not.”
He revealed a list of questions every potential partnership should talk through in-depth before making any formal agreements.
Checklist of questions
➡ What are the shared goals – and are they aligned?
➡ What will each partner be expected to do for the company?
➡ How will decisions be made?
➡ Which actions require unanimous decisions?
➡ What are the dealbreakers when seeking investment?
➡ What is the debt tolerance?
➡ What is the desired exit timeframe?
➡ How will you divide business assets if the partnership breaks up?
“Once you give someone partial ownership of your company, it’s like giving them a kidney… you won’t get it back. It’s theirs now,” Grinberg said.
The next session of the KEC “In the Room” series with Gera Grinberg will be held on May 23.
