By Tom Ballard, Director of Innovation and Entrepreneurial Initiatives, Pershing Yoakley & Associates, P.C.
A warm crowd welcomed a musical performance by Anderson East, comments by Mike Fabio on social media, and a “Founders Series” presentation by Nashville entrepreneur Mark Montgomery during the most recent “First Friday Fanfare” hosted by the Knoxville Entrepreneur Center (KEC) on April 4.
The monthly event combines music and presentations as part of KEC’s role in championing entrepreneurship in the region. During last Friday’s session, the crowd clearly enjoyed Fabio’s comments, East’s music and Montgomery’s views on entrepreneurship.
The latter, described by KEC’s Jonathan Sexton as “Nashville’s most well-known music and tech entrepreneur,” used a somewhat irreverent style to provide the audience with some very useful insights from a person who has succeeded in starting several businesses. He’s also an investor in companies, including Sexton’s Artist Growth.
“I’ve had a bent for this (entrepreneurship) all of my life,” Montgomery said, citing his first business – a lawn service. He arrived in Nashville in 1990 with $800 and a few other questionable assets that you needed to be at the “First Friday Fanfare” to hear and fully appreciate.
Seventeen years later, the avowed music fan and his partner exited Echomusic, an online music marketing company, in a $29 million deal. Since then, Montgomery has been very active in promoting start-ups – from being an investor in specific companies like Sexton’s to allocating a portion of his assets to activities like The Entrepreneur Center in Nashville.
With creds like those, the audience listened intently to Montgomery’s thoughts.
“I like to go to war with incumbents,” he said, citing big corporations. “I’m constantly looking for a way to break something and do it better.”
When Montgomery started selling music directly to consumers through an online platform, his was one of only five companies doing it at the time.
“I had to build the whole (computer) system,” he said.
The initial effort morphed into Echomusic, and Montgomery adopted a very unique approach for a start-up.
“I did not take investors for the first seven years,” he said. “When you take money, you’re reporting to the money.”
Comparing the process of negotiating with investors to “playing high stakes poker,” Montgomery described his first investor – an angel – who set three specific expectations, but who otherwise remained relatively passive.
Montgomery followed the advice, and revenue, customers and staff doubled every quarter between taking the angel money and exiting the company.
In fact, things were going so well that, with connections from the angel, Montgomery was able to secure $17 million in new investment during visits to New York City. As he was preparing to execute the deal, he began getting calls to buy the entire company.
“We walked away from $17 million and created an auction,” Montgomery said. The result was the $29 million purchase price.
Noting his experience with an angel investor was positive, Montgomery cautioned the entrepreneurs in the room to be cautious.
“Don’t report to someone who doesn’t know what you do,” he advised.
After exiting the company, Montgomery made the decision to remain in Nashville and has been actively helping the city’s entrepreneurs. He says he currently has an interest in about a dozen companies.
“Anyone who has had any modicum of success has an opportunity to give back to their community,” he explained. It is clear that he is practicing that philosophy.