(EDITOR’S NOTE: As mentioned in last Tuesday’s feature article about the recent visit of the top leaders and others from Queen City Angels to Knoxville and the “Entrepreneurship Bootcamp” that the organization conducted, this is the final article that summarizes advice offered to local entrepreneurs during the session.)
By Tom Ballard, Chief Alliance Officer, PYA
Ahead of a panel discussion and reception that wrapped-up the Queen City Angels (QCA)-delivered “Entrepreneurship Bootcamp,” Vance VanDrake discussed “Intellectual Property” and QCA member John Bruck, now a resident of Knoxville, spoke on the topic of “A View from The Heavens.”
VanDrake might be a familiar name to some readers who recall that the Patent Attorney, Author and Serial Entrepreneur turned a normally dry topic into an insightful talk during a virtual workshop hosted in April 2020 by the Knoxville Technology Council (KTech). Our article summarizing that event can be found here, and KTech later posted a recording of the presentation at this link.
Much of what he covered at the bootcamp was very similar to the KTech presentation, so we’ll refer you to that recording or his book – The Patent Game – which is an Amazon bestseller. As an aside, thanks to VanDrake who brought a case of his book to share with attendees.
Bruck started his presentation with a personal story, showing a letter that he wrote as a fourth grader to Bristol-Meyers Squibb describing an idea for a new toothbrush. It was a way to underscore a key point which was that start-up entrepreneurs and investors, whether angels, venture capital, or strategic, need each other. That said, Bruck noted that less than five percent of Founders who seek outside investment are successful in receiving it, and 50 percent of those investments end up being written-off. Those that do produce an exit result in the following returns: 20 percent produce a 1x return, another 20 percent produce an average 3x return, and 10 percent produce as much as a 10x return.
“How do investors evaluate if they are going to invest?” Bruck said it’s about eliminating failure points.
His list of funding types for start-ups started with non-dilutive capital that comes from grants and government awards – think Small Business Innovation Research and Small Business Technology Transfer, a particular strength of the Knoxville-Oak Ridge region. Others include debit, crowdfunding, and priced-round equity which is what Bruck said is the model for most angel deals. Debt can be conventional, line of credit, a loan on revenues, convertible debt, and SAFEs (simple agreement for future equity).
The latter option produced a brief commentary by Tony Shipley, QCA Chairman, President and Co-Founder, who said, “I don’t know any angel investor that likes a SAFE, but they are frequently used in California and Texas.”
Bruck closed by describing the process QCA uses as it evaluates opportunities. There’s general outreach, looking for opportunities and making prospects aware of QCA. From there, the application is screened, a process that takes three to four weeks generally. If there is interest, the Founder is invited to pitch to members, and that is followed by a due diligence process that can last as long as eight weeks.
In total, Bruck said from application to successful close can take three to five months.