High Velocity Radio Show with Guests: Scott Burkett and Michael Blake
High Velocity Radio Show
with
Stone Payton and Todd Schnick
Guests: Scott Burkett and Michael Blake
11/22/09
STONE PAYTON: Welcome to the High Velocity Radio Show. This is your host, Stone Payton and joining me in the studio this morning is our producer, Lee Kantor and my good buddy,Todd Schnick. What’s happening Todd?
TODD SCHNICK: Not much, Stone. How are you this morning?
STONE PAYTON: I am doing well. What do we have going this week?
TODD SCHNICK: Well, this is Turkey week.
STONE PAYTON: Do you have your Thanksgiving ribs yet?
TODD SCHNICK: No, I don’t have my Thanksgiving ribs. I know you do.
STONE PAYTON: Yeah, we are doing ribs on Thursday.
TODD SCHNICK: And yours are gluten-free ribs, right?
STONE PAYTON: Oh yeah, you can count on it.
TODD SCHNICK: Our fan base, they appreciate the gluten-free-ness of our food.
STONE PAYTON: So are we taking off after this or are we going to do some work this week? What’s in front of us for the High Velocity Boys?
TODD SCHNICK: We don’t do any work at the High Velocity organization.
STONE PAYTON: No, I know that.
TODD SCHNICK: No, I think we probably should take about our next little venture. Our little speed school.
STONE PAYTON: Let’s use the free advertising now, go for it!
TODD SCHNICK: All I did was do video work yesterday, recording the video briefings as part of this thing. So, that is how I spent my Sunday.
STONE PAYTON: I’m tickled to death because our plan was we were going to launch speed school at the first of the year. And it looks like we are going to be able to launch at least by December 7th and our internal deadline actually is December 1. This is going to be a lot of fun.
For those of you who don’t know, the focus of our consulting practice is to solve the sales problem for consultants. One of the challenges that we consistently run into is that some of the folks that could really use our help the most, they can’t afford us. So our solution is this web based curriculum, where not just Todd and I, but experts in a variety of specialties are providing instruction through video, audio, and of course there are job aides and additional resources, in a 52 lap, 52 week curriculum. I am tickled to death that we are going to have an opportunity to release this in just a couple of weeks.
TODD SCHNICK: Yeah, it’s going to be real exciting. I’m having a lot of fun. I’m already getting some good interest in it. I think there is a market that needs that and I think it is going to be a great tool to serve that community.
STONE PAYTON: We are going to have a ball with it! But, that’s not what today’s about. Today we have a really different kind of show set up. It is more of a round table format. I am delighted to introduce to you this morning a couple of gentlemen. The first is a gentleman by the name of Michael Blake. He is Director of Evaluation Services for a firm I can’t pronounce! But we’ll learn more about that later. We also have Mr. Scott Burkett, who in some ways works directly with Michael. I get the sense that he also does some things on his own on well.
TODD SCHNICK: I don’t we have a clue what Scott really does. He is one of those entrepreneurial guys. We’ll let him tell us.
STONE PAYTON: Welcome to the show Mike and Scott.
SCOTT BURKETT: Thanks for having us, guys.
MICHAEL BLAKE: Thanks.
STONE PAYTON: We are delighted to have you. Let’s start with you, Mike. Tell us a little bit about what in the world Evaluation Services really entails. And maybe we ought to also start with the name of this firm I can’t pronounce.
MICHAEL BLAKE: The correct pronunciation is Habith, Arogeti & Wynne. We are the largest independent accounting firm in the southeast United States. I run the valuation practice, which basically means I am a business appraiser. My job is to appraise businesses and business assets like patents and other intellectual property or stocks, securities in privately held companies and I tell you what I think they’re worth.
STONE PAYTON: Do you ever find when you go in and evaluate a business that what they are really worth, because you have some science and structures and discipline and rigor around all this, what the business is really worth is sometimes a slightly different number from what the business owners think the business is worth?
MICHAEL BLAKE: No, I sometimes find that it is really different. Almost delusionally so! Part of it is that my report doesn’t buy the business. A lot of people will say, in terms of value, that a value of a business is worth whatever somebody else is willing to pay for it. And that’s true to an extent except it doesn’t really factor in the ‘knuckle head’ factor. (laughing) And just because some knuckle head pays something for a business…if I sell you this bottle of water for $10, that doesn’t mean I can turn around and find some other knuckle head to sell this thing to for $10. So even though somebody bought it at that price, that’s not the value of the asset, that is just what somebody paid for it. That’s probably the most difficult concept to get across to clients. They will say, “My buddy sold this business for three times sales or five times EBIDA.” Well, good for them, and I’ll say, “Go see if that guy will buy your business too.”
STONE PAYTON: Now do you specialize in a specific type of industry?
MICHAEL BLAKE: Not so much industries, but I do a lot of intellectual property evaluation. I do a lot of patents to a lot of early stage stuff to a lot of venture stuff. Probably just because my background is a recovering investment banker and they were forming venture capitalist. So I have spent my entire life with emerging companies.
TODD SCHNICK: Michael, what does a down economy do to that sector, is that an increased amount of sales and business or is it decreased or the same?
MICHAEL BLAKE: Due to which sector?
TODD SCHNICK: The amount of businesses that are sold.
MICHAEL BLAKE: You know what happened…what the correction about 15 months ago did is that it took all the motor oil out of the engine. It just seized up almost instantly. What happens is you get sort of a buy-sell or bid-ask spread. Whenever you have a correction like that the buyers are saying, “Yippie! I can buy stuff on the cheap now!” and the sellers are saying, “No, not so fast, I was going to get $10 million bucks for this business”; it takes awhile for that reality to set in. You have willing buyers and willing sellers but they can’t close the gap on the price. You throw in the additional monkey wrench, the banks are not lending you money to buy a business anymore. So, all of a sudden you have to come up with the cash, you have to convince the seller to provide a note or finance that business for you. That makes it a lot more difficult. There is a lot of liquidity that has been taking out of the market to actually go out and buy those businesses, even if you can agree on the price.
It is really a liquidity issue from both those sides that is preventing or hindering of buying and selling of businesses. I will tell you, at sort of the sub-Wall Street Journal level, not a lot of deals happening at the $500 million level and up. There is a lot of stuff going on in the $10 million and under.
STONE PAYTON: Is that right?
MICHAEL BLAKE: Yep. I think it is because the sellers can be flexible in terms of their financing. More people can plausibly pay cash on the barrel for a $10 million business. But, you want to go pay $500 million, not many people can write that check.
STONE PAYTON: So Scott, how do you fit into this equation?
SCOTT BURKETT: I am basically the guy that Mike follows around with a fire extinguisher and just tries to keep me in check. (laughing) I am basically a serial entrepreneur. Born and raised in Georgia. Right now my day job, I know we are not here to talk about that but I’m going to pimp it anyway…
LEE KANTOR: Pimp away! That’s a lovely fur coat you are wearing. (laughing)
SCOTT BURKETT: You’ve heard of the Cheetah? Well, no…that’s not actually my business. Actually I am the Chief Operating Officer of a company called StarPound Technologies. We are an Atlanta based software company that focuses on helping companies automate their business process and make them on demand. It’s a pretty fun thing. That’s my story. That’s it and I’m sticking to it.
STONE PAYTON: I tried to do my homework a little bit, on you particularly Mike. Last week before we got to the show, I noted that in reading one of the articles that you have published you talk about the seller reducing the perceived risk. Talk a little bit more about that and maybe share with our listeners some of the things that you can do when you’re preparing to sell your business to reduce that perceived risk for the buyer.
MICHAEL BLAKE: It is all about reducing risk whenever you sell anything. It could be a car, tires look a little worn so you put new tires on the car. You put a new coat of paint on. Same thing with a business. You make it easier to buy, easier to look at and you are going to get more people that are interested. The same goes on the venture side when you are raising capital. Scott and I have the connections through StartupLounge and the thing that we do most as we are advising people in the StartupLounge community when they are selling their businesses or selling stock in their businesses that they’ve got to reduce the perceived risk. They have to make it as easy as possible for somebody to learn about them, investigate the business, get comfortable with the entrepreneur and buy the thing.
STONE PAYTON: I don’t know if Scott was blowing smoke up my skirt or not out here in the lounge, but he said you guys have something like 17-18,000 community members around this StartupLounge.
TODD SCHNICK: Let’s step back for a minute and tell us a story of StartupLounge. I think you said it’s just about three years old.
SCOTT BURKETT: Yeah, Mike reminded me a couple of days ago, three years ago a couple of days ago.
MICHAEL BLAKE: We’ve lasted as long as Star Trek.
SCOTT BURKETT: That’s amazing.
MICHAEL BLAKE: You think they will have people dressed like you at Dragon*Con?
SCOTT BURKETT: I doubt that. Actually, they do have people dressed like me at Dragon*Con but it has nothing to do with the fact that they know who I am. (laughing) A couple of years ago I sold a small software company, I guess it was ’04 or ’05 and Mike and I got to know each other at that time. I sort of came up for air and looked around in the Atlanta startup community and I really just wasn’t excited about what I saw. Mike and I started talking about it and drinking and talking about it and drinking some more (laughing) and we just said, “Let’s do something about it.” Not necessarily try to solve the problem but let’s try to promote a healthy dialogue, as it were. We basically made a list of all the things that we thought that Atlanta could be better at in terms of startups. When I say ‘startups’, let me also delineate between a small business and what we call a fast growth startup, something that is a venture back-able play. That is really where our focus is. That typically involves software, technology, clean tech, biotech, those kinds of things. We just pulled up two microphones and said, “Hey, let’s do this thing called a podcast.” We did and we were our own first guests. It went over like a hand grenade in the small crowded marketplace.
STONE PAYTON: Your typical pilot program.
SCOTT BURKETT: We just went out in our network and we started bringing on really great guests, like you guys. Bringing on Chris Klaus and Mitch Free and just people who had been there and done that. We had a real conversation with them. We didn’t talk about “Tell us your story”, “Tell us how great it is to be rich now”, they are more than happy to do that, people love to talk about that; but we just started talking about Atlanta and what can we do as a community to be better. It just took off from there.
STONE PAYTON: Where can we get to StartupLounge? Where is it?
SCOTT BURKETT: StartupLounge is in an alley way down in Midtown! (laughing) No, you just go to www.startuplounge.com and we have all of our podcasts on there, 40+, 42. We have all of the information about our various events and podcasts and things like that on there.
TODD SCHNICK: You have been around for three years. Three years ago in the new modern world of marketing is almost a generation ago. Has the technology of podcasting changed? Is the world accepting them?
SCOTT BURKETT: I don’t think the technology has necessarily changed, though certainly it is improved. I think the adoption is certainly there. We had a certain challenge too when we started ours. You guys remember this and I guess to some extent it is still that way. People love bite-sized podcasts. You are sitting on the train, you are on the plane and you want to listen to a 10-15 minute deal. Our first podcast was like 1 ½ hours long. We said, “Nobody is going to listen to this thing. This is ridiculous, just two monkeys sitting up at a microphone talking for a 1 ½ hours.” Our podcasts will typically go about 1-1 ½ hours, it depends. We just said we wanted the person that listens to that podcast to listen to it for the right reasons. If you don’t want to listen to it because it is 1 ½ hours long, you are not the person that we want to help. We found for some bizarre reason that that works. It may not work for everybody that is in to podcasting, but it certainly works here.
We were also able to take advantage, and Mike you would agree, of the pent up energy that was here in Atlanta. People would listen to it for 1 ½ hours long because they wanted to hear what that venture capitalist thought about that particular sector.
MICHAEL BLAKE: Without question. Most venture capitalists, up until about two years ago, ran around town like they were in the Pope-mobile. (laughing) You couldn’t get within 500 yards of them. The way this town operated was that the only way you meet millionaires was to yourself be a millionaire. That’s great, but you are not the one looking for the angel investment. Maybe a guy like a Charlie Papparelli will get on a panel or something or he will give a talk, or a Steven Fleming, or one of the other noted VCs.
STONE PAYTON: Or Stone Payton or someone like that?
MICHAEL BLAKE: Sure.
STONE PAYTON: We’re not easy to get to!
MICHAEL BLAKE: No. They have their people, they have their handlers.
TODD SCHNICK: They have the PR flack, you know!
MICHAEL BLAKE: Because they were targets in the marketplace, frankly for people like me because I’m a service provider, it is my job to sell people stuff like accounting and tax and junk, they do their thing, they get up on their panel and then they just duck out the back door.
SCOTT BURKETT: They run!
MICHAEL BLAKE: Like Elton John after a second encore. In the limo, boom, gone! The reason the podcast works with the length is that here is the opportunity to listen in on a long in-depth sit down with guys that are generally inaccessible to most entrepreneurs in the market. You should listen to the whole thing. That’s where all your information is going to come from. We ask a few soft ball questions, we ask them the tough questions that the entrepreneurs need to understand.
STONE PAYTON: What’s the secret to getting to them? How do you get all these great guests?
MICHAEL BLAKE: Tax returns! (laughing)
SCOTT BURKETT: Exactly, he works at a tax and accounting firm. Need I say more? One of the things that I think we were very fortunate to stumble over was that a lot of the successful folks in the community wanted the same things we wanted. They wanted Atlanta to be better. Once we provided a vehicle for them, we really didn’t have a problem finding people and going out into our network and bringing those folks on. They were very excited about it. “Yeah, I’d love to do that. I’d love to not do a soft ball – tell how great it is interview – but really get down to the brass tacks. Tell us the five things that you really struggled with in building that billion dollar company.”
MICHAEL BLAKE: The other thing that helped, Scott’s being modest, it was his network. The first eight guests were all personal friends of his and they are important people in town.
SCOTT BURKETT: The only eight friends I have.
MICHAEL BLAKE: Yeah, but they’re a good eight friends.
SCOTT BURKETT: They are not friends any more. (laughing)
MICHAEL BLAKE: He would say, “Let’s get Chris Klaus on the podcast.” Well, great but how do we do that? “Well, I’ll call him and let’s gets Steven Fleming on too.” Well, how do we do that? “Well, I’ll call him.” I’m thinking great! This podcast is great. But once we got that caliber of person on and we didn’t 16 minutes them. We decided early on you could be Mike Wallace with a guy like that once. After that you are never going to get…we don’t want to play amateur investigative journalist, but at the same time once people figured out that we could get the kind of people that were hard to access by themselves in the marketplace it started almost to develop a viral quality to it. I think our guests genuinely enjoyed being on the program as long as they could get by the profanity.
SCOTT BURKETT: Exactly, And the nudity. (laughing)
MICHAEL BLAKE: Yeah, there was that unfortunate exposure incident.
TODD SCHNICK: I saw the website, that was awful!
SCOTT BURKETT: You have to take one for the team when you come into the lounge.
TODD SCHNICK: They say 2010 is the year of the video, but in your case…WOW…
LEE KANTOR: it is the year of the arrest!
SCOTT BURKETT: Isn’t that the Chinese calendar? The year 2010 is the Year of the Indictment?
TODD SCHNICK: The Year of the Orange Jumpsuit!
STONE PAYTON: I want to hit you guys with the same question Todd and I get all the time. I am really interested in how you answer this…How does all this translate to making money?
SCOTT BURKETT: That’s a very good question. Mike is going to jump in here in a minute, I know. But one of the questions we got asked probably for the first 1 ½-2 years of doing StartupLounge was, “I don’t get it. You guys are a nonprofit and you are doing this podcast, you are not charging anybody and you do these events that you do where we put entrepreneurs and investors together and we don’t charge anybody. What’s your angle, how are you getting paid?” We basically said, “We’re not.” It is a nonprofit organization.
A lot of people thought for awhile that there is something there with those guys. They are doing something. They are getting a piece of this or a taste of that or a percentage point of that…it really wasn’t about that. We founded it because we wanted to make a difference. I think that’s the thing that people in the community are finally coming to terms with. The reason I think that’s important is that we’ve established a level of trust, both with the investment community as well as the entrepreneurs. The goal is to make money but it is not for us to make money, it is for those entrepreneurs to make money.
STONE PAYTON: Wow, that was a really good answer. Now I want to get the truth.
TODD SCHNICK: Now let’s get the real answer.
MICHAEL BLAKE: You know, we’re Communists. (laughing) Which is ironic because Scott gave 2-3 years of his life defending us against Communism, on the Czech/German border, protecting us from errant snowballs from the Communists…
SCOTT BURKETT: And stale Gummy Bears, exactly!
MICHAEL BLAKE: The whole idea is…Mark Twain once wrote that everybody complains about the weather, nobody does anything about it. Everybody was complaining about the weather in Atlanta for start ups. Why don’t we do something about it. Look, we have a nonprofit and we are involved in trying to help people become millionaires and realize their dreams. That’s not a noble goal like building houses or curing cancer…we get it. But on the other hand, speaking for myself, I have no skills to feed, clothe, shelter or heal anybody. I am a danger to myself and others when I try. Do not accept a house that I worked on Habitat with. You are just asking for trouble. (laughing) But, the one thing I do know something about is how to cultivate early stage businesses in the venture capital area. So, why not?
For me on the back end getting your name out there and being associated with the StartupLounge brand is helpful. I don’t ask for any business for H, A & W through my StartupLounge persona, I don’t need to. When people are ready and they need a valuation and they need that kind of advice and it is appropriate for them to get that then they know the person to call.
SCOTT BURKETT: Let’s also credit your firm Mike, H, A & W who has an amazing spirit of community about them. They are one of our sponsors and they have done an amazing job of helping us in any way they can, whether it is freeing up your time or giving us space to work out of or helping us with the events and things like that. Kudos to your firm.
MICHAEL BLAKE: They were a sponsor before I joined so this is not like total kiss-ass thing! (laughing)
SCOTT BURKETT: That’s true.
MICHAEL BLAKE: They sponsored and then I joined the firm, not the other way around.
STONE PAYTON: There really is some path to some of these guests, they get to know you, they trust you, they are getting genuine value from the experience at the StartupLounge. They know what kind of business you do. And in many cases they are perspective clients for you. You don’t have to hammer them over the head with, “Buy my stuff, buy my stuff!”. But when they are ready for the kind of services you provide, you are certainly one of the people they are genuinely going to consider talking to.
MICHAEL BLAKE: There are clients and referral sources. I don’t think a guest has ever been a client. But, listeners certainly have been. Through that I have actually gotten engagements over Twitter. You can do business over Twitter.
TODD SCHNICK: I thought you said you got engaged over Twitter! Does your wife know about this? What is that about?
MICHAEL BLAKE: Well, one of them does! (laughing) There is that element and there is the personal branding. I think I get a lot more out of StartupLounge than I give to it. One of the reasons for that is being one of the StartupLounge guys is a very comfortable persona to have in the marketplace as opposed to being H, A & W, here I am to sell you professional services - NO. There are a lot of places I don’t even hand out an H, A & W business card, because when I say I am one of the StartupLounge guys I am here to help and I want to learn about your business and try to help you, it immediately puts people at ease. That is a much better persona than sort of a guy who is just another accountant.
TODD SCHNICK: People think a certain way about Stone, but when he hosts a radio show then he suddenly becomes cool. We get that, we understand that. (laughing)
MICHAEL BLAKE: It is good to be part of the media, isn’t it?
STONE PAYTON: In reading that article that I read, all that great homework that I did, it occurred to me all of the advice that you are giving people to follow in preparation for selling their business, you ought to do this stuff even if you are not going to sell your business. Say more about some of the key disciplines that you ask these people to exercise and how and why that plays into selling the business effectively or just continuing to run a business effectively.
MICHAEL BLAKE: There are lots of things that are best practices in businesses that people don’t necessarily execute on a day to day basis. If you look in the neighborhood, which are the best maintained houses in your neighborhood? They are the ones that are about to go up for sale. A new coat of paint, they just repaved the drive…unless it’s a foreclosure house.
STONE PAYTON: Well, that and the one retired guy at the end of the cul de sac. I do not like this guy! (laughing)
TODD SCHNICK: The Homeowner’s president, invariably. “Your trash cans are visible from the street!” (laughing)
MICHAEL BLAKE: When you get ready to sell something, all of a sudden that fresh coat of paint matters.
SCOTT BURKETT: Yeah, the books gets balanced all of a sudden.
TODD SCHNICK: Books?
SCOTT BURKETT: Yeah, the hastily scrawled books.
MICHAEL BLAKE: The thing is that, yeah, there are things that the margin help your business on a day to day basis. But, there are people who’ve owned their businesses for 30 years and they’ve never kept accounting records. They have an external accountant who does their tax return and they’ve done fine. Operationally that works. It is just when you try to bring in a stranger to understand the business you have to sort of meet them half way. You have to professionalize it. You have to put in processes and procedures that weren’t all that important when you were just operating the business. But as you position it for sale, that fresh coat of paint all of a sudden becomes more important.
STONE PAYTON: So how fresh is the paint on StarPound?
SCOTT BURKETT: StarPound, we’ve been around for around five years. Noro-Moesely, venture partners here in town is a significant investor in our fund. We were actually founded by Michael McChesney, who is one of the co-founders of S1. The paint looks good, although it is 4-5 years old. We say we are a startup even though we are 4-5 years into it. I would caution a lot of companies, as you are growing, to try to do everything you can to retain that culture of startup-ness, you know that fast, fluid, you never know what the next is going to bring. But, you are there because you want to wear ten hats every day. We are a mature startup, how about that?
TODD SCHNICK: There is a different attitude. You are little bit more courageous. You are willing to try some things. It is funny you say that because I have seen a lot of other thought leadership out there talking about that same thing.
SCOTT BURKETT: Culture is important. In a startup world in particular, where you are wearing so many hats. In fact, we were talking about Jason Jones just outside here today. There is a great podcast called “Battlefield of Business”. I was on his podcast and we were talking about lessons from the military and how they applied to start ups. One of the things that I liken a startup to is a small squad or a small unit in the military. Small unit tactics apply. I was a tank gunner in the army. If the tank gets disabled, guess what? You are instant infantrymen. Guess what? If you can’t shoot a rifle or carry a pack or do all the things that you were trained to do secondarily to your primary job you are going to fail. In a small team of four or five people, if one person goes down in a military unit that causes problems. Very much the same way in a startup. There is a lot more risk and the risk is applied at almost miniscule task based levels sometimes. You don’t have that in big companies. Trying to retain your culture through all that chaos is almost impossible sometimes.
TODD SCHNICK: We are two weeks past Veterans Day. Thank you for your service.
SCOTT BURKETT: Thank you. Thank you very much.
STONE PAYTON: I thought you were going to say we were two weeks past chaos at High Velocity!
TODD SCHNICK: We’re always two weeks past chaos at High Velocity! (laughing)
SCOTT BURKETT: You guys have nice digs here. I think I may have to come up here and start doing our things here. This is nice. This is a lot nicer than your office!
MICHAEL BLAKE: You’ve got the sound panels here, the sound absorbing panels. Nice.
TODD SCHNICK: I don’t think you said earlier, but you told us before the show. You have a pretty respectable audience listening in to that podcast.
SCOTT BURKETT: We do. It is very strange. We started with about 100 people pulling in our feed. That is kind of cool, there is actually 100 people in the world with nothing better to do but listen to the two of us yap on.
LEE KANTOR: It shows you can sell 100 of anything!
SCOTT BURKETT: We get an entrepreneur that says, “Nobody is buying my product.” We are like, “I don’t want to hear that”. If we can do it. That became 1000, which became 5,000. All of a sudden, last count a few months ago it was 17-18,000 people. It is just bizarre.
TODD SCHNICK: Did you do anything to push that or did it just happen?
SCOTT BURKETT: Not at all. Just word of mouth.
TODD SCHNICK: Just good content and people were sharing it.
SCOTT BURKETT: This is one of the things that I think…I guess this will be my third New Year’s resolution in a row, Mike, where we sit down and say, “This year I am really going to make an effort to try to promote our stuff.” Yeah, right! We have day jobs. In fact, you were asking me before the show, “Do you do it once a month?” We used to. Now it is like, “Yeah, we should probably do that again. We should probably do another podcast.” It is a lot of time, as you guys know, to do the research for a show and to edit and all those kinds of things.
TODD SCHNICK: Yeah, it is a lot of work for Stone.
SCOTT BURKETT: He was saying he does carry an unbalanced load of the work around here. I read it on the internet, so it must be true! (laughing)
STONE PAYTON: Listening to you guys talk about the podcast. You really seem to talk a lot about Atlanta and the community here and the players in the Atlanta VC market. But three years hence and 17-18,000 subscribers, are you getting an audience from outside of Atlanta?
MICHAEL BLAKE: Oh yeah. We’ve been asked to go to Berlin and Philippines.
SCOTT BURKETT: I’m like, “I’m not going back to Berlin! I did my time there. I’m sorry.”
MICHAEL BLAKE: Apparently there is an MBA professor in Toronto that makes our podcast required listening as part of the curriculum.
SCOTT BURKETT: Now that’s some scary stuff right there!
MICHAEL BLAKE: Don’t do business with Canada, that’s a lesson right there! (laughing)
SCOTT BURKETT: The Philippines and just bizarre places. They ask, “Can you come do your ‘Capital Lounge’ event here?” We are like, “No.” I think one of the things that we want to do and we are trying to do is sort of open source our methodology, our philosophy. Here is how we do things…if you want to take it in your neck of the woods and go off and…have at it. That’s fine. We have no desire to gallivant around the globe.
STONE PAYTON: So are you staying true and talking strictly about the Atlanta community when you are on?
SCOTT BURKETT: We talk a lot about the Atlanta community, I would say the Southeast. But, it sort of gravitates towards Atlanta. But I’ll tell you the thing we noticed about a year into it, as we started getting emails from people and just bizarre requests – and we’d get some strange ones. But we found out that basically anybody outside of Silicon Valley has a similar set of problems to Atlanta. I think there’s that sort of universal appeal of StartupLounge. We talk about Atlanta personalities sometimes times, we’ll talk about certain companies here in Atlanta and that really does kind of pertain to Atlanta specifically. But when we start talking about the under-served capital market here and what entrepreneurs have to do to think out of the box to get that first customer or to meet the investor half way, and we start talking about the cultural aspects of Atlanta, we found that they actually apply, more times than not, around the world. It is almost universal.
TODD SCHNICK: Are all your guests in the studio with you? Do you have anybody phone in?
SCOTT BURKETT: We do both.
MICHAEL BLAKE: We phone it in each and every time! (laughing)
SCOTT BURKETT: Exactly, we’ve done a few over the phone and those are fun. But to us it is a lot more fun if the guest is there because you can actually see the reaction on their face when you take your clothes off, things like that…(laughing)
STONE PAYTON: Mike, you touched on Twitter a little while ago. This whole social media thing, are you guys trying to capitalize on that and if so what kind of results are you getting from it?
MICHALE BLAKE: It is not a concerted effort. Scott and I didn’t say one day, “We have to capitalize on social media.” But, the podcast is itself social media. Everything I’ve learned about social media I’ve learned through this podcast and it is really more an issue that if you want to be a player in the tech community in Atlanta, you have to be on social media. That is where everybody is spending their time. A lot of the big players…guys frankly of an older generation that you wouldn’t think are big on Twitter and Linked In and Facebook are on it all the time. Very accessible.
SCOTT BURKETT: Actually, one of the things that we’ve seen is that three years ago when we started StartupLounge we had some very specific things that we wanted to accomplish and three y ears later this is a different Atlanta, in terms of high tech startups, fast growth startups. We asked the question the other day when we were doing an interview and Gene Creech said, “What do you attribute the changes in the Atlanta startup ecosystem to over the past couple of years?” and our answer was social media. Without social media the community didn’t have a voice. We didn’t have that voice through Twitter and blogs and podcasts and things like that. Now we do. Now there is a real dialogue happening with investors and startup entrepreneurs and angels out there and it is happening over Twitter and it is happening over blogs. It is awesome.
TODD SCHNICK: One of the points you made earlier was that it was hard to find and to get to some of these people. What I’ve found in the time I’ve been on social media is that some of these big players out in the world are very accessible on things like Twitter.
MICHAEL BLAKE: In fact, they prefer it. It is spot, they can do it very quickly and you are not sucking an hour of their lunchtime down. They would rather reserve that for that power lunch with Mr. Blake, you know.
MICHAEL BLAKE: It lets them be more selective. It gives them more control over how much time they invest in that exercise.
SCOTT BURKETT: They realize too that a lot of these folks had a fundamental branding and messaging or marketing issue. Especially the investors here. Atlanta is perceived and still is by some to be a very closed looped community as it pertains to investors. We are opening that up. Not StartupLounge, but we the community are opening that up now. Investors are participating. It is almost like they always wanted to but they just didn’t know how. It is very cool. It is very cool to see. In fact, we see more VCs now coming into Atlanta looking for deals.
STONE PAYTON: So they are from another town and they will come to Atlanta because now they feel like this is a community that they can tap.
MICHAEL BLAKE: There are a lot of North Carolina VCs that regularly come down here.
SCOTT BURKETT: Yeah, Boston, Chicago…
MICHAEL BLAKE: And a couple with a permanent representative now.
SCOTT BURKETT: Once a quarter we throw about 200-300 entrepreneurs and investors in a room and we shut the door and we feed them and sort of let nature take its course. We are seeing now that we have about 4:1 ratio of entrepreneurs to investors. That is pretty remarkable. There are a lot of people who didn’t think that there were that many investors in Atlanta. But a lot of them are coming from out of the state. It is great. That’s good stuff.
STONE PAYTON: I want to hear more about these live events that you do. Can you describe what happens at these things?
MICHAEL BLAKE: The event which is called ‘StartupLounge’, renamed recently. It used to be called ‘Capital Lounge’, now it is ‘StartupLounge’. It is basically 3 ½ hours of chaos. What we do is we rent a facility that is owned by a good friend of mine that actually fronted a lot of the money for the first event, or at least in terms of free food did. It is invitation only. In contrast to most of the other events in town where anybody can show up as long as you pay a fee. We don’t charge a fee to anybody but you have to be on the list. You have to be an entrepreneur who is serious about building a fast growth startup. We really define that as a startup that could sell for $50 million in 5-7 years. So it is not going to be a flower shop, it is not going to be a life coach, it is not going to be a chiropractor. That’s not who we serve. You have to be an investor and be able to point to a track record that says you actually write checks, not just some guy who says he is in an investor, “Yeah, I’m an investor. I’m a lawyer too, but I’m an investor.”
We’ll invite people from academia and nonprofit, and education, and government sectors as observers. What we do is exclude the service providers with the exception of those who sponsor the event. That’s been a major issue with events in the Atlanta area. Yogi Berra once said, “It is so crowded, nobody goes there anymore.” That’s what has happened to a lot of the events that you are supposed to meet a lot of these entrepreneurs and investors. They are so over run with people like me, stuffing business cards in their pocket, “Can I have five minutes of your time?”, that they just stop going. So you go to these events and they are basically hungry service providers who are just desperately seeking some sort of business.
SCOTT BURKETT: Imagine a room full of Mike Blakes, just coming at you all once! (laughing) That’s a Left for Dead game, just a bunch of zombies coming at you.
LEE KANTOR: That’s Orwellian, right there!
MICHEAL BLAKE: Right. What it does is it creates a great energy in the room. We also don’t really have a speaker component. There is a component where Scott and I get up and we crack a couple of jokes and make some community announcements and we thank our sponsors. But it is not one of these deals where we have anybody really get up and make a speech because that is taking away from the networking time. We hope that that time is being used, and it has been used, by people to start conversations about making a deal. We’ve had nine investments confirmed over the last three years, really two years, that arose as a result of connections that were made at that event.
SCOTT BURKETT: And we’ve had entrepreneurs meet other entrepreneurs and ended up merging their companies and their ideas together because they realized they had one half the puzzle. We’ve had entrepreneurs find their first customer at our event. That community spirit, it is a great cocktail party, if you walk in there you can feel the energy in that thing. It is just amazing. I can tell you we are spent after we do it.
MICHAEL BLAKE: We’re dead!
SCOTT BURKETT: It is a lot of fun.
TODD SCHNICK: You can just feel the capitalizing oozing over the event.
SCOTT BURKETT: You can. What is really cool is you see people helping each other. That is awesome. When you see an entrepreneur saying, “Hey you know what, that’s really cool what you’re doing. I know a guy that may want to look at that deal. It’s not a good fit for me but let me introduce you to him. Give me your card.” There is a lot of that and it happens thousands of times at that event. We do it once a quarter. It is just so amazing when we see those kinds of things happening.
MICHAEL BLAKE: And there is the hope and the tension on the way in. Entrepreneurs are going to be put in front of an investor for the first time in their lives. The tension, “I hope I don’t screw this up.” Some are overcome with it and they sort of rock in the corner like Leo Mizzoni working off tension. Most of them, after a drink or two at the cash bar, will loosen up and they will wade in and they will start getting those conversations going.
Scott and I are pulled around like pinballs, “Can you introduce me to this guy?” We do send out a list of the entrepreneurs to the investors beforehand so they target 5-6 people that they make sure they want to talk to. So Scott and I and a couple of other folks will try to make sure that those connections happen.
STONE PAYTON: Do you find some of these entrepreneurs are a lot more effective at articulating what they do and what they want than others? If so, do you help directly or do you put them in touch with people who can help them articulate that?
MICHAEL BLAKE: Yes, as a matter of fact at our first event it was funny. It really wound up being like an 8th grade dance! (laughing) We thought we were helping everybody. We were going to put investors and entrepreneurs in the same room and they are going to get together and have a great old time. What happened was they separated into two distinct groups, the investors on one half of the room and the entrepreneurs in the other half of the room. It was like the Berlin Wall was in between them.
SCOTT BURKETT: I felt right at home!
MICHAEL BLAKE: Exactly. They just wouldn’t cross. What we realized is that the entrepreneurs were utterly unprepared for that conversation.
SCOTT BURKETT: Ill equipped. Absolutely ill equipped.
MICHAEL BLAKE: What we decided is that we had to equip them. So we set up a free seminar that we do periodically called ‘Pitch Camp’. Pitch Camp is a seminar that is, again free, and it is really a workshop and we take about a dozen entrepreneurs or so and we lock them in a windowless conference room for 3 ½ hours and using Guantanamo style indoctrination tactics we do nothing but teach them about the elevator pitch. One of the cool things is that we get investors, check writers from the community to help with that education process. Don’t believe me and Scott, because we are not writing checks, we bounce them all day long. (laughing) But we get the guys in…
SCOTT BURKETT: We write plenty of them!
MICHAEL BLAKE: Don’t run to cash it though! (laughing) The investors, the guys who actually write the checks are in there and say, “Hey, look if you want to get somebody like me interested when you meet them at a cocktail party here is how you have to do it…”
SCOTT BURKETT: What’s awesome is we have each of the entrepreneurs give their elevator pitch when they come in and 3-4 hours later when they go back through and everybody does their new pitch after they go through the workshop, it is night and day. Night and day! We have had 150-160 CEOs, startup CEOs go through that in the past couple of years. Investors will tell us at the event that they can tell who has gone through the motions of Pitch Camp because they are more confident, they are very precise with their pitch. I don’t care who you are as an entrepreneur, you cannot pitch your deal without surrounding yourself with people that are like-minded that can beat you senseless over the head. You cannot do it by yourself, you are too close to it. You have to have people with fresh eyes to say, “Are you an idiot? Don’t say that.” You have to have that.
MICHAEL BLAKE: It’s fascinating that that is a big part of what that does. We talked about Speed School at the lead of the show and the first lap we are talking about is how to tell who you are and what you do. Most people can’t do it!
SCOTT BURKETT: It is not rocket science, unless you are close to it. If you are that close to it your elevator pitch becomes eight minutes long and the guy wants to stick a pin in his eye the whole time, “I just want to kill myself”. Pitch Camp is fun, it is always a lot of fun.
STONE PAYTON: I just have to know, because you guys see the load I’m carrying, it is all on me! We have several things that are going on in our world but you guys have Pitch Camp, you have the StartupLounge, you’ve got your business, you’ve got the valuation stuff…How do you keep it all organized? How do you stay on top of it?
SCOTT BURKETT: We don’t.
MICHAEL BLAKE: Well, you assume we keep it organized.
SCOTT BURKETT: We don’t. We are very fortunate that we can make calls to the community and get help from people to help us with various things. I tell you that this is probably the one thing in my life that I’ve been the most passionate about, except for my family. I think Mike is the same way. We genuinely love to help people.
There is something almost romantic or exciting very American-ish about a kid or a guy who is swinging for the fences and he is putting it all on the line. Mike says it best that this is one of the few countries in the world where the entrepreneur is a folk hero. Mike has spent some time and I have spent some time behind the Iron Curtain in Russia or at least what was left of the Iron Curtain at that time…it is different. “You are an entrepreneur, what’s wrong with you?”. But, here you read a success story about someone who put their mortgage on the line or their kids college fund and they bet the farm and they went through all this adversity and they made it. Everybody has a soft spot for that. When you see that kid or that guy who got riffed at Bell South or AT&T, whatever they are calling it these days, and he is going to be a first time entrepreneur at 50, Man, you have to respect that and you have to help. You have to help because that guy may end up hiring you three years from now when you don’t have a job! (laughing)
There is a sense of business karma, I think it does come back. We are trying to doeverything we can to get people to espouse that as well.
MICHAEL BLAKE: There are a lot of people who serve on boards and they organize their own charities. Quite frankly if it is a choice between watching ‘So you Think You Can Dance’ or doing some work on StartupLounge and helping an entrepreneur, it is a pretty easy choice!
TODD SCHNICK: It’s like Gary Vaynerchuk, who you are probably familiar with, he says, “If you watch ‘Lost’ on TV then you are not going to be a success in this modern world.”
MICHAEL BLAKE: But if you watch it and understand ‘Lost’, you have a shot. Because, I have to tell you, I watched that show one time and thought, “My god, this is like…I don’t even know what’s going on.” (laughing)
STONE PAYTON: There goes our sponsor! ABC is out now! Whatever the network is.
MICHAEL BLAKE: ABC, NBC, whatever it is. There’s a consulting opportunity there for your guys. A little branding issue there…story writing at least!
STONE PAYTON: We could hang out with you guys all day, but it is just about time to wrap up the show. Before we let you go…there are a couple of things we want to do. Number one, we want to make sure that our listeners know how to get in touch with you guys and are able to access StartupLounge, your firm Mike, and of course your firm Scott. Why don’t we do that first. Then we have a question we’d like to ask you as we wrap.
MICHAEL BLAKE: My firm is Habith, Arogeti & Wynne. The website is www.HAWCPA.com My email is mike@startuplounge.com My Twitter handle is @unblakeable My blog site is Unblakeable
SCOTT BURKETT: Of course you can go to StartupLounge at www.startuplounge.com I’m scott@startuplounge.com If you have nothing else to do with your spare time and you like to see what I do for my day job you can go to www.starpound.net
STONE PAYTON: Well, we do have a little tradition on the High Velocity Radio Show. We’d like to ask each guest if they would to share a mistake that they’ve made at some point in their career and really more importantly what they feel like they learned from it. Can we get you guys to do that?
SCOTT BURKETT: Wow, I make mistakes every day, it is hard to single out just one. Gosh, Mike, I don’t know…there have been so many, where do I start?
I think the mistake that I made early on in my career after I got out of the military…I am from Columbus, Georgia and in Columbus, Georgia if you are in the technology business, certainly at that time you basically went to work for TSys or Synovus or Aflac or you moved to Atlanta. That was sort of the path. I think very early on I was in denial about who I was, upstairs. I made a lot of mistakes because I kept trying to force fit myself into a big company culture. I should have known better because the entire time I grew up I was the kid with the great grades that no one could seem to reign in and calm down in the classroom. That caused me a lot of grief early on. That was a world that I understood but I just didn’t fit into it, as you can well imagine. So, it took me about 6-7 years to sort of trickle my way down to belonging in startups. There were a lot of mistakes as a result of that that I ended up paying for. They have all expunged now.
STONE PAYTON: That’s material for a whole other broadcast!
TODD SCHNICK: Thanks for the Statute of Limitations.
SCOTT BURKETT: Yep, the Statue of Limitations, absolutely!
MICHAEL BLAKE: The biggest mistake I made early in my career was thinking to myself as not a sales guy. It limited my career early on immensely and although I take pride in the technical element of what I do the fact of the matter is there are a lot of people who can do what I do from a technical standpoint. There are a very few people in professional services that are good at selling. I am not saying I am good at selling. I work very hard to be average. But, making sales a key element of my career was a major turning point. I probably handle most of our sponsorship relations now as well as sort of the sponsorship management and recruiting.
SCOTT BURKETT: That’s because most of them don’t want to deal with my anymore! (laughing)
MICHAEL BLAKE: (laughing) By default! I think back, even five years ago, having sales be a big part of what I do for a living seemed incomprehensible. Now, not only is it a big part of what I do for a living, it is a big part of what I do for my night job or my hobby. That was the biggest epiphany of my life. I had to figure out how to be a revenue generator. If you are a revenue generator you are never going to go hungry.
TODD SCHNICK: That’s true.
STONE PAYTON: You are indispensible.
MICHAEL BLAKE: Absolutely. I can find accountants all over the place, but you have somebody who is bringing in the dollars, that is a very tough resource to let go.
SONE PAYTON : Well, I think the biggest mistake you and I have made, Todd, is waiting this long to have these two guys in the studio. Huh?
TODD SCHNICK: I’m telling you what…it is amazing that people pay us to live this kind of life.
SCOTT BURKETT: The funny thing Mike, is that the next show they are going to say their biggest mistake was having those two guys one! (laughing) They keep looking at the clock on the wall, I don’t know if that’s a bad thing.
STONE PAYTON: Well, we have had a terrific time. It’s been an absolute delight. Thank you both so much for coming on. I hope you’ll come back and visit with us again sometime.
MICHAEL BLAKE: We’d love to. Thanks for having us.
SCOTT BURKETT: Thanks so much.
STONE PAYTON: Until next time, this is Tone…
TODD SCHNICK: You don’t even know your name, man. Come on…(laughing)
MICHAEL BLAKE: He needs Pitch Camp!
TODD SCHNICK: Yeah, you do need Pitch Camp!
STONE PAYTON: When is your next Pitch Camp? (laughing)
Until next time, this is Stone Payton, Todd Schnick, our producer Lee Kantor and our guests Scott Burkett and Mike Blake and the entire RadioX family saying, “We’ll see you in the fast lane!”
END
