The Unusual Class that's Shaping Austin's Startup Scene
“To be honest, we just Googled ‘best city to start a business’ and Austin was the place that kept coming up.”
That's how Massachusetts natives Kevin Tully and Dave Barry landed in Austin to launch their startup, custom guitar company Moniker Guitars. Adds Tully, “We wanted to start our business someplace warm.”
Tully and Barry launched Moniker in Austin in 2012. One year later they found themselves in the heart of UT's entrepreneurial engine, one of the very resources that lands Austin in those "best city" Google search results year after year. Moniker was accepted, along with 10 other startups, into the McCombs School's Jon Brumley Texas Venture Labs accelerator (TVL), and soon discovered that at UT, being the subject of a student project may just result in a total business transformation.
Students and Startups Working Together
TVL provides hands-on learning experiences for McCombs students as well as a handful of graduate students from the School of Law, Cockrell School of Engineering, and the College of Natural Sciences. Experiences include the Texas Venture Labs Investment Competition in February and the bigger Global Venture Labs Investment Competition in May. TVL also hosts two Venture Expo events, at which startups present their companies as if they were pitching investors — which, in fact, they are, since investors do attend Venture Expo.
But a lesser known part of TVL is the semester-long TVL Practicum class, and it is perhaps the best picture of students and startups working together.
The Ladder of Entrepreneurship
In this class the process of learning entrepreneurship works as a ladder — when a student moves up a rung on the ladder, it involves being mentored and coached by the faculty, students, and teachers on the rung above. And at each rung students are cementing what they’ve been learning by sharing and learning alongside their rung-mates, and mentoring and coaching the students below them.
TVL practicum students work directly with Austin-area startups, such as Moniker Guitars. Each semester when the class begins, the startups that have been chosen by TVL staff make a presentation to the class about their companies and what they think they need help with. Each student team (usually five students plus a leader) chooses a company to work with. Then the team and the company founders together decide on a plan of action.
That’s a critical point, says Rob Adams, TVL director. The students don’t merely implement a plan conceived by the startup; they also pitch their ideas about what the company needs. Startup founders are notorious for “not knowing what they don’t know;” many are following a passion or have extensive subject matter knowledge, but not much general business experience.
A common and crucial step the students complete is a “market validation,” or sizing the potential market and quantifying its value. It’s something many startups fail to do or don’t know how to do.
Jaime Sutton, the principal of a team that assisted Moniker Guitars this semester, explains the students’ approach.
“We ask, ‘Where is this company in its life cycle, what is the company’s team good at, and what are they lacking?’ The Moniker team didn’t have a lot of business background. They didn’t know who their target customer was and their price point had come from nowhere.”
Kevin Tully concurs. “Working with the team made me wish I’d gone to business school instead of law school,” he says.
Making a Startup 'Investor-Ready'
In the class, “our teams take the point of view of an investor,” says Sutton. “We ask, ‘What will a potential investor need to know?’ and ‘What’s missing that would need to go in a pitch?’” Startup founders, she added, often “don’t see the need” for such information as market validations. (Sutton was a returning TVL Practicum student, a common practice in the program. About 20 percent of students each semester have taken the class at least once before, giving them even deeper knowledge.)
The Moniker team met with the company’s founders biweekly at the AT&T Executive Education & Conference Center, the practicum’s home base. Over the spring semester, the team performed a market validation and straightened up the company’s financial information so it would be more visible to investors.
Tully says he was particularly impressed by some Excel wizardry from the students, who created a spreadsheet showing the comparisons among three different guitar-neck vendors. The spreadsheet’s formulas allow Moniker to calculate their margins at different price levels using each vendor. The spreadsheet formulas even allow Moniker to determine the ideal number of guitar necks to purchase from each vendor in order to get the best price.
The spreadsheet tool wasn’t part of the initial plan, but students saw a need and an opportunity. “They finished a milestone early, came to us and said, ‘Why don’t we run this analysis for you?’” Tully says. Moniker now has better financial organization and clarity around issues such as target market, pricing, and sourcing materials. Says Tully, “We’re ready for the next step.”
One next step: Moniker Guitars raised just more than $61,000 (well over their $50,000 goal) in an April Kickstarter campaign meant to raise funds needed to start selling semi-hollow-body guitars (previously Moniker sold only solid-body guitars).
As for Sutton, she receives her MBA this month but is staying on at McCombs for another year as an Accenture Venture Partner, a one-year, post-graduate fellowship. What do they do, you might ask? These students are a step above the TVL Practicum principals on the ladder of entrepreneurship, and a step below the second-year Accenture Venture Partners. They will work with the current Venture Partners on the competitions and the practicum, providing hands-on assistance to those behind them on the ladder.
The 10 startups besides Moniker with which the TVL Practicum students worked in Spring 2013 included several biotech firms; an online platform for employee status reports; a company with a new technology for data storage; a company devoted to ending “vampire” energy loss in chargers, external power supplies, and microprocessor cores; a microchip design company; and a family-oriented social network. As each company explained the students' contributions at the spring 2013 Venture Expo, it painted a picture of TVL as a thriving ecosystem for entrepreneurism in which everyone involved works hard to get a little further up the ladder or a little further down the road.