In the recent Price Waterhouse Coopers Money Tree Report for Q107, I was shocked to find that only four companies in the Southeast received seed/early stage funding from the reporting funding sources. Of the four, one received $20.5M, one $2.5M, one $50k and the other $28K. Several thoughts jumped out when I discovered this.

How many of us would consider $20.5M to be a seed stage investment. In a recent article, Tom Weithman, the Vice President of Entrepreneurship and Investment Services at the Center For Innovative Technology in Virginia, pointed out that the average seed/early stage ask from entrepreneurs is less than $400k, while the average seed/early stage investment is $2.5M. Clearly this is an indication of a market need that is being overlooked and under funded.

When I look around the Southeast, it is loaded with biosciences development and leadership talent. The wonderful university teaching centers such as UAB, EMORY, Vanderbilt, Medical College of Georgia, the University of Florida, the University of Tennessee, not to mention technology hubs like Huntsville, Nashville, Atlanta and Memphis, are producing great biosciences products and innovation. I am seeing many opportunities coming out of these institutions and markets and I am amazed there is not more funding being applied by Southeastern sources to grow Southeastern companies.

At Third Trimester, we are dedicated to this space. While the Northeast and Silicon Valley are the regions getting most of the biosciences funding, the Southeast remains an area of opportunity, growth and returns in the biosciences sector. I truly believe that over the next five years, the Southeast will challenge Boston and Silicon Valley and emerge as one of the premiere regions for innovative and valuable biosciences development. The common denominators for success are all here. There are many sources of available funding, there is a quality development environment that is supported by infrastructure and world class scientific talent, and there is a robust pool of experienced executive leadership who have run and managed bioscience companies. Innovation, deal flow and experienced leadership talent should equal success for the Southeast in biosciences.

By: Bob Crutchfield

Last week I spent the weekend with my wife and three children at the Beach Club in Fort Morgan, AL.  While we were sitting under our umbrella and relaxing, I began reading a book called Jefferson’s Secrets, by Andrew Burstein.  It is a great book because it presents our Founding Fathers in a way that I normally don’t think about them.  Generally, I only remember their political activities during their public careers.

Jefferson, the author of our Declaration of Independence, was also a renowned architect, gardener, wine connoisseur, planter, inventor and writer.  He was very much a Renaissance man, following after the pattern of George Washington.  Washington was a livestock breeder, planter, grain miller and distiller of liquor, among other things.  It is hard to imagine what it must have been like during the post-revolutionary period with the effort required to gain access to information and to share ideas and concepts.  Entrepreneurship in that era was truly the result of human will and perseverance.

When Jefferson retired from public life after his Presidency, he was quoted as saying that he was going to devote his life to “reading, design and communication”.  It struck me that those are the same traits that drive today’s entrepreneurs.  Through research and study we seek to find a unique niche for a new product or service. We then work to design a business model that will allow us to commercialize our ideas, which creates form and function.  Finally, we attempt to communicate these ideas via marketing efforts that cross a wide range of mediums to reach the targeted audience.  And like our predecessors, the greater the benefit, utility or pleasure produced by these products and services, the more likely and significant success will be.

As we study early stage biotechnology and healthcare companies at 3TVM, we look for common denominators that are known to contribute to business success and positive financial results.  It is comforting to know that reading, design and communication are simple common denominators of business success that have continued to produce results for generations of entrepreneurs.

If you are reading this, then you have found the Third Trimester website. I am very grateful to have you as a reader, as I am extremely excited about what we are building.

If you are reading this on June 18th, this is a very important date, as it recognizes two important birthdays. Today is the date of the official launch of Third Trimester. As you have seen from our website, Third Trimester is a management and seed stage investment firm that is dedicated to helping early stage biotechnology and life sciences companies cross the threshold of realizable potential. The other birthday is mine, as I turn 50 years of life well lived today.

As I have told my friends, family, colleagues and people that I stop on the street, Third Trimester is much more than a company that is involved with management consulting and seed stage investment. Driving fees and returns, while important, are not the primary goal of our mission. Our mission is to assist young, impact companies in the biotechnology and life sciences space, have your products, services and intellectual property achieve meaningful and beneficial market traction.

How we will do this? We will link business management experience with seed stage investment to create a dynamic environment for accelerated growth through operational excellence. As you may have already picked up, I am a true believer in applying business fundamentals to creative and innovative thought. Our desire is to have a mark on impacting healthcare. It is my passion to use the next half (hopefully) of my life to aid development and delivery of important, entrepreneurially created answers to the healthcare issues we currently face in this country.

It is my goal to use this blog to create dialogue and debate around healthcare issues. I encourage readers to participate and sound off. Remember the old question? If a tree falls in the woods and no one hears it, does it make a sound? Healthcare is the same way. Trees are falling daily that limit our choices, increase our insurance premiums and prevent us from having access to the latest technology.

Welcome to Third Trimester. Please feel free to make yourself at home here. I will talk to you in a couple of days and let you know how the launch has gone.

Bob

By: Bob Crutchfield

Just about everyone knows what an SOS distress signal means. It means someone is in serious trouble, not just having a minor problem or a bad hair day. But most major distresses in business, and life for that matter, rarely occur spontaneously. They happen as a result of a series of decisions that lead to a crisis.

One of the best-known SOS stories is the ill fated, maiden voyage of the Titanic. What most of us remember is that the state of the art luxury liner tragically hit an iceberg in the frigid waters of the Atlantic Ocean. However, the disaster was the result of previously made decisions. After the Titanic had been sailing for 4 days, it began to get multiple ice warnings from other ships. The captain and crew ignored the warnings and continued on full speed ahead. At about 11:40 p.m., the watch was about to change. The watchmen spotted an iceberg! They quickly told the bridge to turn, but it was too late to prevent the Titanic from scraping against the side of the huge iceberg.

The Titanic’s captain sent out a distress signal- SOS- just before it sank. A nearby ship, Carpathia, received this signal and rushed to the scene. About 700 people were saved from the wreckage, water and lifeboats. All of the deaths occurred because existing codes did not require enough lifeboats for the passengers and crew. Hindsight is 20/20, my Mother used to tell me, and there is a business application here. Had the captain of the Titanic taken simple preventative actions, the wreck could have been averted.

Early stage entrepreneurs should take heed. We all are racing forward at Mach 5 with our hair on fire. Our rugged pioneer spirits tell us we can face and overcome all challenges and hurdles. But if this is true, why do most start-ups fall short of their dreams for success? I believe it rests on S.O.F. disciplines; Sales, Operations, Finance. Every single business has a targeted customer, an operational approach to reach that customer, and a financial reality with regard to these activities. Think about it. There is not one start-up company that cannot relate to these common business denominators.

At Third Trimester Venture Management, our approach is to look at behaviors around S.O.F. At the end of the day, individual actions create results. When we look at companies, our focus is always on the behaviors that are critical to the sales, operational and financial objectives. We also look for how these activities are measured and if they are linked to create the best results.

An example of what I am talking about can be seen in a company I recently took a look at. The company was an early stage, service company in the healthcare reimbursement arena. They had discovered an area of claims management that was challenging for hospitals and had created a solution. The company had four employees and two active accounts that confirmed their business model. They were seeking seed capital for expanding their sales and marketing efforts and the associated infrastructure needed to service their customers.

My first question to the President of the company was how do you measure the accuracy of your sales forecast? In other words, how do you know that the accounts you have targeted for closing in August will actually close? He looked at me as if I had asked him to predict the global warming patterns for the universe over the next decade. What I really wanted to know is have you identified the steps in your sales cycle, have you put metrics in place to manage the sales cycle and are you using this information to create more accurate forecasting for your business? It quickly became clear that he intuitively knew the steps and had a mental forecast, but he did not have it in a form that others could see.

The problem with his approach is that sales results created operational mandates to deliver on the services new accounts were expecting. There was a lack of linkage between operations, finance and sales. And this was a business of only four people. Without aligning the behaviors of the individuals in this small company, they were unknowingly limiting their success because they weren’t building a model that was predictable, repeatable and duplicatable.

So, I am sending out an S.O.F. to the world of early stage entrepreneurs. Build discipline early and it will assist you in expediting your growth and demonstrating to customers, investors and employees that you are serious about what you do and how you do it.

By: Bob Crutchfield

I have recently been reading, and would highly recommend, a very good book by Guy Kawasaki called Selling the Dream. Guy worked as a “Product Evangelist” in the early days at Apple, and after reading his book, I can see why. He is able to make very complex ideas come across as obvious. Guy defines evangelism as “the process of convincing people to believe in your product or idea as much you do. It means selling your dream by using fervor zeal, guts and cunning”.

As I read further into his book, the more I began to see that there is a fine line between evangelism and dogmatism for early stage entrepreneurs. Webster’s defines evangelism as great enthusiasm, fervor or zeal for a particular cause. In the case of those of us who are drawn to entrepreneurial ventures, we express our business evangelism by attempting to convert investors and customers to our business beliefs. We do this by passionately conveying our personal faith in our creative ideas, products and/or services in such a way that generates a desired response. Every early stage businessperson desires confirmation that his/her dream is on track through receiving investment capital or a customer buying our products or services. But how many of us would stubbornly hold on to a belief in which we received no benefit?

As I visit with founders and CEOs of early stage bio-technology and life sciences companies, it is interesting how evangelism can sometimes take on shades of dogmatism. Webster’s defines dogmatism as the tendency to express strongly held opinions in a way that suggests they should be accepted without question. As early stage entrepreneurs, we should have regular reality checks to insure that our evangelical passion does not devolve into unproductive dogmatism. We should constantly challenge the market efficacies of our products and services and question how can they be improved. We should also ask that our teams, customers, friends, families, and even strangers, do the same.

Leadership is built around embracing a desire for constant improvement in order to produce the best products or services for our customers and to become better people. The best companies are those with products or services that are constantly being tweaked and changed to better accommodate the needs of their customers. If you establish an atmosphere of intellectual curiosity in yourself when your company is small, you will be far more likely to build a growth company that doesn’t have to kick the dogmatism.

By: Bob Crutchfield

Fundamental principles of science, math and physics rule the universe we live in. But the same is true of business. There are fundamental principles that govern the success or failure of every new venture. In all of the businesses Third Trimester sees, the following is an absolute; business dreams begun without business discipline invariably become business disasters.

Every new company begins with an entrepreneur’s dream that their idea, concept or model improvement will be revolutionary, successful and produce both personal and professional dividends. Without this level of passion and commitment, no new business would ever be launched. But the business idea is only the beginning. Real business success occurs through business discipline. Operationally and financially, those businesses which have written goals and objectives and understand the operational behaviors that are critical to achieving the desired results, always have the odds for success more stacked in their favor.

As you manage your early stage venture think through what are realistic goals and objectives on a quarterly basis. Write them down and agree to them as a team, whether it is a team of colleagues, employees, or a team of business advisors. Carefully consider what has to be done to deliver on these goals and the individual behaviors that need to be tracked, whether they are financial, operational, and/or sales and marketing oriented. Without these metrics of measure to gauge and manage the business’s progress, it is difficult to know where you have been and where you are going as a business.

When I launched my first start-up, Surgical Innovations and Services, Inc. in 1995, I formed an ex-officio advisory board. This group was made up of my banker, business attorney, accountant and commercial insurance broker. I met with them on a quarterly basis to give them progress reports, seek advice, and to give them visibility to the next quarter’s goals and objectives. This accomplished several things for the business. First, it allowed me to have the four most important advisors and service vendors of my business meet with me each quarter for a couple of hours for free! It held me accountable to previously established goals and objectives and for preparing new ones each quarter. It kept my banker aware of what my financial needs were and what financial results had been achieved, so request for credit line extensions and capital needs were always clear and, luckily, most always approved.

As a result of these early disciplines, Surgical Innovations and Services, Inc. grew into a leading provider and manager of surgical laser programs for hospitals and surgery centers in the eastern United States. When I sold the business five years later to a publicly traded company in Philadelphia, we had offices from Milwaukee, WI to Miami, FL and over 120 employees operating in 16 states. I am confident that had I not set up my ex-officio advisory board early on, the company would not have grown so quickly. I am always amazed when I talk to new early stage entrepreneurs at their level of confidence and risk aversion with regard to their idea, product or service. In addition, most bootstrapping business leaders leverage for growth very well. But rarely do I find the leverage of professional resources like bankers and accountants. Bankers, accountants, insurance brokers and lawyers want to be esteemed (just like the rest of us) and desire to be helpful. Particularly when applied in the order of esteem first! I would encourage you to reach out to the key professionals who are working with your business and create an advisory board. At the end of the day, the worst that will happen is that you add a critical component of business discipline to your business model.