You might think you have your startup's story straight. Until you share it with an investor or mentor--and he says you're not making sense. That's what happened two years ago to Nic Gray, founder and CEO of Hyprloco, a Denver-based startup providing location-based marketing and analytics software to customers.
In Gray's mind, the story was simple. His cofounder Damon Baker had developed some amazing location-detection technology. Baker's technology was so advanced, businesses could use it to track where customers were at almost any given moment. Imagine all the individualized marketing messages these businesses could send out. Imagine all the analytics they'd have access to.
The problem? That wasn't really Gray's story. It was a description of technology. One of Gray's business mentors, David Mandell of TechStars, broke the news to him. "He said, 'You need to go ahead and get your story straight. It’s bullshit right now.'"
Like many founders, Gray, 35, was more comfortable talking about technology than talking about himself. But at Mandell's urging, Gray learned to integrate his own story into his startup's. When you hear Gray's story, you'll wonder--and also understand--what took him so long.
The Art of Storytelling
There's a reason storytelling is an essential skill in the founder's toolkit. You're giving presentations to investors and potential customers--and talented recruits. You want to show your own vulnerability, for that's the fastest path to mutual trust. You also want to display your skills and competence.
So, you can go ahead and talk about your potent technology. But that doesn't tell investors, customers, and employees what they really want to know, which is: Who's this person I'm potentially trusting with my time and money?
Here's Gray's story: He was deployed to Baghdad in 2006 in support of Operation Iraqi Freedom. He was in charge of tracking the nighttime movements of both enemy forces and NATO forces. He was a .50 cal gunner. "One of the challenges over there," Gray recalls, "was understanding where someone was inside of a building--and also knowing if they were friend or foe." In Iraq, information like that "would've saved American lives," he says. He wondered what it would be like if troops, on handheld mobile devices, could learn the real-time locales of possible threats in their surroundings.
Back in the US after an honorable discharge, Gray became "hellbent" on finding a solution. He met Baker, a former marine, at a military function. They began talking about their business ambitions. Gray shared his idea. Coincidentally, Baker had been working on this type of "hyper-location" technology, inspired by the movie Minority Report. Soon, they became partners and cofounders. Gray became CEO and Baker became CTO.
Landing Initial Customers
Some founders wonder whether it's worth it to join an incubator or accelerator. For Gray and Baker, the experience has been priceless. Gray was part of a three-day program based in Washington, DC, called the TechStars Patriot Boot Camp (PBC). It's exactly what it sounds like: For no cost, veterans and their families get to use the mentors and tools in the TechStars network.
It was at PBC that Gray met Mandell, and learned the importance of personalizing his story. It was at PBC, too, that Gray learned about a great offer from Galvanize, an entrepreneur-focused community-workspace with locations in Denver, San Francisco, and Boulder. Galvanize offered three months of free rent to PBC participants. "I used that, was there a couple months, and haven't left," says Gray.
So far, Hyprloco has three clients: a Las Vegas casino, a cruise company, and a ski resort. Gray expects 2014 revenues to reach the mid six digits. Not bad, considering he and Baker remain the only full-time employees. In landing these initial customers, Gray has remained "vertical agnostic." That is, though he and Baker have their ideas for which vertical markets are the most lucrative long-term fit for Hyprloco's offerings, his initial goal is pluck the proverbial low-hanging fruit.
For example: He was able to close the deal with the casino in "a 10-minute phone call." It was a fast close for two reasons: (1) Gray had networked his way to the decision maker; (2) through his personal network of military connections, TechStar connections, and Galvanize connections, Gray learned that this particular casino had the hardware infrastructure to rapidly integrate Hyprloco's cloud-based technology.
The bottom line: If you're working as a one-person sales team, as Gray is, you need help. If you can't network your way to your end customers, network your way to others selling to the vertical you're targeting. They'll help you reach the decision maker. And that's one way to shorten the sales cycle.
What's next for Hyprloco is a potential deal with one of America's four major sports leagues. This league would use Hyprloco's software to enhance the stadium/arena experience for attendees who opt in to using the product. The general idea is this: If a sports team (or sports league) knows exactly where its customers are in the building, it can be smarter about offering other products and services to those customers.
It can also improve its marketing efforts, having zeroed in demographically on the attendees. "Cookies for the physical world--that's what we are," says Gray. He is referring, of course, not to what Girl Scouts sell but to the online "cookies" that collect user information as you browse the web.
How did Hyprloco land a meeting with this sports league? It was a TechStars connection whom Gray had stayed in touch with. Gray's biggest tip for improving your networking is a classic from the Dale Carnegie playbook of making connections: "Understand the potential value you can bring to them first," says Gray. "And establish that."
Mind you, Gray doesn't think of his networking as networking, per se. From his perspective, he's just being his friendly self: Meeting new people, shaking hands, asking them for coffee or a beer, learning about each other, and then concluding the hangouts with one simple question: "Is there anything I can go ahead and do, or any connections you need?" This friendly behavior is something he routinely observed in his parents. "It just carried over," he says.
A Patient Approach to Fundraising
Hyprloco is projecting 2015 revenue to exceed $2 million. Despite its high-tech product, the company has opted to wait before taking venture capital or angel money. The big reason for being patient is a potential pitfall of private valuations, which Gray's connections have warned him about. Tempting as it can be to take venture capital or angel investments--and the prestige and networks they bring to the table--the risk is establishing a premature (and thus, too low) valuation for your company, before you've generated revenues or attracted high-leverage customers.
To help their cash flow in the absence of early investors, Hyprloco is in the process of closing a $400,000 convertible note with a 5% interest rate and an 18-month maturity date. "With no valuation, this allows us to go ahead and increase sales and marketing," says Gray.
The note will provide a cash bridge that will get Hyprloco to the start of 2015, at which time the company anticipates closing a Series A round. By which time, Gray also believes he'll have bolstered revenues and broadened the customer base. "The more clients we can onboard, the higher our valuation will be," he says.
In terms of exits, Gray says Hyprloco is "definitely expecting to be acquired" in the next 18 months. In his ideal exit, though, he'd stay involved and continue to manage the company indepedently, under the auspices of the right acquirer.
Meanwhile, he'll keep networking his way to potential customers and partners. Don't be surprised if in the next few years, you find Hyprloco's technology at a stadium near you.