Companies On The Spot
Colin Barton seemed to be enjoying himself. The president of Ikier Technology Inc., of Burlington, Mass., stood in front of an audience of more than 100 people, enthusiastically describing the company he and his partner, Hans Ikier, had recently set up to manufacture computer graphics equipment.
It was the sort of situation any entrepreneur about to launch a new business would relish: a chance to talk with a group of people who knew the field and to have them comment on his plans for the company. But Barton's excitement was going to be short-lived; seven men were about to shatter his illusions.
The setting was a meeting room in the Student Center of the Massachusetts Institute of Technology, and the event was a session of the MIT Enterprise Forum. The Forum taps the expertise of MIT alumni and faculty, as well as outside sources, to provide advice and exposure to small businesspeople.
At the moment, Barton was enjoying the spotlight. For 20 minutes he set forth his goals for his company. Barton, formerly of Tektronix, and Ikier, an engineer who had founded another computer graphics firm, Lexidata, wanted to produce a microcomputer for the professional market. Barton discussed the business plan, made a pitch for investments, and extolled the technological virtues of his product.
Finally, like a salesman winding up his pitch, Barton posed questions to the seven panelists, who he thought had bought his line: "How do we best attract dollars from a situation like this? What do we do to get the talent in? Where does the panel see the biggest risk?"
The first panelist's response seemed promising: "Basically, I like the idea," said Tom Hagan, the president and co-founder of Camex Inc., a small computer systems firm. "I think the best of all possible sources of money is some sympathetic, interested, and intelligent customer."
Barton smiled, and jotted down a note about the suggestion. But then the atmosphere suddenly changed."The business plan is very interesting fictional reading," Art Parthe, a Forum veteran and the head of a Nashua, N.H.-based high-tech development and management consulting firm, noted drily. "Fictional in that it's rather idealistic; everybody lives happily ever after, and quite wealthy at that.
"Your organization is somewhat topheavy with technical types," Parthe continued. "I really have the feeling that it's technology-driven at this point. There's one thing that's completely missing from your business plan, and that's an analysis of the down side, the risks. There are all kinds of risks -- technical risks, business risks."
Parthe, the past chairman of the Forum, went on with his analysis of Ikier Technology's shortcomins, reading from his notes as from a formal charge: "I went through a listing of so-called graphics terminals and I stopped counting at 50. If there are 50 names floating around out there, and now 51 when Ikier comes along, how are you ever going to differentiate yourself in the marketplace?"
Parthe questioned every aspect of Barton's plan, from the need for the product itself to the feasibility of using a third-party field service.
Douglas T. Ross, chairman of the board of SofTech Inc., a Waltham, Mass., software company, was hardly more encouraging. "Yes, I found the plan and the presentation interesting, but also...," he hesitated, "a bit naive in spots." Ikier Technology had no clearly defined head, was weak in the area of software, and faced strong competition it hadn't identified, Ross said. "In any case, good luck to you." Barton nodded his head as if he'd just been read the last rites.
The rest of the panel, an MIT professor and the heads of three other hightech companies, were equally hard on Ikier. They noted that the product was not unique, that even if it was successful it could be easily copied, and that it cost more than some of its competitors. They faulted the company's business plan, projections, and lack of leadership.
Barton quietly thanked the group for its comments before he fled to the Harvard Bookstore Cafe, where he settled down with a salad, a glass of wine, and a book on Raphael. For the next few hours he tried not to think about computers.
But though Barton was upset, many of the members of the Forum had decided that Ikier Technology was a winner. "I think that, if they listen carefully to what we have to say, they're going to be very successful," one panelist remarked to his neighbor.
"The principal benefit," says Parthe of the Forum, "is objectivity -- light being shed on a situation by people who know their industry. A lot of it can come across sounding rather negative, but it's not meant that way. It's meant to be straight from the shoulder: This is how it is, and this is how we see it."
The Forum, which is sponsored by MIT's Alumni Association, grew out of a series of special workshops that were conducted in Cambridge and New York in 1971 for alumni who were setting up or already in business. The prototype for the Forum in New York was called the MIT Venture Clinic.
In 1978, a group of MIT alumni in the Boston area realized that a similar operation could be invaluable to local companies, particularly the high-tech firms concentrated on Route 128, a belt-way around the city. MIT could provide the technical expertise, and management and financial advice could come from alumni operating their own companies and from Boston's banking and investment community.
In April 1978, the MIT Enterprise Forum held its first session, taking a close look at a firm that produced minicomputers and at a ski manufacturer. Each of the programs, which are now held 10 times a year, features one or two companies, generally ones that are starting out or are facing a serious problem such as the need to recapitalize. There are twice as many applicants as openings, so the Forum's executive committee decides which could benefit from the Forum's services and which ones are appropriate to the expertise of the Forum.
The companies selected to appear before a Forum panel pay $200 to cover the costs and are required to submit a business plan at least four weeks before the presentation. The company's chief executive officer also meets with a member of the committee beforehand to discuss the firm's needs and goals. The executive committee of the Forum then selects a panel that will best be able to advise the company. It draws on a list of over 500 people, including MIT faculty and alumni, and others. Sometimes it finds it necessary to recruit specialists. When the Forum reviewed a firm that manufactured contact lenses, for example, it asked a doctor from Harvard Medical School and an expert on the contact lens market from Arthur D. Little to serve on the panel.
Panelists serve without compensation. They like the Forum because they can assist entrepreneurs in fields related to their own, because it's a source of contacts and investment opportunities, and, perhaps most important, because it's a lot of fun. "Some people like golf," says Barry Unger, a co-founder and vice-chairman of the Forum, "others like to help a new business get going."
Panelists sometimes wind up personally involved with the companies they review: They tour plants and make suggestions on production setup, or are invited to serve on boards of directors. In one case, a panelist at the New York clinic was so impressed by a business that he invested in it, then took over the company. That, however, is not the normal course of events.
Forum presentations are open to the public and attract 100 to 150 people to each session. Like the panel members, spectators come to see what's happening in their fields, to size up promising companies, and, in some instances, to do business. Each presentation is taped so the chief executive will have a record of the panel's observations and advice. The audience also fills in a questionnaire, evaluating the comments of both company and panel. The completed questionnaires are presented to the chief executive.
For the first 20 minutes of the program, the presenter describes his company in detail, and sets forth the problems it's facing. Then each panelist, who has had about two weeks to review the business plan, has an opportunity to ask questions and offer his analysis.
Veteran panelists say they see a number of recurring problems that plague small businesses. Barry Unger notes, for example, that many high-tech companies "are technology-driven rather than market-driven -- they're obsessed with the excellence of the product rather than its marketing needs."
Other companies have difficulty deciding what they want to do. "One company that came to us had $1 million in sales, but it was manufacturing 23 different products," Unger explains. "We wound up saying, 'Focus. Focus. Focus."
Parthe, who conducted a study of the Forum's findings, says that eight problems occur most frequently: organizational weakness due to understaffing of the management team; poorly defined strategy, objectives, and goals; inadequate marketing techniques and channels of distribution; fragmented product and/or service offerings; inadequate knowledge of the market; under-financing and inadequate financial management; failure on the part of the chief executive to delegate authority and responsibility; and lack of an objective and qualified board of directors.
Companies that make presentations to the Forum are enthusiastic about the quality of the advice they receive, though some, like Colin Barton, find the way it's delivered can be quite unsettling. "If you talk to them right afterwards," says Parthe, "they're still sometimes in a state of shock or depression -- their feet are still in the fire." But after a while, they all seem to be able to sift out valuable advice.
"Six months after we started up," says Ronald Matlin, president of TriSolarCorp of Bedford, Mass., "we were beginning to have to face up to some questions of financing and sales. We wanted to know how to get involved in overseas marketing. The Forum suggested various ways to sell, and directed us on a strategic course. Now we have equipment in 20 developing countries in Africa and Asia." TriSolarCorp, which manufactures solar-powered systems for use in remote areas, had sales of $1.1 million last year.
Matlin found that the audience reaction was in some ways more important than the panel's advice. One member of the audience is now on the company's board. "There were also several bankers there," Matlin says, "and we got appointments right afterwards with three different banks. It was a very positive experience and I'm very happy we went."
Even when the Forum experience is a negative one, participants are often enthusiastic about it. Neil Herring, the former treasurer of Path Medical Systems Inc. of Portsmouth, N.H., is even grateful for the Forum advice that caused Path to decide to go out of business. Path had planned to market software for clinical laboratories, Herring explains: "We raised $880,000 from a variety of sources and began to develop the software, but after eight or nine months we began to run out of money and it was clear the product was never going to be developed.We went to the Forum to get ideas on what we were doing wrong and to see if any venture capitalists were interested. The panel said that the company didn't have a chance. We realized that there was no way in hell that we could get the software developed in any kind of cost-effective manner. So we closed the company down, two weeks after the Forum.
"If a company is just getting off the ground," Herring adds, "the Forum is great, because it brings to the table marketing and financial people with a lot of sophistication and a lot of resources. I can't think of anything else in the country like it."
There are, however, other things like it now. The Forum and its prototype, now called the MIT Enterprise Forum of New York, have proven so successful that alumni groups in other sections of the country are now following their lead. In October 1981, a group of Washington, D.C., alumni and business and government leaders staged the first program of the MIT Enterprise Forum of Washington and Baltimore. A somewhat less structured program is offered by the New Enterprise Forum, co-sponsored by the MIT Club of Northern California and the Peninsula Chapter of the Stanford Business School alumni organization. Located in the heart of Silicon Valley, the group has reviewed both high-tech companies and a few firms more obviously Californian in spirit, such as a firm tht manufactures shoes with water-cushioned soles.
Two weeks after he bared his soul and his business plan before the Forum, Colin Barton was still reeling. "It was an uncomfortable evening," he admitted. "It was a very negative atmosphere. Their approach was too aggressive. I mean, we're just starting out, and there are bound to be problems in a start-up company no mtter what you do."
But Barton conceded that many of the panel's suggestions were excellent, and were going to be implemented, including advice on cash independence and the need to have one company president, rather than two.
In short, the Forum had addressed the questions Barton had raised, and provided him with some of the answers he needed. Unfortunately, it was a painful process.
"If I had it to do over again," Barton concluded, "I don't know if I would or not." But if Barton is anything like the others who have survived, and benefited from, the Forum's baptism of fire, he may think better of it in time.