Check back over the next month as we will be highlighting the different programs created this year by the Nebraska Legislature through the Talent and Innovation Initiative.

Being an entrepreneur – or being involved in any capacity with a start-up — can be quite the challenge, yet successful entrepreneurs provide reward not only for themselves, but state economies are also spurred to new heights by these entrepreneurial successes.

With this in mind, the Nebraska state government has created and is now implementing a new set of government incentives for investment in businesses (start-ups and others) in the form of the Talent and Innovation Initiative, or TI2.  The goal is to spur investment in start-up businesses and to also grow existing businesses.

Historically, incentives for business growth in Nebraska were dominated by the Nebraska Advantage Act, a comprehensive set of incentives for new and existing businesses, as well as the Employment and Investment Growth Act. These endeavors, according to the state’s Department of Economic Development website, have provided businesses with partial refunds of sales tax paid on capital investments as well as a tax credit given to businesses based upon their hiring and wage metrics.

But, recognizing that these incentives could be structured in other ways, Nebraska Gov. Dave Heineman and leaders in the Legislature worked to pass a new round of government incentives in the last legislative session.

“Our vision for Nebraska’s economic future is for our graduates and young professionals to have access to high-quality, high-skill careers with dynamic companies doing business in Nebraska,” Heineman said in an Oct. 3 press release. “The Talent and Innovation Initiative provides tools that will help build Nebraska’s innovation economy.”

In January, Heineman, together with the Department of Economic Development and the Legislature, crafted economic development gold in the form of legislative bills that, in part, would later become known as the Talent and Innovation Initiative – thus named for the section of an economic study released the previous fall. Other significant legislation related to economic development included:

• LB 345: The Economic Gardening Technical Assistance Act. This bill laid the groundwork for technical assistance and a portion of funding to grow the companies already in Nebraska.

“The Nebraska economic gardening program is designed to ramp up small businesses across the state,” said Kevin Andersen, program director at the DED. “We (DED) intend to fund a diverse set of business mixes and technical assistance providers to award qualifying businesses the opportunity to explore their respective marketplaces and increase sales.”

This funding closely mirrors that of another program suited to providing loans to qualifying businesses from across the state.

• LB 386: The Nebraska internship bill. This bill provides funding for Nebraska companies to bring on interns currently enrolled at a two- or four-year institution. A portion of the cost of the internship is incurred by the state.

“InternNE, which began June 1, 2011, has more than 100 businesses that are currently participating who are creating more than 300 new internship opportunities across the state. Participating businesses fall within a wide range of industries, from distribution to software development to financial services; though a majority is manufacturing,” said Allison Hatch, development consultant at DED.

• LB 387: Business and Innovation Act. This bill provided for a variety of levels of technical assistance and financial assistance for the transfer of technology into the marketplace for commercialization in different stages. With funding and assistance at multiple levels, this act packs quite a punch.
• LB 388: Sites and Building Development Act. This program allocated resources to the Department of Economic Development for the refurbishing of industrial sites and building across the state, to make them all the more welcoming to potential new companies.
• LB 389: Angel investment tax credit. This measure provided generous tax credits for those making substantial investments in start-up companies.

Another component of LB 389 is a “sidecar fund” geared toward matching and accelerating private investment, administered by Invest Nebraska.

Given that these incentives are packed with different opportunities, there are many details to cover in soon-to-come articles detailing how entrepreneurs can help government incentives become functioning and contributing members of their successful entrepreneurial family. As always, check back at Nebraska Entrepreneur to read more about these helpful new resources.

Hall started a product called PMOG, later changed to The Nethernet, which focused on making web browsing into a game format. His company started in July 2007 and ran until December 2009. In that time the company raised two rounds of funding, hired and de-hired 12 people and built a user base of around 130,000.

In this candid discussion Hall talks about the joys and tribulations of the startup and where things went wrong. Topics included games, mobile, the Internet, San Francisco, startups, scale and focus.

The Q&A session at the end of the presentation we felt had a lot of good information so we have included it here as well.

Q&A

Funding will be the topic of our next series on Nebraska Entrepreneur. Big to small, the topic comes up in some form for most startups.

We asked former NASA robotics scientist and current Nebraska entrepreneur Shane Farritor for tips on how to get funding for startups.  Here’s what he had to say.

Shane Farritor

University of Nebraska-Lincoln mechanical engineering professor and businessman Shane Farritor knows a thing or two about overcoming difficult challenges. He earned a doctorate from MIT, helped design Mars rovers for NASA and built surgical robots for use in remote areas where doctors aren’t available — but despite his scientific accomplishments, it might be in the business world where Farritor encountered his most daunting challenge: getting funding.

Farritor founded two startup companies, Mrail, which monitors the stiffness of railroad tracks to prevent accidents, and Virtual Incision, which produces surgical robots. Both of them needed outside capital to grow. But as many an entrepreneur can attest, getting money for a startup is easier said than done.

“Mabye the hardest thing I’ve ever done was raising money,” Farritor said.

Farritor pitched to more than 60 angel investors and venture capitalists in those early days, often meeting with failure many times before succeeding once. It was through that “trial by fire” that Farritor and his team gradually improved their approach and learned the lessons that have kept them in business to this day.

“Going through that process really improved our business plan and pitch and I always tell people it improved our research too. It was an experience I wouldn’t trade for anything,” Farritor said.

Now that Virtual Incisions has raised more than $2 million in Series A funding and Mrail has raised $500,000 in seed money, it’s safe to say Farritor has probably figured out some things about raising money that are worth passing along. So what’s his most important piece of advice to people looking for venture capital?

“You won’t be discovered,” Farritor said. “Don’t expect people to see how wonderful your idea is and overlook all of your flaws and run to fund you.”

Farritor, who taught a class on entrepreneurship at the UNL engineering college this spring, suggests that while entrepreneurs who are serious about finding investors should indeed have a great idea, what they really need is a great business team and a well-executed business plan.

A successful business team should include people who are knowledgeable and successful in a relevant field of business and a CEO who inspires confidence. A business team composed of people who are hard-working, bright, innovative and well-respected is a lot more likely to execute their business plan well than one with people who lack these traits. And it’s execution that is the key.

“Execution is really what it’s all about,” Farritor said. “Execution is how you make a good idea into something real.”

An entrepreneur with a great idea and a poorly executed business plan cannot hope to succeed, Farritor said, but even a mediocre idea can be lucrative if backed by a great business plan that is flawlessly carried out. But just because an entrepreneur does everything right doesn’t mean he or she is going to succeed. Pitching to venture capitalists is notoriously difficult.

“If I asked 100 people to give a venture capitalist pitch I bet venture capitalists wouldn’t like any of the hundred,” Farritor said. “They’re looking for very specific things and if you don’t have that list you get into trouble pretty quick.”

Farritor suggested a list of 10 Power Point slides he gleaned from the third chapter of famous business author Guy Kawasaki’s book “The Art of the Start” as a good model for how to pitch potential investors. A good pitch should include:

1. Problem
2. Your solution
3. Business model
4. Underlying magic / Technology
5. Marketing and sales
6. Competition
7. Team
8. Projections and milestones
9. Status and timeline
10. Summary and call to action

“The Art of the Start” is just one of more than 50 books on entrepreneurship Farritor has read since going into business. His other three favorite books for how to raise money for a startup are: “Engineering Your Startup,” “The Monk and the Riddle,” and “Business Model Generation.”

Some of these books are standard fare for top venture capitalist firms like Kleiner Perkins Caufield & Byers, while other are just full of great models and ideas for how to make a business better. But all of them are worth reading.  While taking the time to learn how to succeed is as important in getting business funding as it is for any other pursuit in life, there’s one sticky little detail anyone hoping to pitch a venture capitalist should bear in mind before ambushing one on the way to an elevator.

“You need an intro,” Farritor said. “That’s just the way it is. You’re never going to just cold call a venture capitalist and get in.”

And to that end, Farritor continued, you need a mentor too. It’s extremely important to network with knowledgeable, well-connected people to create a business that is attractive enough to lure venture capital and to put that business in a position to be noticed. He had a few useful people in mind.

“Find someone to help you through the process,” Farritor said. “If you’re looking for angel investment I would reach out to some of the Nebraska Angels in the directorship and say, ‘Will you sit down with me and just talk to me? Can I buy you a cup of coffee?’ If you’re not to that stage I would go talk to NUtech Ventures.”

NUtech Ventures, formerly UNL’s Office of Technology Development before it became a nonprofit company, commercializes University of Nebraska research. Farritor also said that his door is always open to UNL students who want to become entrepreneurs themselves.

Trying to attract angel investment into a company? Considering making an angel investment? This discussion will delve into some of the devilish details surrounding how to structure an early stage angel investment. In particular, this break out session will propose a framework for thinking about the business-side challenges of backing an early stage company. And it will then look at some specific contracting solutions to those problems. Professor Bernthal teaches a Venture Capital course at CU-Boulder and, additionally, examines angel investment opportunities in Colorado. This session will combine academic theory with practical lessons from his experience in the field. This session is targeted to entrepreneurs as well as individuals interested in early stage investing.

Brasch began his career in 1969 as a professor of marketing at the University of Nebraska-Lincoln. He remained there until 1980, when he decided to take a leave of absence to begin work at Century Manufacturing Co. He went on to start four companies: International Management Services in 1978, Senior Technologies, Inc. in 1985, Turun International in 1996 and J. Brasch Co. LLC in 2011.

He sold Senior Technologies in 2002 to Stanley Works but stayed on board as CEO until 2005. Brasch continues to operate TurunUK in Lincoln with sales operations in London.

Brasch is also one of the founders and president of Nebraska Angels, an angel investment firm in the state.

“I realized the need in order to get a company started in Nebraska and it was capital,” he said. “Angel capital–not venture capital–was needed. With some encouragement, I made contact with some people in Southern California that showed us the way to get this done here. I used their model to set up an angel network. The angel network has now funded nine companies and helped two others get their funding.”

His products include the Century Bathing Systems, WanderGuard departure alert system, Ariel Wireless nurse call systems and Tabs fall risk alert monitors. All of these products were new to the health care industry when they were first introduced, but now almost all nursing, assisted living and clinical settings use products created by Brasch and his companies. All his companies were started in Nebraska and have expanded to include an international marketplace.

His newest product, the SafePresence communicator, provides two-way communication for home caregivers. It allows those receiving care and those providing care to have better communication throughout the home setting. Until now, most of the products Brasch released were for institutional use. This is his first major home use system.

Even after all he has achieved, Brasch decided to keep working and creating innovative products for elderly care.

“Retirement isn’t natural to me,” he said. “I like doing things and working with bright people that maybe I can help start on a new career. This has just been a lot of fun for me to do and there’s a fair amount of risk in it because we don’t know how the public will respond but we’re very optimistic based on feedback we’ve had.

“We’re rolling out the next opportunity and it’s part of a broader plan to help caregivers at home. That’s what this product does. The needs of the patient are going to evolve and this device, because of the way it functions, can keep being useful over an extended period.”

You can also check out more information by visiting their resource page on this site at http://www.nebraskaentrepreneur.com/resource/funding/nebraska-angels/

Q: We talked before about how your Operational Assistance program provides investment funds to give scalable businesses a “leg up” to better attract angel investors and venture capitalists. What is your new angel investor database about?

A: Our plans for 2010 include creating a network database of 100 Nebraskan angel investors, who are individuals with a high net worth. The angel investors in our database will be accredited investors as defined by the SEC (Securities and Exchange Commission). To meet the SEC definition, an angel investor must have a net worth of more than $1 million or an annual income of at least $200,000. These are individuals who can take a risk for a potential high return because they can afford to lose money.

Q: What will you do with the database?

A: We will use the database to bring together these accredited investors from across the state with entrepreneurial businesses in Nebraska. As companies come forward, we will do the due diligence on them, such as reviewing their financials. We will do a lot of the leg work and then provide the information to the angels. We hope to marry the angel investors to those companies right for them.

Q: How can individuals learn about angel investing?

A: We plan to have about five angel seminars across the state this year to provide information. We will explain what angel investing is and how it can benefit that local community. For communities that are interested, we will provide templates to help them form a local angel investment fund. For individuals that are interested in participating in our network we will sign them up for the network.
When seminars are scheduled we will post them on our Website, www.investnebraska.com.

Invest Nebraska

NebraskaEntrepreneur.com talks to Dan Hoffman, executive director of Invest Nebraska, about their Venture Competitions. Invest Nebraska is a nonprofit corporation that advises and invests in entrepreneurial businesses in Nebraska. In future posts we’ll talk with him about other Invest Nebraska activities and opportunities.

Q: What are the Venture Competitions you organize?

A: Last year we had six successful business plan competitions held across the state – five regional competitions and a statewide competition. We reviewed over 100 business plans from across the state. Most of the judges for the regional contests come from that area.

Winners get an equity investment award, typically around $20,000 to $30,000, and the contacts and expertise of our board members and me to help them grow the business.

I think we are accelerating entrepreneurship in the state, not only because we are creating successes, but also because the competitions force entrepreneurs to take that next step and develop their business plans. Competition brings out the best in people and their ideas.

Q: Who should enter the Venture Competitions?

A: Both startups and existing businesses can enter. They should be located or willing to locate in the area of the contest – the specific region for the regional contests or anywhere in the state of Nebraska for the statewide contest.

Business ideas vary – the regional competitions look different in different parts of the state. If we had a competition just in the city of Lincoln, we might get more technology-driven businesses due to the concentration of students and the universities and colleges in the area. In the Western part of the state we might get more lifestyle businesses like Cabela’s. In either case we are looking for opportunities to bring new dollars into the local area. We say it’s worth it for everybody to apply. Completing the business plan is another step forward to meeting your goal of being an entrepreneur.

The judges look not only at the business plan but also whether the entrepreneur can carry the plan forward. Does this person have the passion for it? You can tell those people who have the passion. While some of the winning plans are well-written, others are not as well-written but the entrepreneurs do have the passion.

One item we look at is competition. Is this idea something unique compared to other competitors? Does it have some competitive advantage?

One interesting result from last year was that all five regional winners happened to be women.

2009 winners: Ashley Hagan & Jeffrey & Stephanie Dusatko - Photo Credit InvestNebraska.com

Q: What makes the Invest Nebraska competitions different from other business plan competitions?

A: The prize isn’t just cash – it’s an actual investment. Invest Nebraska becomes a shareholder in the venture. Members of our board of directors help advise the business and become a source for contacts and opening doors. The business and Invest Nebraska negotiate details of the percentage of equity to be owned by Invest Nebraska after the contest.

The Invest Nebraska competitions are based on the success of Hormel Family Foundation’s Hormel Business Plan Competition, which started in 2007.

Q: What business plan competitions will Invest Nebraska have in 2010?

A: In 2010 we will have the same competitions as last year. The planned months are tentative: April for the Western Nebraska Venture Competition in Scottsbluff; May for the Northeast Nebraska Venture Competition in Norfolk; June for the Hormel Family Foundation Business Plan Competition in McCook; September for the York Venture Competition in York; October for the Southeast Nebraska Venture Competition in Peru; and November for the statewide East 2 West Nebraska Venture Competition in Omaha. There are more details on our Website, www.InvestNebraska.com, or you can email me at dan@investnebraska.com.

We think if entrepreneurs start seeing the same competitions come up every year they are more apt to put the effort into completing their business plans. Part of this is an ongoing trial: Is the regional structure a good approach or should we concentrate on cities? In a few years we hope to see.