Friday, February 2
Military Matchmaker Seeks Private Partners
The Picatinny Arsenal in Morris County, the U.S. Army’s research and development plant, has found a new way to nurture and partner with entrepreneurs for the benefit of both. And what’s linking these private and public sector entities, is, interestingly enough, a non-profit.
Developed barely four years ago, InSitech Inc. is a self-sustaining, not-for-profit company that helps the military partner with businesses to reach its technology goals and also helps turn existing technologies into commercial products. At this point, InSitech (www.InSitech.org) is looking for established companies, entrepreneurs, and management teams to partner with the Picatinny Arsenal’s military and commercial projects.
InSitech is just one of the companies represented at the New Jersey Technology Council’s annual capital conference on Friday, February 2, at 7:30 a.m. at the Westin Princeton at Forrestal Village. Cost: $290. Visit www.njtc.org.
Timothy Teen, president of InSitech, is part of a panel discussing “Growing Through Strategic Alliances.” Additional panels cover early and late stages of financing, getting venture capitalists to show their money, and investment trends.
Teen has a two decade history of making small companies large and fostering successful linkups. Raised in Bradley Beach, he earned a bachelor’s degree from Montclair University in l984. Teen then worked as a marketing strategist for several companies throughout the state.
Eleven years ago that Teen first discovered the missed potential that results from not understanding the military’s needs and processes. “I was working for a battery company and we had a good product that would have fitted the new type of army vehicle just fine,” he says. “But our sales force was not geared to dealing with the government. Military contracting was a mystery to us, so we let the whole thing pass. Now at InSitech I realize how much we probably forfeited.”
The new millennium found Teen working for Corporation Investment Partners, a J.P. Morgan spin off, where he analyzed technology and determined its commercial potential. Meanwhile at Picatinny, former technical director Carmine Spinelli was formulating his vision. He proposed a sharing of technical advancements between the military and private sectors that might lower tax burdens and streamline efficiency. He launched InSitech in August, 2004, and hired Teen as its first CEO.
InSitech was established as a partnership intermediary to facilitate projects between Picatinny’s Armaments Research, Development & Engineering Center (ARDEC) and businesses or management teams. Teen saw that if the U.S. military and private business were going to enter into this collaboration, the military would have to do more than just toss out bids to anxious and confused companies. “The programs like SBIR (Small Business Innovation Research) have a breakdown,” says Teen, “because their departments are stingy with advice. To deal with the military, businesses need encouragement and nurturing.” In offering this encouragement, InSitech had to belong to many camps.
Idea swap. Throughout Picatinny Arsenal’s 6,500 acres, 4,500 researchers and workers labor to come up with solutions for the Army’s needs. ARDEC is a massive scientific brain trust and lab specializing in optics, guidance systems, energetics, and the whole vast field of nanotechnology. But scientists talk, and they realize that prototype development can be boosted by sharing with academic and business R & D groups already immersed in the same problem.
“Whether the original innovation came from ARDEC or a private firm, our goal is to link the entities, and get the plan improved and produced,” says Teen. “That’s where the real entrepreneurial fun comes in.” Teen and InSitech reach out not just to established firms, but also to budding entrepreneurs. They will even hunt up and select management teams to initiate a project launch. All the while, technologies are shared.
Part of the InSitech service is to act as mentor through the military’s labyrinthian contract maze. “The logistics of dealing with the army are not simple,” says Teen, “and most firms consider InSitech’s consulting fees a worthwhile investment.”
Joe Moran, CFO of the company, points out that these fees are part of what sustains InSitech. “We may have 501(c)3 status,” says Moran, “but the military encourages us to make a surplus. After all, any profit we make goes back into the Army and lessens the cost to the taxpayer.”
Crossover tech. To avoid reinventing the wheel in the private sector, one of InSitech’s primary partnering missions is to find commercial uses for military products. Such dual use is increasingly valued because of enormous costs of Homeland Security initiatives. As with products strictly for military use, Teen and his team are constantly seeking out entrepreneurs and management groups that can bring commercial products to market.
One such crossover package was developed originally by Princeton Plasma Physics Lab for the Army a mere three months after 9/11. MINDS — short for Miniature Integrated Nuclear Detection System — is a software package operable from a simple laptop that can detect dangerous radiation apart from naturally occurring or radiation or radiation being used in approved medical procedures.
As numerous agencies and companies become more security conscious, the commercial use for the product became evident. Through InSitech, MINDSCo was formed. The MINDS software system is now operated by the New York/New Jersey Port Authority.
Venturing into VC. In many cases, it’s less information or mentoring that a business requires, than good hard cash. To meet this need InSitech has developed, jointly with Chart Group, a direct venture capital arm, Chart Venture Partners, L.P. This for-profit firm, with offices in Manhattan and at the arsenal, is currently holding assets of $150 million, and has been dispensing its investments in allotments of $3 to $7 million. Chart (www.chartventure.com) finances companies that can commercialize defense and security oriented technologies for any market use.
PARC explosion. The largest undertaking of InSitech’s many projects is the long term development of the Picatinny Applied Research Campus (PARC). This 120-acre planned adjunct to the Arsenal’s ARDEC station will foster teamwork among the military, academic, and private business sectors. Currently 100,000 square feet are being made ready for lease, with over 1 million square feet planned for the future. Businesses are now being sought to fill these laboratories and create everything from weapons and propellants to pollution prevention technologies.
InSitech has been granted a 70-year management lease on PARC with options. “Not only will we have a central R & D center,” says Teen, “but we already have over $1.5 billion worth of very specialized equipment — some of it one of a kind, which we are sharing with the PARC companies and with universities.” Even in the short term, PARC designers are estimating that PARC will create 1,000 new jobs.
InSitech mission can be looked at as something akin to NASA’s crossover commercialization. Just as laser, optical, and heat-resistant materials technologies have been boosted by NASA’s efforts, ARDEC’s outreach via non-profit InSitech could do the same in an even wider range of technologies.
— Bart Jackson
Venture Capitalists Make a Comeback
Venture capitalists are seen as both gods and devils. Their money can turn an idea into a multi-billion-dollar business, but the control they exert can quickly push the people who had the idea in the first place out of the picture.
Mark Heesen, president of the National Venture Capital Association, talks about just what venture capitalists can — and cannot — do for entrepreneurs in the keynote speech at the New Jersey Technology Council’s Capital Conference on Friday, February 2, at 12:45 p.m. at the Westin Princeton at Forrestal Village. Heesen’s talk is part of the day-long event that begins at 7:30 a.m. with a series of panels, including “Financing for Early Stage Companies” and “Managing the M & A Exit.” Cost: $290. Visit www.njtc.org.
A native of Philadelphia, Heesen graduated from Duquesne University with a bachelor’s degree in political science and earned a law degree with an emphasis on taxation at the Dickinson School of Law. Heesen served as an aide to Pennsylvania Governor Dick Thornburg, and later, acted as deputy director of federal funds for two Texas governors.
Heesen says that there have been substantial changes in the venture industry. “Both the companies and individuals — venture capital firms and angel investors — have become noticeably more professional.”
Post bubble regroup. From the mid-1980s on into the late-l990s, high tech entrepreneurs dazzled funders, and created a Gold Rush mentality. The venture industry got caught up, jumping in and out of investments, and backing dubious startups. The result was so disastrous that it appeared that all VCs had crawled under a bed.
They have now reemerged, but, says Heesen, “in a much more disciplined form. The past silliness has yielded to strict due diligence.” There are markedly fewer venture firms than there were before dot-com euphoria reigned, but Heesen sees this as a proper adjustment, reflective of a more stable market.
According to Kansas City’s Ewing Marion Kauffman Foundation, America’s venture industry invested $18.2 billion in 2003, down from $30 billion a year during the 1990s’ boom. Heesen notes that today’s hot investments are still in the Internet categories and medical devices, joined by the new category of clean energy technology.
But the big difference is at what point the venture capitalists are now investing. Of that $18 billion invested in 2003, only two percent went to seed,startup, or early stage financing. So while the once-burned venture capitalists are playing it safe, who remains to take up the slack?
Fearless angels. Dating back to the early 1900s, the word “angel” was used to describe a wealthy person who would bankroll a Broadway play for profit, but mostly for fun. Angels were also involved in getting dot-com companies — and companies in a whole range of other industries — off the ground.
Traditionally there has been a gap between the amount an entrepreneur can borrow from friends and family, and the point where he is ready for venture capital. Twelve years ago the gap was generally between $500,000 to $2 million.
But now, Kauffman statistics report, venture capitalists have raised the bar to a figure that is closer to $5 million, while funding from friends and family is still only about $500,000. Increasingly, angels are stepping into the breach, and providing much more than the seed money that they have typically invested.
In 2004 angels and angel associations doled out $18.1 billion in 43,000 deals. A good portion of this was seed money, but it was also money that venture capitalists used to put up as a first major funding round. And with this increased reliance has come a big change in the angels’ role.
The widening step-up to venture capital has forced a total revamping of the way in which angels work. Seldom able to bankroll a startup entirely, angels are uniting. In l993 there were only 10 angel groups in the country, but now there are more than 200. Of these, 10 percent have taken on a corporate structure.
“Angels themselves have taken up a new code of ethics and disciplined due diligence,” says Heesen.
Heesen sees the restructuring of the funding process as beneficial for both the entrepreneur, who can now turn to new groups of angel investors for his first funding round, and to venture capitalists, whose new rigor is sparing them — and the businesses they support — the heartache and financial pain of an early, unprofitable exit.
— Bart Jackson
Saturday, February 3
Ace That Interview
You’ve finally landed that all-important job interview. Now what can you do to insure that you are the candidate who is chosen? Interviewing is a skill, says Jean Baur, a senior consultant for Lee Hecht Harrison, which has offices at 989 Lenox Drive. Baur works in “what is euphemistically called career transition,” she says. That translates to outplacement counseling, assisting employees who have been downsized to find new jobs.
Baur speaks on “Interviewing Skills that Can Save Your Life” on Saturday, February 3, at 8:30 a.m. at the St. Paul’s Church Career Networking Group at 214 Nassau Street. The networking group was established by the church in 2001 to assist people who are looking for new employment opportunities. It meets weekly from September to May, is open to all, and has assisted over 1,000 people in the past six years. It offers participants the chance to develop networking, interviewing, presentation, and research skills.
Interviewing is always stressful, says Baur, but learning a key set of skills — and practicing them beforehand — confers an edge in what can be a stressful situation. Baur has a degree in English, and says her specialty is “being a good listener.” At Lee Hecht and Harrison she often begins working with people from the day they learn they are losing their jobs. She also does executive performance coaching.
Baur also works as a fiction writer. She has published short stories in a number of print and online literary journals and her literary agent is currently working to place her first novel with a publisher. Her work as a writer has helped her to empathize with her clients. “I tell them that as a writer I have more experience in rejection than they will ever have,” she says.
Mapping. Baur says that there are three techniques that are vital to the success of any job interview. The first is to develop an “interview map.” This is a two-column chart that lists everything you know about the company with which you are interviewing.
A list of what the company is looking for is written on one side of the chart. On the other side are keywords to remind you of the skills you have that match those items. This “cheat sheet” can easily go to the interview with you to prod your memory and keep you from walking out saying, “I should have said…”
“It may feel like a security blanket to you,” says Baur, “but the interviewer will just see that you have made notes.”
Zapping. “Zap” is Baur’s phrase for “zeroing in on the interviewer’s needs.” The best way to do this, she says, is to turn the tables on the interviewer and ask some questions of your own.
For example, the interviewer says, “tell me about yourself.” This very broad statement, if taken at face value, can lead you into spending a lot of time talking about things the interviewer is not interested in.
The best way to handle it, says Baur, is to “zap” him with a question by saying something like this: “I have a very broad background. Is there an area you would like me to focus on?” This is a good way to get a better feel for what the interviewer is looking for, and once you do have that idea, “provide a short, positive answer with a selling point,” she says.
If you can find out where the interviewer’s needs mesh with your skills, “you can be spot on with your answer,” she says. However, if you don’t feel that you have that particular skill, give an example that shows how well you learn new skills.
Asking questions during the interview “will change the whole atmosphere,” says Baur. Everyone likes to talk about themselves and their interests, so showing interest in the interviewer’s job and company only makes good sense.
Rephrasing. This skill is the most important, and the most difficult to learn, says Baur. Think of the question you most hate to be asked, maybe “you have no background in this area. Why should we hire you?”
Don’t get defensive or negative, says Baur. Instead, rephrase the question in a positive, or at least a neutral, way: “How would my diversified background be useful to your company?”
You must still answer the question, but rephrasing it “has built a bridge that puts you in control rather than on the defensive. It works like magic,” says Baur. The trick, she explains, is to “listen for the concept” behind the question. “It’s so very smooth. Most people don’t have a clue as to what you are doing.”
You must, however, stay true to the concept of the question when you answer it. “This is not about being a politician who is asked one thing and goes off to another planet with his answer,” says Baur. Instead, it is “using language to give yourself an advantage.”
Rephrasing is difficult to master, she warns, and must be practiced before it is used in an interview, an inherently stressful situation. “Practice on your family,” she suggests. “Try using it when you are networking with someone you don’t know too well. Then by the time you get to a real interview you are skilled in using it.”
The sum of these techniques is the confidence that comes from being really well prepared. You will feel it, and so will your interviewer.
— Karen Hodges Miller
Tuesday, February 6
Muscling Through A Business Crisis
‘How badly do you want it?” asks Melva Harris. That, she says is the question a business owner must ask when faced with a crisis. “If you want it badly enough, when it’s your heart’s desire, there is no such thing as not enough time or not enough energy” to devote to keeping a business going despite a setback.
Harris, the founder of North Brunswick-based Harris Development Consultants, speaks to the Middlesex Chamber of Commerce on “How to Survive a Business Crisis” on Tuesday, February 6, at 9:30 a.m., at the chamber office, 1 Distribution Way, Monmouth Junction. Cost: $45. Call 732-821-1700.
There are several typical crises or low points that business owners, particularly new businesses owners, experience, says Harris. All of them are solvable if the owner is willing to put in enough time and effort.
Slow growth. This problem occurs when a new business owner is unrealistic in his expectations. He thinks that his business should become profitable immediately, and when it does not, he wants to throw in the towel. “I was talking the other day with the owner of a restaurant who had been in business for only three months,” says Harris. “She was thinking of quitting because she wasn’t making a profit yet.”
The problem here, says Harris, is not the business. Instead, the problem is an owner who has not done her homework. Before opening the business she did no market research into other restaurants in the area. She did not find out if the area could support another restaurant. She did not research how long it takes for the typical restaurant to turn a profit. Looked at from this point of view, it is not really a “business crisis,” it is a problem that is solvable — if the restaurant owner wants to go back and do the research.
Even if the restaurant owner finds she has opened her business in a market that is already saturated with similar businesses, there are ways to fix the problem. “If the immediate market area is saturated, she can reach out and do advertising to a larger community,” says Harris. Many businesses can draw from a wider audience than the immediate town in which they are located. It will, however, take more creative, and probably more expensive, marketing to reach this larger community, she says.
The problem may become more complicated if, because of unrealistic expectations, the business owner does not have enough money in reserve. “She needs to look at her commitment to the business,” says Harris. “Instant success is not the norm. It takes three to five years for a business to earn a profit.” says Harris. If she is still committed to the business, a loan can see her through, but to get it, she will have to go back and do the market research to prove to the bank that her business can be profitable.
Loss of a client. Many small businesses, and even larger companies, rely too heavily on one or two major clients for their income. If the client leaves, the business is in trouble. “Many people get sloppy with their marketing when they have one large client,” says Harris. They forget that the client can leave at any time, for any reason.
“Even larger businesses have failed because they have gotten complacent in their marketing,” she says. She cites many of the automotive parts suppliers that relied exclusively on General Motors for business. When GM began to have serious financial problems some of these suppliers found themselves in dire straits. They had to quickly find a new client or go out of business.
“You have to continually market yourself,” says Harris. “If a business owner is lucky, he or she will survive the crisis, learn the lesson, and not allow it to happen again. Never get caught with just one client. Diversify.”
If you have several small clients and one leaves, you aren’t in trouble financially. The challenge, she says, is too remember to market your business even when you feel pressured to keep up with work for the clients you already have. “Make a consistent habit of getting on the telephone each week and making new connections,” says Harris.
Finding qualified people. Business is great, you have plenty of clients. In fact, you have so many clients that you need to hire help. How do you find the right people? Most business owners are not “well versed in job performance,” says Harris. They don’t know how to break down a job into its essential elements to determine its requirements. Since they aren’t sure who they need, they don’t look for the person with the right skills. “They resort to asking friends for recommendations.”
There are better ways to find the best employee for the job, she says. Employment agencies and trade organizations can be excellent places to find qualified workers. Another potential sources of employees are area corporations that are in the process of downsizing. A good way to find these recently unemployed workers is to find out what company is handling outplacement.
“Many people look at employees coming out of a downsized corporation and think, ‘they were making so much money at that corporation; they’ll never want to work for me,’” says Harris. But she finds that this is often not true. Many of those downsized employees will be happy to have a regular paycheck, even if it is smaller than they are used to. Small businesses can also offer other enticements to people coming from a large corporation, such as flexible hours and the ability to affect the decision-making process.
Harris herself left the stability of a regular paycheck in 1988 when she left a position at AT&T to form her own company. She holds a bachelor’s degree in business administration and management from Baruch College and a master’s degree from the New York Institute of Technology in human relations and psychology.
“I love writing and thinking, so management and administration was always the side of business that I loved,” she says. She found she also wanted to add teaching, speaking, and counseling to the mix, something she couldn’t do at a big corporation.
“When AT&T was restructuring in the 1980s I kept waiting for the package, but they had a job for me,” she says. She finally decided to strike out on her own without the safety net of a buyout package. She then faced her own business crisis. “I hadn’t planned well enough financially,” she says. “I took part-time work for a few years so I would have the flexibility to develop my own business.”
That search for flexibility has led her to teach part time at Middlesex and Mercer County community colleges. “I teach one class a day and I have the rest of my time to pursue other things,” she says.
Her experience in her own business, as well as in helping other business owners, has taught her that a crisis can be a learning experience that can make the business — and its owner — stronger. Says Harris: “Wisdom comes from our mistakes.”
— Karen Hodges Miller
Wednesday, February 7
Tap Carefully Into Markets In China and India
With dreams of millions upon millions of new customers, both small entrepreneurs and large corporations are turning to China and India. But visions of sugar plums and yuan in the pocket are two different things. Yes, it’s worth turning toward these large markets, but, no, success is not a given, and certainly not without careful planning.
Unfortunately, false assumptions abound. “Everybody looks at China like an easy score,” says Elliott J. Stein, a shareholder at Stevens & Lee P.C. who has extensive experience serving American companies in Asia, and in China in particular. But that’s not true. “Companies need to do business as carefully in China as in England, France, or Germany,” he advises, adding that lots of help is available, from specialized law firms and from organizations like the New Jersey Technology Council and the New Jersey Department of Commerce.
To move into the Chinese market, probably the first step is to hook up with a Chinese representative or distributor — because the alternative, establishing an actual physical presence, means lots of red tape. “There are distributors for virtually every type of product you can name,” says Stein. A number of trade organizations link business people with distributors. China Boot Camp (www.chinabootcamp.com), for example, provides American business people with several days of training in the fundamentals of doing business in China and then takes them to China and introduces them to Chinese distributors.
Stein moderates a panel on “Opportunities in China and India,” on Wednesday, February 7, at noon, for the New Jersey Entrepreneurial Network at the Princeton Marriott Hotel and Conference Center. Panelists include Kalyan Gopalakrishnan executive vice president of life sciences strategy at TAKE Solutions Inc., who has extensive experience in India; and Timothy Weckesser, president of Sino-Consulting, Inc., who has expertise in bringing American companies to China. Cost: $50. To register, go to www.njen.com.
Stein advises entrepreneurs both on what they should and should not expect when they embark on doing business in China.
First of all, don’t expect a monolithic trading partner. “Most people talk about China as though it were a single entity,” says Stein. But in reality the nature of doing business changes from one region to another. The large industrial areas, Shen Zhen and Guang Hou, and of course Hong Kong, are better set up to deal with issues that arise between American and Chinese buyers and sellers. But even within those more predictable regions, rules will change from time to time.
The Chinese government itself can vary in its stance toward international trade, although generally it is supportive, with the goal of increasing revenues for Chinese businesses. The government, says Stein, “goes in fits and starts. There are days that they are pro trade, and other days they put out regulations that inhibit trade.”
Entrepreneurs can expect lots of challenges anywhere in China, but can also reap a huge payback. Stein suggests that entrepreneurs should expect to encounter the following as they establish trade with China:
Difficulties getting paid. Payment for products or services rendered is not always certain and credit cards are new and far from widespread. Chinese are used to the old-fashioned approach, where the American sellers issued bills of lading against letters of credit. When products were shipped, the bank paid on behalf of the buyer. But these old approaches, says Stein, “are anathema for sellers from the United States. American companies want instantaneous payment.”
The reality today, however, is that American sellers ship the goods and often have to chase down the buyers. And they have little recourse when the buyers are slow in paying, because the Chinese legal system not is a friendly place for foreign companies. To protect themselves, says Stein, American companies trading in China should use local reps and distributors partly “as an insurance policy to get paid.”
Things may be changing, though. The Chinese banking system is now under close scrutiny from the World Bank and a number of American banks, CitiBank for one, are moving into Chinese business centers like Beijing and Shanghai.
Difficulty establishing brand recognition. With the exception of the largest of the large companies, like Disney or General Electric, it can be difficult to gain a foothold in a region. “Lesser knowns need to blaze their own trails and make their own markets,” says Stein. “They have to build a market the way a new company builds its market, region by region, customer by customer.”
Even the most substantial advertising budget cannot reach all over China, and probably the best a company can do, he says, is to reach test regions and then try to build momentum.
Communications difficulties with Chinese consumers. Problems arise in communicating to customers about how to install and use a product; how to deal with warranty issues, complaints, and claims; and how to upgrade products.
Regulations from the Chinese government. China has its own version of America’s Food and Drug Administration (FDA), for example, and American pharmaceutical companies need to take into account Chinese regulators and safety rules.
Logistical problems in distribution. It is getting easier to move products into and around China’s biggest cities, but it’s much for difficult to get products into more remote areas in China.
Intellectual property issues. Stein’s largest clients have been manufacturers of items like batteries, furnaces, and oil burners, but he has also represented a number of technology companies, where copyright issues abound.
“Intellectual property protection in China is nowhere near what it is in other parts of world,” says Stein. Tools that a business might provide to local distributors and reps to help them build the marketplace can be dangerous — because they can “lay you open to wholesale copying.”
And when that happens, legal recourse is dubious. As a result businesses put in place complex arbitration clauses that provide for jurisdiction in other parts of the world. Yet they don’t always work.
Stein grew up in Dumont. His dad ran grocery stores all over New Jersey and his mom was secretary to the chief financial officer at a publishing house.
Stein graduated from the State University of New York at Binghamton in 1972 with a bachelor’s degree in ancient history. As an undergraduate he also spent time at the University of Tel Aviv, in Ramat Aviv. After graduating from Rutgers Law School in 1975, he was in private practice for three years, focusing on aircraft, firearms, and computers, and then moved to in-house legal positions in the computer industry, ending up as general counsel of MAI Systems, an international hardware and software firm. In 1994 he became a partner at the California firm of Deacons, Graham and James and specialized in its Asia practice. He became a partner at Stevens & Lee, which has its offices at 600 College Road East, in 2000.
In the end, says Stein, the size of the Chinese market exerts a strong pull on entrepreneurs, despite the problems they are likely to encounter. “Even small penetration into a marketplace with billions of consumers is an attraction that few sellers can resist,” he says.
But he issues a note of warning: “Americans have had one weakness in world trade — they think that every market operates like the American market.” But unless prospective sellers study the market and gain insight about how to adapt their goods and services as well as their marketing methods for the Chinese market, they won’t be successful.
— Michele Alperin