Bilgistic.com

After seeing this article about a new venture firm in town, I got excited. Before I got ahead of myself I thought I’d reach out to Steve Nussrallah and get some direct scoop and see if the story was, in fact, reality. Well, as it turns out not quite. It’s still a good story but not exactly as reported.

Steve has left Noro-Moseley Partners, but it sounds like it’s on good terms. Steve and his crew (more on the crew in a minute) are occupying the same office space that was Noro-Moseley’s Mansell Office (it’s still on their web site, in fact). Heck, Steve is still getting email at his Noro-Moseley address. If he had left to start a competing venture firm, I don’t think that would have been the case.

There are three principals in the company. Steve Nussrallah, Jeff Neppl, and Christopher Demetree.

Steve Nussrallah just left Noro-Moseley. But before that he was the CEO of Concurrent Computer Corp. and remains the Chairman there. He spent quite a bit of time at Scientific Atlanta and holds a B.S. in Electrical Engineering (University of Cincinnati) and a M.S. in Electrical Engineering (University of Michigan).

Jeff Neppl and Chrisopher Demetree were both recently at Recordant. I’ll cover the company in a future post but it’s important to note that Recordant’s two fundraising rounds ($12m total) came from Pequot Ventures (New York), Kodiak Venture Partners (Boston), and Aurora Funds (Durham, North Carolina). Yes, that’s right - no local investors.

Looking at these guys, I note that none of them have an MBA. That’s probably a good thing. People with MBAs (like myself) and no real experience (unlike myself) tend to suck.

The one important thing to note about this group is that they don’t have a fund. They aren’t raising a fund and they don’t plan on raising a fund. They may make individual investments (from the partner’s pocket) or tap a network of high net-worth individuals for investments into startups. The original article implies that the firm is going to make investments through a fund, that just isn’t true.

So what exactly are these guys doing if they aren’t really doing investments? They are going to work with teams that may not be ready (because of the team, the product, or whatever) to raise money yet. These folks will come in and work for the CEO of the startup in whatever role is necessary and help them perfect their pitch and raise money. Steve was very clear on one point - they do not intend to take on a CEO role of any company they work with. Two big reasons for this. First, this is threatening to company CEOs. I’d agree with this statement. Second, if they raised money with one of their guys as CEO, they could get “stuck” running the company. Again, I’d agree with this statement. These guys are looking to ramp up a number of companies and hope that some become very successful.

So how do you know that this will work? Aren’t these guys just a bunch of consultants? Well, yes they are. But the way Steve described it to me was that their fees are deferred until fund raising and therefore any payment they receive is strictly success based. If they don’t help you raise money, they don’t get anything. Plus like I mentioned above, they may provide bridge or seed funding. Bridge money may convert into preferred shares with additional common shares paid for performance (at least this is how I understood it). Obviously, every deal will be negotiable and entrepreneurs should negotiate as much as possible with these guys and investors in the future.

When Steve told me the premise behind the firm, the immediate thought I had was “oh, this is garage.com all over again”. A long time ago, I was a garage.com client. Back in those days (2000), Garage.com didn’t have a fund and their tag line was “we start up startups” (in fact, I think I still have some pens with their old logo and tag line on it). That came to an end sometime in 2001 when they realized that they weren’t making enough money on startups to keep themselves going (plus the bubble imploded on them).

So is this a sign of a new bubble? Maybe. But I think there is real value in this model. I know the help we received by signing up as garage.com clients was tremendous (Digital Envoy was a Garage.com client before they had a fund). Perhaps the best help came from Chris Melching who was my speaking and presentation coach. After two days I was much more polished and I’ve carried Chris’ presentation tips with me ever since.

So if you’re a technology oriented entrepreneur, this might be a winner for you. Steve mentioned that their strengths are in the areas of financial advice, business development, sales, marketing, and operations. If you’re weak in those areas or are a first time entrepreneur, it may be useful to give them a call. Their website isn’t functional yet, but if you’re really an entrepreneur you’ll figure out a way to get a hold of them.