Wanted: Fast growing enterprises
New initiative hunts down gazelles among New North’s herd of business start ups
Story by Sean Fitzgerald, Publisher New North B2B
Believe it or not, even companies like Google and Amazon.com don’t just happen solely due to the brilliant vision of a few aspiring entrepreneurs.
No, as much of an entrepreneurial fairy tale like the film The Social Network is scripted, the fact of the matter is that a myriad of other behind-the-scenes influences helped guide these fast-growth, high-value businesses into the Fortune 100 firms they’ve become in 2013. It is possible to identify resources within a region that help provide such behind-the-scenes influence and connect them in a programmable initiative which could help to mine, cut and polish these billion-dollar gems in the rough into employers creating thousands of jobs and millions of dollars annually into a region’s economy.
That’s the long-term goal of New North’s Fast Forward program, which is officially getting under way in 2013 following a six-month beta version to test specific dynamics of Fast Forward wrapped up this past summer. Fast Forward is dubbed as a way to identify and accelerate fast-growth entrepreneurs in northeast Wisconsin, assisting them with aspects of innovation, business development and capitalization to help the region foster potential gazelles.
The term gazelle was coined by economist David Birch in 1994 to illustrate those fast-growth start ups which outpace the growth rate of Fortune 500 “elephants” and Main Street “mice,” as Birch wrote at the time. More specifically, Birch defined gazelles as companies which increase revenues by at least 20 percent annually for a period of four years or more, effectively doubling their size during that time.
“If we’re doing this well, we should have one a year, maybe two,” said Jerry Murphy, executive director for The New North Inc., the regional economic development effort for northeast Wisconsin.
Building the perfect gazelle trap
The development of the Fast Forward program was nearly three years in the making, spawning from the recognition that a gap existed in funding those firms in northeast Wisconsin that were ready to take the leap from start-up to second-stage, but generally wouldn’t be candidates for traditional bank financing or other conventional credit.
The type of start-ups Fast Forward was designed to target could ideally grow to at least $12 million in valuation during a five-year period, have the ability to scale the operation into a national market, and create a number of high-paying jobs in the New North region.
Fortunately, the components for identifying and nurturing successful gazelles were already resident in the region, meaning there wouldn’t be a need to create or recruit new resources to northeast Wisconsin, or even to invest in the further development of existing resources.
A strong, well-networked audience of entrepreneurial and economic development service providers across the New North was already in place, and would serve as the points of entry for start ups in search of assistance getting their company off the ground. There was also a relatively well-networked group of individuals retired from a career of top-level corporate leadership, others who successfully exited a growing company they founded, or those with various aspects of venture capital experience – all whom were willing to serve as mentors to aspiring entrepreneurs in the region. The strategy of fast Forward would be to aggregate these resources together with qualifying start-up firms.
“Then smother a fast-growth firm with all the talent in the region and get them to the finish line, which in most cases here means seeking capital,” Murphy said.
A network of eight mentors had come together by the fall of 2012 who unselfishly volunteered their time and valuable knowledge and experience to guide new business owners quickly through the process to become second-stage companies. At the same time, six entrepreneurs pitching proposals for fast-growth enterprises had been funneled through various service providers in northeast Wisconsin. They would eventually be matched with a team of mentors to serve as test subjects for the Fast Forward process.
Out of the gate
One of those entrepreneurs, Mike Zielinski, had already been working on his company RightDoc.com for more than two years and had developed an initial business plan through the E-seed entrepreneurial development program at Fox Valley Technical College’s Venture Center. A physical therapist by day, Zielinski discovered earlier in his career that patients often struggle to find a suitable doctor or other medical professional, often in the same manner that they might be challenged to find a good mechanic or plumber.
“Many of my patients found it was difficult to find a good doctor, or any health care professional for that matter,” Zielinski said. During any period of time in which the patient may have not been receiving proper care from a medical professional, Zielinski said the patient loses out on a good deal of unnecessary time with poor treatment, unnecessary medical expenses, and often suffers a decreased quality of life which might have been avoided if not for a more appropriate match being made between the patient and their doctor.
While various online profile matching services where helping pair consumers with, say, a more reputable electrician – think of Angie’s List, for example – the health care provider community had become one of the last professions to gravitate toward such an approach to marketing due to the complex nuances of judiciously evaluating provider service.
“Health care was a little behind in terms of accepting that people are going to be talking about you online most of the time,” Zielinski said.
Zielinski’s approach through RightDoc.com captured the attention of the medical community because it doesn’t allow patients to review providers with a rating scale – rather, it asks patients to provide endorsements for doctors. Over time, physicians with a growing number of endorsements begin to develop a profile illustrating their various strengths based upon the specialty in which they practice.
Zielinski’s proprietary medical provider evaluation process through RightDoc.com is unique enough he secured a provisional patent for it.
At the time Zielinski stepped into the Fast Forward program in late 2012, he was already past the start-up stage and beyond the need for seed funding. He needed more substantial funding than family and friends could provide – and it wasn’t the kind of operational funding that any bank was going to be willing to lend. Zielinski hoped his mentors would be able to help him refine his pitch to prospective investors in RightDoc.com.
He was paired with Jack Riopelle, the former CEO and owner of Wisconsin Film & Bag in Shawano, and Glen Yurjevich, a veteran manufacturing executive who’d served as president and CEO for area companies like Neenah-based Outlook Group and Creative Forming in Ripon. Zielinski said he met with the two mentors on a monthly basis to discuss strategy and get some assistance with time management, helping Zielinski better identify those tasks in his business he needs to take direct responsibility for executing and reserving other tasks for employees or contracted vendors to manage.
More than he even anticipated at the outset, Zielinski credited Riopelle and Yurjevich with helping to better position RightDoc.com in front of the proper administrative leadership for large physician groups in the state. Previously, Zielinski was meeting with individual doctors or small groups of physicians at best to help develop an initial profile for RightDoc, which proved to be an inefficient use of his resources.
RightDoc.com officially launched this past March, and included profiles for more than 25,000 medical professionals in Wisconsin, Zielinski noted. The Appleton-based online service is initially rolling out to patients and medical professionals through Wisconsin as somewhat of a beta test, and plans to expand nationally within a year.
But Zielinski needs outside investment in order to grow much further. He’s made a few pitches in front of state angel groups and other wealthy individuals, but “we haven’t found an investor as of this point,” Zielinski told B2B in mid September. He’s looking to raise between $300,000 to $ 1 million to help with the costs of marketing and business development, as well as provide Zielinski more independence from his day job so he can concentrate his focus on RightDoc. He’d also like to fund the process to obtain a non-provision patent for RightDoc, which would offer more permanent protection for his intellectual property.
Zielinski credits the Fast Forward program with positioning him to advance to the next stage of growth. He continues to meet regularly with Riopelle and Yurjevich.
He acknowledges, as do his mentors, that RightDoc.com is perhaps one investment away from national awareness, fast growth, and creating dozens of additional jobs.
Another company to participate in Fast Forward’s beta program – Basiliere Pharmaceutical LLC – moved through the program relatively fast, but not without receiving some valuable business plan guidance as owners Jim and Rich Basiliere seek as much as $6 million to $10 million in venture capital to finance equipment and a newly constructed facility for the manufacture of sterile injectable pharmaceuticals.
Jim, a Minneapolis-area resident who has more than 20 years experience in pharmaceutical manufacturing, and his brother, Rich, a Madison-area resident who works as an investigative auditor for the state Department of Justice, both wanted to bring a fast-growth, heavy-job-creation pharmaceutical manufacturer to their hometown of Oshkosh. After being ushered into Fast Forward through service provider Oshkosh Area Economic Development Corp., the brothers began meeting with Yurjevich, Riopelle and another mentor, Randy Lawton, to begin looking at options for a manufacturing facility, arguably one of the most important pieces to the puzzle of their start up.
“When you’re asking for a lot of capital, investors want committed customers,” Rich Basiliere said, indicating it’s difficult to secure contracts with customers without having a facility.
Such a facility comes with some of the most stringent regulatory requirements from the federal Food and Drug Administration. As a result, the cost of such a production plant is extremely high on a cost-per-square foot basis, as are the overall barriers to entry in this industry, which has tremendous opportunity for high revenues and large margins for profit.
By the end of their time together, the Basiliere brothers found the assistance they sought from their mentors to develop an effective business plan and pitch that was complete and attractive to potential investors.
“Glen, Jack and Randy assisted us in ensuring that our plan was investor-ready by suggesting revisions and giving us advice on what to expect from investors,” Rich Basiliere said.
Additionally, though, the mentor group planted the seed for the idea to begin manufacturing in an incubator space just to get the business moving forward, and gradually look to attract more substantial outside investment and construct a more permanent facility as the company begins to generate cash flow.
The road ahead
Even though the initial beta phase was incorporated to work through any issues in the Fast Forward process, the entrepreneurs who went through this test phase were anything but guinea pigs – they’re actual business start ups looking to grow and identify additional sources of investment.
Moving ahead, Fast Forward is looking to attract additional start ups which might fit the criteria for potentially being considered fast growth. Part of the process still includes educating service providers about the initiative as well as how to define and refer any potentially fast-growth entrepreneurs, noted Amy Pietsch, executive director for the aforementioned Venture Center and the chair of New North’s Small Business & Entrepreneurship Council, which developed and currently administers the Fast Forward program.
“Right now we have ten mentors, and they keep asking me ‘When are we going to get more entrepreneurs to work with,” Pietsch said. “It’s a good problem to have ten mentors who are hungry for more mentees.”
One of those mentors, Dennis Allar of Sherwood, particularly enjoys the teaching component of helping aspiring business owners grow and operate sensibly and profitably. An engineer by trade, Allar and a group of other partners acquired Appleton Manufacturing in 1993 from their employer, Menasha Corp., who owned the company at the time. Allar sold his share of the company to his partners in 2006 and left the business, and has since continued to consult with various manufacturers. Scratching an itch to teach, Allar became an instructor in the Venture Center’s E-seed program, where he eventually became better acquainted with Pietsch and New North’s Small Business & Entrepreneurship Council.
Becoming a mentor for the Fast Forward program also fulfills Allar’s desire to help local entrepreneurs prosper. He said the value to the mentees he and his colleagues are mentoring is that they offer an unbiased, often outside-the-industry perspective that can be crucial to a new business owner coming to market with a degree of entrepreneurial naivety.
“Sometimes when you’re in the middle of the forest, it’s a bit hard to see the trees until you stand back a bit,” Allar said.
Pietsch said the flexibility of the Fast Forward program allows entrepreneurs from across northeast Wisconsin to enroll at the recommendation of a local service provider at any time. And in the few short months since New North has been promoting the Fast Forward program more diligently, Pietsch and her service provider colleagues have been surprised by the number of potentially fast-growth new business proposals – even though still perhaps unrefined – that exist in the region.
“There’s more high-impact entrepreneurs out there than what we originally thought,” she said. “It won’t take long until the pipeline is full.”