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um as mike said i'm tom i'm the sales and marketing guy i've been involved in over 25 different startup ventures in my career and uh my good friend gino here said hi geno hello he's the smart one of the two of us he's the brain of the operation god help us all uh we first met back in the 70s in the streets of edina and uh and are both very proud alums from the uh from the university of minnesota and uh and our wives are really good friends and we have a a really fun uh fun life stage we're in right now in our 60s and uh and moving forward so where do we fit in the investment time frame so if you think about a traditional uh startup venture right you've got various levels of funding represented by this chart here right um and when you start out you you you bootstrap and then you get some money from your friends and families you get a grant in fact we just got an email from a partner of ours a couple hours ago who just got a grant from a group in the state of minnesota which is very exciting uh then you moved in in the venture capital world and crowdfunding and so on so forth so where we fit in is we really fit in before the start i call the professional money comes in so look at us as your shepherd if you will your partner to help you go through this early stage of your of your journey and get ready for the professional money to come involved not that we're not professional we're not we're not really you know registered an investor investment organization in in the traditional sense of world i've raised money a bunch of times in my life so i can help you get ready if that's the road that you uh you go down so our model is pretty simple um we help people build prototypes um we an active investor in both of our in terms of our talents and our skills and our money and then we're a manufacturing incubator you can see behind us here uh this is gino's uh this is geno's business you want to take a second you know and tell them what you're looking at here so we're we deal with metals uh primarily sheet but we do a lot of tube as well and we fabricate uh all kinds of devices for many many industries across the country and across the world and how long has business been here do you know we the business is 43 years old i've owned it for 32. okay sorry about your dad yep yep yep so basically minnetonka labs is uh we sort of incubate inside of uh inside of geno's business so even though it's just the two of us in a sort of a this early stage id investment gino's been kind enough to sort of open the doors and let us kind of kind of incubate in here so if you want to uh you know talk to minnetonka labs over doing this together we usually have our our partners come in here and uh we use this as our as our as our launching point for our conversation for making prototypes and putting things together so who do we work with we work with all sorts of people but usually people like yourselves that have ideas proof of concepts it may be a simple cocktail napkin it could be a detailed design i got a call today i've got three phone calls today from three inventors in minnesota that all want to explore our business model together and one gentleman already has six patents uh but he hasn't prototyped it yet um so he's very very mature in his in his journey other people call me up and say i got this great idea what do i do and everything in between and we love to talk to all those people my background is is almost exclusively software geno's background is industrial commercial as you can see behind us hard goods uh we're not in the software world i've departed by 35 years of software and now we're in the in the physical goods business but we are industry agnostic um but think again physical b2b uh hard tech industrial he does a lot of work in the in the fiber optics in fiber optics business um and logistics we're gonna talk about an example in the logistics base that we um that we just uh are working on as we speak and usually people we work with have either are working on or applied for or in this gentleman's case have been approved for a patent so what do we provide in the relationship we provide uh all sorts of things also geo is geologists great technology blueprints 3d cads engineering documents there we go uh patent application assistance uh if you've never done that process before we can help guide you through and coach you through that process material selection um specifications yep uh we do what we call a four-phase prototyping phase um so the first one is is does it work second phase is is can we can we can we break it and where does it break and where does it break right once we go through that process then we we make prototypes for field testing and then lastly uh to get to that pre-manufacturing stage so think of us as sort of a four stage it's not cut and stone obviously every situation is different but generally that's kind of the approach we take from our prototyping perspective we get bid ready manufacturing specs and then we also provide go to market strategy development in concert with the inventor or the entrepreneur and help you validate the market and this is a big one a lot of inventors i talked to they got great ideas but they don't know how to go about validating if there's actually a viable business here is somebody going to give money to buy what they have correct what's our model uh we have no charge for these services that's part of our investment we negotiate some success model on the back end um whether it's a revenue share or equity or some combination of both we will put in cash if it's uh if it's necessary and needed to usually necessary during the prototyping phase right but we want to make sure our vision here and our mission here is to is most inventors entrepreneurs are not wealthy individuals with huge bank accounts a lot of people in yourself you know bootstrap these things is we want to we don't want to take cash out of the business of the early stages right we're dedicated to make this a win-win situation and we'll make our money once you're successful and that's how we are motivated to make sure we do the best job possible for our partners so when you come to us when you come to see us um and like i said i'm getting calls every day now these are we're going to ask you and so if you're going to call me up call gino be prepared to answer these questions what's the problem you're solving do you have proof that potential buyers actually care and that's a really hard question um but it's one you got to ask yourself is how do i prove that people are willing to part with their money for this invention or this idea of god is the market ready i created a company three years ago called basin commerce with this great vision of uh of making an expedia for river barge traffic on the waterways the illinois mississippi river and so forth and we asked the first two questions we said is there a problem yes we're still booking barge freight on the phone in the fax machine do you really care yes we really care we said yes great we spent two years hoping for money pardon me bunch of money doing it but then two years into it i found out that the market wasn't really ready it was going to be ready in five more years and so that ready question is important how big is the market uh what's the status of your patents are there other patents or works of art we need to worry about what do the macroeconomics will look like and how do they work and lastly how are you actually going to sell this are you going to monetize it and generate revenue and that's the big question that i always uh i'm always going to ask multiple times over you might be able to tell and i i stick more to the patent side is that patent bulletproof can you work with it is it gotcha real protection because if you can't protect it you're not going to get time to to work out your problems and get it to market because if some big guy likes it realizes that you've solved the problem and the market cares they'll just steal it yeah and lastly will you be making your little your livelihood by doing this is this just a part night part-time thing and you want to just license your your idea or your patent or you can actually try to make a living out of this and that's also a very important question you need to ask yourself so as an example our first project we're shepherding through and some of you have heard of this um this is actually a situation where we are our own customers so to speak um we have invented something called the tilt break hand truck and this is for uh professional delivery people like food service people that are moving heavy loads on a two-wheel hand truck down an incline or a ramp and you stack up 500 pounds of frozen hamburger patties on one of those things and it's really easy to lose control we were watching somebody do that back in july the guy crashed his cart and a bunch of beers broke out in the parking lot and uh there was there was somebody that said i know how to solve that problem and uh and and we're at this uh at the stage of getting this thing hopefully a prototype built very soon inside of there there's a breaking mechanism that's actuated when you tilt the hand truck down breaks it actuated on the insides of the wheels and slow the rate of descent for the operator we're going to target food service delivery market the beverages think you know beer and soda and moving companies are the first three markets and uh we started this back in august we hope to have our first prototype done in march we've actually been through two different prototypes actually three three now three different prototypes and working on the fourth and again all all geared toward destruction you know does it does it work how does it perform will the market accept it um what where does it break if you if you happen to mishandle the product it can you get someone hurt by using the product are there pinch points and things like that how do you maintenance the product so all of the things you think about uh maybe as a consumer when you buy something you know how do i take care of this thing we've we're working through in this process great and then lastly we have a provisional patent filed which we filed back in uh back in back in august yep so this is the first the first real problem [Music] somebody uh please meet your phone somebody accidentally unmuted something it sounds like so that's a little bit about minnetonka labs uh what we do uh we'd love to talk to any of you out there that have ideas and so forth so now i want to kind of shift gears and talk about um how you monetize ideas and and and the inventor versus the entrepreneur conversation i i mentioned so before we can answer the question is how do you monetize you need to ask yourself are you an inventor or an entrepreneur and this is a very important question to ask yourself so here's the definition of an inventor okay someone who devises some new process appliance machine or article makes inventions pretty straightforward so what's an entrepreneur right it's a person who organizes and manages an enterprise especially a business usually with considerable initiative and risk okay two different people very different people we'll talk about the next slide but i hear these words used interchangeably a lot when i have meetings like this and one million cups and people refer to them as entrepreneurs but they're really inventors and vice versa so i just want to get you thinking a little bit here if you've got ideas and inventions you're working on which of these two are you because it's gonna really make a difference as to how you if you want to work with us how we're going to treat you based upon the answer to that that big question in our short experience it's rare to have both it's one person correct correct so if you're an inventor right you've got basically i see two options right you can license your patents or you can sell your patents uh both of them are reasonable uh ways to monetize your idea and your patent um but if you're purely an inventor and there's a lot of you on this call that i've gotten to know over the last six months those are the best way to monetize your ideas if you're an entrepreneur there's kind two different options you got in terms of our opinion one is i can build a product but not really build a brand or a business out of it right i can go into a private label manufacturing arrangement um and and build it and let somebody else sell it right you can do that um it's not as not as lucrative but also not as risky and the way to make the most money out of your idea and invention if you are really truly an entrepreneur and have the right profile for that is you can build a product and a brand and a company um it's not for everyone and it is ten times more work than you can possibly think it will be when you start the when you start the journey yes okay and we'll talk more about that here in a little a little bit so i like to ask the question and say you you don't know what you don't know right and i want to tell you a couple of quick stories back in the 80s when i got into business and gino clapped when i brought this up there used to be a management technique called mbwa which stood for in the old days management by walking around and that was the idea that too many managers and leaders sat in their cubicles their offices all day and didn't have a feel for their employees or more importantly their customers okay so the first thing i would say to this community is get the heck out of your garage get out of your office code would set aside and get out of what we used to call the ivory tower i'll give you an example i got a call about two week three weeks ago from a young man who's a brilliant data scientist he used to work for a company called c.h robinson you all know c robinson great big logistics and 3pl company based here in indiana prairie and he was working inside of c.h robinson and decided to leave the company and start our own software business called click tower and he calls me up because he's looking for money right i said well what's click tower it goes well click tower is if you picture a big distribution um facility with all those receiving docks and all those doors number you know one through 20 and they got the red lights and the green lights and all the great stuff because right now they organize and and they tell truckers where to go you go to slot 3 they do it by by by hand and by the telephone and i'm going to build a platform a software platform that's going to automate that whole process i said well that sounds really cool i said how many people have you talked to that run those docks well none i said have you been to one of these facilities no so there's a bright young data scientist who thinks he's got a great idea he's never been in a distribution facility and never talked to a person that actually manages the traffic in and out of those loadings he's gonna fix all their problems and fix all their problems and he's asking me for money and i said well well son because he literally could be my son i said uh you go make go talk to 10 people whose job it is to manage those those doors and then you come back and call me and we'll have a second conversation and it's a great example of of this concept of get the heck out walk around find look at your customers and talk to the marketplace secondly know your customer thoroughly my biggest weakness is my optimism and as inventors and idea guys which i am we always think our day is going to be loved by everybody but the reality is is not and so be honest with yourself and know your customer and know your market very very thoroughly before you spend a bunch of money in time work on a project the next thing i would i would recommend is test test tests okay product positioning and sales pitch if you look at that book on the right-hand side the lean startup that's what this is that book is all about if you haven't read it i highly recommend you read it because it talks about how to do this thoroughly um because until you triple test and quadruple tests you're not sure you're really going to be successful with your market and the last thing there's an old scene in this business that says build a better mousetrap and the world will be the path to your door i think ralph waldo emerson gets credit for that but the reality is that is completely false that is completely false the world is littered with great ideas with great product to sat on the shelf because they were never sold or never marketed properly because the inventor thought hey i work for these guys i work for a lot of guys in silicon valley in the 90s and the in the zero zeros that thought they had the coolest piece of software in the world didn't want to spend a nickel on sales and marketing and we all failed as a result because we underfunded the sales of marketing effort because he thought this was going to sell itself it doesn't sell itself nothing does nothing does okay so let's pretend you want to build a business out of your invention and become an entrepreneur so a guy named gina wickman famous very famous author of something called the enterprise operating system or eos he also has a book out called the entrepreneurial leap and he's identified six traits of an entrepreneur number one you got to be a visionary and i'm not talking about just i got a vision on how this product works but i got a vision on how the world will look at it and how the world will accept it and how the world would use it so not the vision of the technology it's the world the vision of the usage of the technology or your invention you got to be passionate this is not a this is not a business for people that really are kind of vanilla ish or neutral when they come to the passion leader gotta yell problems because in this company's new problems start up all the day every single day multiple times a day you gotta be very driven to be successful almost to a point if you look at the really successful guys we can think of elon musk steve jobs bill gates mark zuckerberg those guys are all extremely driven people well even local successes okay absolutely hey susan can you mute your phone sorry thank you you have to be a risk taker because this is all about taking risks financially emotionally time wise and lastly you got to be responsible you don't get to blame anybody but yourself when things don't work um right you know yep and that's on your desk right so if you want to go down the road of i'm an entrepreneur i suggest you read this book and really take an introspective look at yourself and really be honest with yourself as to do you have these traits to be successful okay so let's say you want to build a company okay it's really exciting it's a lot of fun it's also a lot of work this is just a list that i created off the top of my head the other day on all the stuff you gotta build okay you gotta create a vision you gotta create a legal structure you gotta do financing and cap tables and a banking partner and you gotta worry about facilities and accounting systems and board directors textbooks and hr benefits and hiring and firing and trademarks and staffing and sourcing and marketing and sales and and every one of these things receiving process shipping process invoicing process and get all those bills paid right all those are critical but there's a lot of them right there's a lot of them and i'm and i'm we're trying to give you the message here that it's a wonderful journey to build a company out of an idea but we want to be truthful with you and let you know that it is a it is a lot of work it is a lot of work so now let's switch gears here and uh and talk about sales um and i created this slide the other day i was thinking about this and all the inventors that i've met and worked for in my life and even the people i've met in the last couple three months since we started minnetonka labs and it's remarkable to me as to when i have the question about selling they really haven't thought about it that much and i started asking myself well you can't sell it why are you invading it why are you wasting your time and your energy inventing something that no one's going to buy if you can't sell it so if you come to talk to us gino's going to talk to you all day long about patents and engineering and cad camera all that great stuff but i'm going to be the guy in the room that's going to say how the heck are you going to sell this thing and make any money because we can't figure that out we're all wasting our wasting our time has to do with price point and does it work and is it serviceable or does it last and all that kind of stuff so i want to walk you through something and maybe some of you have seen this chart it's called crossing the chasm and it was uh first developed in the in the early 90s by a guy named jeffrey moore out of silicon valley and he was a mark i think he was a professor at stanford if i recall and he's created basically the bible for new product introductions in the technology industry which is where i've been my last 30 years but it applies i think to most industries and into most ideas and the concept is that if you look at this chart is it this sort of breaks up any given marketplace for a new product right it says okay you bring a new product to market in the left-hand side and in any market there's a small number of people called the innovators and then this chart it says it's two and a half percent of your market they'll buy anything i'm the same guy this the day that new iphone comes out i want to have it right and then just they're all out there and it's easy to go find those guys and sell it and they'll be really enthusiastic and they're going to give you all sorts of great false promise that this is the greatest thing since sliced bread because that's the way they think about things then you have the next phase of the market called the visionaries or the early adopters okay and they're a little more advanced they're a little harder to get to um but they think out 10-15 years it's oh you know what this iphone man i see where this thing's gonna go i want to get part of this thing early right and then you've got this this gap called the chasm okay and this chasm is the hard part of the business because where you make all your money if there was a revenue line on the same chart right the revenue line would get really big in the middle two sections right the early in the late majorities which are basically you know 70 80 percent of your of your marketplace okay the challenge is getting across that chasm and i call this death valley okay because this is where most companies go to die because a they got market feedback from the first two sets of customers the innovators nearly adopters and they first of all they assume that that's what everybody else wants but pragmatists don't buy the same thing necessarily with the same functionality as the first two groups okay you have to talk to them differently you got to you got to sell them differently you may have to modify your product to make it to that marketplace that chasm or death valleys i call it is really expensive and can be a very long process okay and so as you think about your idea and your product if you're going to build a company out of it um keep this in mind that it's easy to go out and sometimes get fooled by early early adopters and say oh this is really cool this is great and you know we're going through this thing with tilt break right now and we've talked to half a dozen people and everybody said this is that's really cool tom it's a great idea gina what's i want to buy a bunch of this right well we don't know yet if the people were talking to our innovators early adopters or they represent the majority we we have not had enough conversations yet to know that okay and as we go through our journey with that product we'll start to figure that out but that that chasm or that death valley is really important to understand it's there um especially from a financing perspective because that's where it gets expensive you burn a lot of cash correct correct so i want to share that with you for those you've not familiar with that that concept the next thing i want to talk about is what i call the four w's of sales and marketing it's nothing that i've generated myself it's pretty standard knowledge in the business but again as inventors and guys with product ideas it's important to think about these things as you think about what to do with your your product right so the first thing is the who right who writes the check for this thing or this service or this technology who uses the product and if you're selling to businesses if you're in a b to b business right those are likely two different people all three of these people are different people right and lastly who says no and that's the person that most sales people miss right because we get happy here we call happy years of the business right we hear what we want to hear we get excited we feel like us but usually there's somebody in the organization again if you're in a b2b situation that can say no and they'll kill your deal and so you got to think through if you again invest in a b to b sale versus a b to c sale think these things through right who can say no who can say yes and who uses the product and versus who writes the check which are the gino said different different people what okay back to that problem what are we solving is this just kind of a cute little thing to have um that we think is nice or is it really solving problem in our business with it with the tilt break right we know that there is a there is a health and safety issue and more importantly an economic issue related workman's comp we talked to one individual who manages a fleet of 400 trucks and he says if you can if we can if we can document one injury a year by the use of our trucks it would be worth it to buy them yeah he'll re-outfit their whole fleet of 400 trucks if they think it will prevent one injury a year because that's how much it costs and workman's comp to that to that company so understand the problem understand the value prop which is what we just talked about right it's usually save time or save money right so what is it we're solving and what are the economic impacts of that of the value problem next is why and as i always like to ask people my product better be better faster or cheaper than what's already on the market and usually i tell people i say you better have at least two out of three if not all three you'd love to have all three it's really hard to do all three but if you can get two out of three you got a shot if you only got one of those three then you may not have a sellable product in the marketplace so ask yourself that question is my product better faster cheaper than what's already on the market a lot of cases there's nothing like this on the market and so your why has to be looked through looked at through a different lens than than a situation where there's already a solution or a product on the marketplace then lastly is the win right again these are mainly in b2b sales right um but what what is the process by which um they make decisions right um for those who have not had a sales background and you're an inventor and you have great ideas and you're scientists and engineers once you try to bring products into businesses there's a lot of issues that you gotta uncover to understand how they do things in in in what is their decision cycle do they do they require trials of 30 days or 60 days before they'll use your product right purchase orders delivery time frame there's all sorts of issues payment cycles yep and so when do they make a decision when do they achieve purchase order and then when you get paid cash which may all be months and months and months and months apart from each other yep um just because somebody says i'm gonna buy it doesn't mean you're gonna get cash in your in your bank next week right and if you start a business i can tell you from experience the number one thing you got to worry about is cash flow right and understanding how and when your customers and their decision making process and their payment cycles has a huge impact on your cash flow and that will again be that i think it's tom it's one of those things in the shark tank that when they say what kind of sales have you had of this product already what revenues are you're producing right and when when uh someone on that tv show says well i'm really not doing anything or maybe i've got this little bit they pretty much get thrown out yep they walk because i mean you need that that organic base to start out and start moving some stuff yep absolutely absolutely okay that's like a few slides left here um so i want to also walk you through something i'm going to give credit here to the exponential group it's a it's a local company here in minneapolis i've gotten to know they do sales consulting for startups so if you want to hire some sales consulting guys that are really good the exponential group is a great a great place to look at um and they've created this thing called the sales learning curve and process for for for startup companies okay and if you look at the bottom here right it talks about learning testing you see that word test test test again down there where you get to book for performance and what they've done is they've kind of broken up selling it in the sort of four phases right the first phase is in this development side and then we've got the systematic side the first phase is can the founder sell this right it's usually the easiest thing to answer right in our case the tilt break as soon as we get over working prototype as the founder we're gonna go out and try to sell this ourselves it's almost necessary i mean the founder needs to be the one absolutely gets it going absolutely the second question is can a non-founder sell this right then if he can sell it or she can sell it can we get a mini sales team to sell it right a small group of people now we're getting towards hey we're getting out of our development phase into a systematic phase and then the bigger question is and now how can we scale sales whether it's through a distribution channel an online strategy a direct b2b sales force an independent rep network right there's dozens of different ways to do this but then once we get to that where we're going to become a scalable company and really start to generate positive uh profits and growth is can we create a scalable sales model um that can support the necessary revenue to actually create a successful and in profitable business okay what's on my clock here 705. so last thing i want to talk about is funding options okay um these may not be new to you but i just wanted to cover them uh and we can talk more if you'd like to but obviously there's some simple ones like your own cash right and bank leverage this gentleman called me this morning and he's got he's got six patents and and he but he really needs to take care of some bank issues he's got in a personal level and we certainly want to help him help him do that there's of course friends and family uh which we've all we've all gone down that road before um you've got targeted customers or potential partners and this is the one i wanted to spend a moment on because i don't hear it talked about enough um when i talk to young companies and entrepreneurs they go down the road of getting a bank loan go to an angel whatever it might be friends and family but if in your if in your world you've got targeted customers or a licensed partner or a potential channel partner those are the best possible investment options you could ever have in your life no doubt about it right because they they they usually know the market and the product generally how it might be applied in the marketplace but they also have their own inertia and and if you can get into their inertia you can attach yourself to them and begin to gain momentum through their momentum it's worth it's worth giving away something yeah yeah we call these strategic investors versus financial investors and they're always the most uh i should i should have stack rank these in retrospect on on on the best the worst but that would be the best the best part if you can it's not easy to do this is not an easy an easy piece of advice i'm giving here i recognize that but it uh it's hugely valuable if you can pull it off right uh you've got national science foundation grants uh which one of our our younger younger inventors just got one last week for 28 grand um which is awesome news he just sent us an email this afternoon which is really really cool a young young 22 year old still in college graduate in the spring and hopes to take the business to be a fam uh to be a lifelong lifelong business he wants to make a lifelong business for himself and he's got a real shot at it he believed yeah he's got a great super smart very energetic um in fact he got a 20 000 grant when he's still in college it's an amazing amazing accomplishment yeah amazing and we hope to be part of his uh his journey um you've got you know simmer um you know grants as well that some of you guys have applied for as well you've got angels and angel networks um you've got early stage vcs which you know if there's any vcs on this call i apologize in advance but those are usually the last place you want to go um because they will usually ask for the most um and again notice nothing disparaging about anybody on this call um but um unless you really got a great model and you're really confident it's going to scale like crazy um they provide scalability yeah they do what they also ask for a lot yep you're going to give up a lot right and then of course you could uh you can use minnetonka labs with a very innovative creative or creative way to uh to finance your your early stage uh early stage investments so three words of caution this will be my last slide and then we'll open up for q a this will take longer than you think for sure if you if you think it's going to take six months double it and then double it again [Laughter] right gino tell you that my pillow guy took how long ago two years to get the pillow going so two years to build and then he said he's he sold them at at trade shows and state fairs all over the country he's selling them one pillow at a time that's how he got started and then to date i think he sold i think i did the math somewhere around a billion and a half dollars worth of pillows yeah it took him two years to make a pillow and seven years to get it going yeah it was probably much longer than you thought it was going to be right so whatever you think it's going to take it's going to it's going to be it's going to be some factor of two or three or four times that it's also going to be more expensive than you think okay um every venture i've been in we have vastly underestimated the expense um and the timing um it's it's no matter what we try to be conservative it's it's amazing how how what things you don't think of once you get into this thing and it's happening right now with us with this our tilt break right um we we won't even go there right now but it's much more expensive than we we thought this was going to happen in october and as we got into it gino started moving with different types of metals and aluminums it got very much more expensive than we thought given what we learned during the prototyping process yeah it's one thing to stick a bunch of stuff together with a welder and kind of make it work it's a whole other thing to make something that's ready for the marketplace absolutely the third piece i'm gonna i'm gonna say is that you're gonna uncover issues and opportunities you've never dreamed of okay um they're both good and bad um but once you go down this road and you get in the marketplace things will happen that you you can't you can't imagine okay so the last piece of advice is be flexible right be flexible and let go of your ego right if you think hey i got this idea and it's going to work like this and the market's going to love it and the market says you got to shift it over this way about 30 degrees drop the ego and say okay market you're right i'm wrong yeah okay because the market is always right they're the ones with the money the guy with the money always always writing in this business right don't fight and don't have the urge to say no you're wrong because i know this is my idea it's got to work this way market says something different let go your ego and and and move with it all right so with that um that's the end of our presentation um and uh i kept that to looks like about 40 minutes or so 45 which i think was my budget um so hopefully i did a good job with that uh gentlemen and we'll uh we'll open up for for questions