We at midVentures are excited by the fact that 2 startups from the midVentures25 were selected for the Excelerate program  including FanGo and GiveForward.  Additionally, we’ve been informed that a third mV25 startup, Adapt.ly, run by Nikhil Sethi, was accepted into the Philadelphia incubator DreamIt, and a fourth mV25 startup, Watermelon Express, is a finalist in the University of Chicago Booth School New Venture Challenge.

In other words, within two months, the mV25 startups are growing via the help of incubator funds and business school competitions. Once a startup gets full VC funding (or experiences an IPO) we will definitely let you know.

I’ve been playing poker a lot more in the last two years, both as a form of entertainment and as a serious academic study. Poker, in its most common variant, Texas Hold’em, is not a game of blind luck: it is a game of skill, intelligence, strategy, risk and reward. If played correctly–as one in ten players do–money can be made consistently in the long run. Like in any other field, only a few master it enough to be a professional. There is no such thing as a perfect player: the best players in the world play each other frequently and trade losses.

In entrepreneurship, a lot of lessons can be derived from poker, in what to do and what not to do. How is poker like entrepreneurship? First of all there is the nature of the hole cards themselves, and how absolute certainty in any poker hand is impossible. Instead, a player must rely on his experience, instinct, and a degree of measured, calculated risk to win money (ROI) on his buy-in (investment). There are different types of poker players, just like there are different types of entrepreneurs. They are loose (risky) and tight (cautious), short stacked (poor) and deep stacked (rich). An investment in a poker game means a chance of failure and loss, but also promises its own much greater rewards.

Many poker players I have encountered at the tables are commodities traders or entrepreneurs–this is not a coincidence. Indeed, the same type of thinking applies to both types of people: people who are risk takers, gamblers, but also thrill seekers and optimistic–maybe even a bit greedy. These traits make successful people, but they can also cause ruin. That’s why professionals and poker players alike recommend that you don’t depend on entrepreneurship or poker as a primary source of income unless it is already a consistent source of income for a year or more. That way, you are not risking ruin if you fail.

midVentures does not endorse gambling (our lawyer told me to put that in). However, I believe that if played correctly, poker is not gambling, but a game of skill. After all, there would be no such thing as a professional poker player if it weren’t possible to master the game! (Meanwhile, there is no such thing as a professional roulette or slots player.) At the same time, most people who play do not do it correctly, and lose money. They play like gamblers and lose like gamblers.

The number one lesson for entrepreneurship from poker is this: Don’t lose your head. The best poker players can be undone by a loss of psychological control. Likewise, don’t let small failures in entrepreneurship drive you off the deep end. Keep your head in the game and don’t be undone by a streak of bad luck. If you are committed to your venture, let your sense and ambition steer you, not your emotions.

As a caveat, if you are interested in taking up poker, do it correctly. Don’t gamble! Take it seriously and don’t spend too much money on learning. Don’t start playing at a casino or a game where a buy-in at a table could be $200 or more. This is money you will inevitably lose at first and you will be more discouraged from learning how to play correctly. Get together a home game where the blinds are $0.05/$0.10 and a buy-in of $5 or $10. This way, you can learn how to play without a great risk of loss. Also, read a poker book or two. Although the best way to learn is by doing, reading and watching poker on TV are two other ways you can get better.

For those who are interested, I am announcing the creation of #ChicagoTechPoker, a weekly poker game for techies only. Only 8 players can play at a time, so if you’re interested, please shoot me an email at brian [at] midventures [dot] com.

Learning how to play poker is a great way to fine-tune an analytical mind, to master a skill set of problem solving and hedging risk, and ultimately a path to success. I hope to see aspiring entrepreneurs at the tables!

First, we have officially moved into a new office at 333 North Michigan. It’s a charming open space for meeting with clients, developers, entrepreneurs, or door to door salesmen who would have otherwise been unable to find us. 333 will be our “corporate office” since most of our designers and developers may still prefer to work from home.

Second, midVentures has added a new partner Jon Pasky to our list of founders. You can see details on Jon here. He is a patent attorney, web entrepreneur, and electrical engineer who adds a new level of intellectual property and business process analysis to the midVentures think tank. Jon was also (quite clearly) a founder of the midVentures25 and an avid follower of the Chicago tech scene.

As usual, midVentures is committed to providing technology and innovation services to the Chicago community, and we have a number of projects under way ranging from web 2.0 charity apps for funding microscholarships for students in india, all the way to a social network for corporations to publish reports, and ipad health care apps. And we are very interested to talk about where the next Groupon will come from in Chicago.

I just finished a one month gig at a technology investment company, where my role was less about financial analysis than it was about market feasibility. Yet that one month did clue me in to several structural flaws in the business of finance that, if others knew about, had never before come to my attention. As a tech guy I generally assume all trades are like technology, where a programmer can generally search google for a forum thread with the code snippet he wants, he can call his friend at another development shop for help, he can even call Adobe or Microsoft for first-hand consulting from the product source. Tech people don’t lie about preferences or features because they know they’d get called out on lying by the technology blogosphere. In other words, information in the technology sector is generally freely available, you know where to find it, and you are called out when you make stuff up.

Finance, on the other hand, is relatively broken. Simple acts like finding a specific piece of information, such as a company’s competitors and the size of those competitors, is ridiculously hard unless you have the right paid logins to proprietary databases. Unlike technology where developers are held accountable for the precise features of their applications, finance professionals seem to live and die by misinformation and concealment. And even if a firm has good internal information practices, information does not move between firms. Many web companies publish free code or data via APIs, whereas finance firms will often publish nothing because all that knowledge is proprietary. Therefore, 90% of financial research and analysis is redundant in that someone out there in the business waters has likely already performed your research for someone else.

What makes finance broken is not necessarily the allocation of labor and information, but the transaction cost of getting information from point A to point B. We complain that technology job boards like odesk or elance do not have adequate quality control mechanisms for someone seeking work to match to someone seeking a worker. Yet a financial opportunity: research requests, equity needing brokering, a law suit needing allegiances, fraud needing press, financial press needing organization: all of this is disbursed between lunch and dinner conversations of small fragmented financial executives- or distributed via brute force via cold calls- seldom captured in any standard organized form. Finance is broken because the cost of A to find B is not just a matter of organizing A and B but the years of trust, the acquisition of credentials, and approval process and the human interaction behind matching A to B.

A startup at a high enough level acts like a company and a company at a high enough level is making financial decisions, yet there is still a great deal that finance can learn from startups. Most of what makes finance broken is not the technology but the trust networks, and the manner in which financial trust networks have no virtual corollary. If the financial data, the trust network, and the complicated incentives schemes of finance could be brought online like facebook activity, I would have more enjoyed my investmetn experience.

I started Enproperty with my business partner Justin Savage, a UChicago student and Rhode Island native. The business started as Checksense.com which was a simple app that let you pay your rent online. I funded the first version of Checksense using $2000 in credit card debt until Justin came on board. We started selling Checksense to property managers, and realized that collecting rent online was just one of a dozen problems their businesses experienced. That is the root of Enproperty, and the lessons I learned building and selling it.

1. Target an industry that can afford to change. This is strange advice since many business school professors advise students to target industries that technology has not yet advanced, such as how Eric Lefkofsky’s businesses Innerworkings targets the print industry, Echo Logistics targets the freight brokering industry, and both are Chicago success stories. But property management is different because very few of the owners, managers, stakeholders and influencers can afford any type of innovation. It took 8 months of slow-motion sales and marketing to realize the property managers simply cannot afford a solution that might cost them $300 - $800 a month, even if if will save their staff time logging paper payments and depositing them in banks. Property management is an industry with  razor thin profit margins, and on top of that, very few parties interacting with PMs are making great profits. If you are targeting low-margin industries, target the brokers or financiers. It would have been smarter for us to build a solution for the leasing agents or the property investors because they can afford new technology.
2. Don’t just solve problems, solve money-critical problems. I had many advisers telling me to listen to the customers (property managers and tenants) in order to understand their problems and pain points. They gave me a laundry list of problems. It took too long to sort paper checks into bank account specific folders. It was difficult to confirm whether or not a tenant’s “check was in the mail”. Tenants had no confirmation that the managers received the check until it was deposited. Low income tenants could not break up large monthly payments into smaller weekly payments. Property managers did not have up to date contact info on tenants. We solved ALL those problems, but NONE of them were money-critical. In other words, the property managers and tenants thought our solution was nice, but we were not making them a ton of money and we were not directly saving them a ton of money. If my software also helped them fill vacancies, they would have paid me a full months rent for each vacancy filled, because filling vacancies is money-critical.
3. Customers don’t care what you plan on building, only what you give them right now. And they will logically compare whatever you give them right now to whatever competitor ’sounds like that’. Enproperty was the only property management software app in Rhode Island, and perhaps one of three in Chicago. We were web 2.0, young, edgy, innovative. Yet 20 meetings later, I got asked the same questions. How is this different from Yardi, Skyline, MRI, propertyware, etc. And the truth was we ‘planned on’ being different. Our business plan shows why our business model is more effective than those competitors at scale. But customers only care what you give them now, and how it compares to the more established names that they trust more.
4. Your customer is your greatest reseller. I thought this banal textbook concept was true for my parent’s generation, but in business 2.0 customers don’t meet at property management bars to chat about what software they use. Well figuratively, they do. Within any industry, even the competitors talk to each other about which vendors they like or which technology they heard of. In other words, the cost of acquisition of your first customer may be extremely high, but if you can keep him happy he will create 4 more customers. And if you anger him he will cost you 10 customers. Your customer is your greatest reseller and it is honestly more important for you to keep him happy than it is for you to solve his problems. Because the first “guinea pig” customers will likely experience more problems than you solve, so keep an arsenal of tactful apologies.
5. Investors like fast sexy disruptive ventures. Enproperty met with several investors during its lifecycle. The first investors were real estate managers, and they liked the idea of “software that made money off of the payment processing instead of the monthly subscription fee”. We were also the first technology venture they invested in; and therefore we were the Bill Gates of the rhode island real estate community. However the traditional investment community has a different opinion. They want to know why your startup will have an IPO or get acquired in less than 5 years for over $100 million, and why no one else can beat you to the punch. Enproperty was founded on the idea that with $200k in funding we could reach profitability and build off of our cashflows. Though that is nice, venture capitalists are not so patient. Our venture did not move fast enough, we did not have a defensible competitive edge, nothing about Enproperty told VC’s that we would be the one software app out of 50 competitors to own the industry within 5 years.
6. Do something you’re passionate about. This lesson can also get you into trouble, because your passions are usually not a good litmus test for business feasibility. But time and again I am confronted by the fact that I have to spend 100 hours a week tweaking the software, meeting customers, attending trade shows, refining my message, talking to employees or contractors about my startup. Admittedly there is a 50 : 1 ratio of music technology startups to property managemetn technology startups because music is for most of us a greater passion than paying rent online. And I would to this day still commit myself to a non-sexy venture if it helped grow my career as an entrepreneur or my capital for my next startup. And if I had to decide between a fun job and a non-sexy startup I’d choose the startup because entrepreneurship fits my personality. But all things being equal, build something that genuinely interests you- or build something you care nothing about and have a perfect plan to sell out early.

To summarize, Mailchimp is an email program which we just started using to send out HTML emails.  Our list has grown to over 700 members of the Chicago technology community, and we wanted to communicate with that list in a professional, clean way, and not through our tacky, 1990’s-style listserv that so many of you have expressed dissatisfaction about!  Mailchimp allowed us to seamlessly import our contacts and design a professional campaign, as well as use many other features like inbox inspection (see what your email will look like in 30 email clients) and delivery doctor (get past those pesky spam filters!).  In addition, Mailchimp provides an interface that is easy, fun, clean, aesthetically pleasing and at some points, humorous.

Point being, I was having so much fun using Mailchimp to design our most recent email campaign that I actually enjoyed paying them money.  That’s right.  I actually enjoyed sending them more money, for several reasons:

1. They presented a product interface that was quick, easy-to-use, and very very pretty
2. The roundness of the application and its confidence made me confident that the services I was paying for are worth every penny
3. I believe that they deserve the money, because I believe that a good business should be rewarded!

I bring this up because very often we see in the Web 2.0 space a focus on design and functionality, but not necessarily a focus on customers or satisfaction.  Mailchimp is an example of a Web 2.0 app that not only looks cool and works well, but also does what I need.  I don’t mind paying extra for some features because the whole package works better with them.

I look forward to seeing what the next Web 2.0 apps are that challenge our notion of how business is done.  Look at what Mailchimp has done with a combination of good design, seamless functionality and a little bit of humor.

What’s your favorite Web 2.0 app and why?

Remix Galaxy, founded by Kyle Reed in 2008, is an online community for remixing and music production that offers a way to create, mix and share music.  midVentures and Remix Galaxy worked together to accelerate Remix Galaxy from concept to prototype to launch, all within one year.  Find out more about Remix Galaxy and midVentures in our case studies.

We’re excited that Remix Galaxy has met a niche in the online music community.  Keep up the good work!

Congratulations to G2.fm, who won our prize pool of over $16,000 in cash, prizes and services.

Inventables CEO Zach Kaplan presents G2.fm their $1,000 cash prize check.

The top five startups selected by our expert panel of judges were bln.kr, G2.fm, Genlighten, JoeMetric, and Watermelon Express.

But all 25 startups who showcased their investor-ready companies at the conference showed that the Midwest is a thriving region for entrepreneurship and innovation.

Photos
Please visit the gallery of photos available from last night’s event: http://www.ajrjphotography.com/photos/midventures25/

Thank Yous
A big thank you to our judges: Groupon CEO Andrew Mason, OpenTable founder Chuck Templeton, Jason Heltzer of OCA Ventures, TradingBlock CEO and RedBox co-founder Biju Kulathakal, Adam Siegel, CEO of Inkling Markets, and Ted Souder, head of regional industry - travel at Google.

Thank you also to our volunteers who worked so hard to set up the event, and our sponsors and exhibitors who made the event possible.

More to come soon!

We have over 22,000 square feet of demo space, where you can meet each startup team at their table.

The top 5 startups will have a chance to pitch to an audience of entrepreneurs, VCs, angels, bloggers, media and Chicago’s tech community.  A panel of expert advisors will ask the tough questions — ultimately choosing one company to win over $15,000 in cash, prizes, and services from our partners.

Agenda

5:00pm – 6:00pm Registration / Open-Floor Expo

6:00pm – 7:30pm Welcome / Open-Floor Expo

7:30pm – 7:35pm Welcoming Remarks

7:35pm – 8:15pm Top 5 Startup Pitches (3 minutes each)

8:30pm – 9:00pm Judge’s Results / Awards

9:00pm – 10:00pm Networking

The focus of midVentures25 is to show the national technology and investment community that the Midwest has an abundance of early-stage innovators within the technology, consumer, and sustainability space. You can expect to engage thought leaders in education, art, media, business, science, and technology during the conference. Dress is Web Casual.

You can purchase a ticket on midventures25.eventbrite.com or you can pay $10 at the door. You can also come any time from 5pm until 10pm. You can park at the garage on Adams and Franklin.