We will see if they can keep their automated systems running and see whether the pros or amateurs become their user base.

RouteSmith acquired by Runzheimer International

Last year, I invested in a company that I discovered through the CTEK angel network called RouteSmith. The company makes software for route optimization - think furniture and appliance delivery routes. I covered the company here in April, 2007.

From the CTEK presentations, there were three of us (investors) who thought this was an interesting opportunity and really liked Matt and Jeff, the founders. At the time, they were in early revenue and just needed to scale the business. Jeff (the CTO) was working full time, but Matt (the CEO) was stuck in a day job. The company needed a relatively small amount of financing in order to allow Matt to focus on the business full time, and to grow their marketing efforts. We decided to pull the trigger - this was a natural fit for me because I had some background in vehicle logistics through my first startup, ZOLL Data Systems.

What we came up was a creative financing. Rather than doing a straight equity deal, our small syndicate loaned the company money. The company was then to pay the loan down, with interest, based upon a small percentage of quarterly sales. This is the same creative structure that I had used to finance $100K of working capital for the first company I founded, so I was familiar with this model already. What’s nice about this model is that the company doesn’t need to pay back the money on any predefined timetable. As investors, we were literally vested in their success with their sales pipeline. This creates a nice dynamic. In return for the loan, the investors received warrants to purchase a small chunk of the company as upside.

This was just what the doctor ordered for Routesmith. With Matt on board full time, the pipeline started to grow immediately, and the company reached monthly profitability within about a year. Because it was software as a service, this was an annuity and became a dependable base to further grow the company. As we suspected, no further financing was necessary, and the founders were able to maintain the vast majority of the company stock. Matt and Jeff never lost sight of their bootstrapping nature, and they stayed hungry and lean as a company.

Then Runzheimer International came along and Jeff and Matt really liked the people and the company. They felt they had a similar vision. Routesmith was acquired last week by Runzheimer and it was a very positive outcome for everyone involved. I believe that Jeff and Matt could have successfully built a much larger company over time. This is what they decided they wanted to do, and as investors, none of us wanted to stand in their way of taking the early exit.

I caught up with one of the founders, Matt DeWolf, this weekend and he told me “One of the great things about the Runzheimer acquisition is the investment they plan to make in the Colorado community. Runzheimer is very impressed with the technology community here in Colorado and we plan to invest in this office as a new product development location.”

Congratulations to Matt and Jeff. They’re a class act, and Runzheimer made a great investment both in them and in Routesmith as a company.

Tech Cocktail comes back to Boulder August 20th

Frank Gruber (Somewhat Frank) and Eric Olson are bringing Tech Cocktail back to Boulder. It’s on August 20th at the Boulder Theater.

Tech Cocktail’s mission is to “help amplify the technology signal in under served markets and have fun doing it.” The format is great - everyone gets to have a couple drinks, talk about startups, and some local companies showcase their stuff. Here’s my coverage of the first Boulder Tech Cocktail held this past March, and here’s coverage on Somewhat Frank.

Register for Tech Cocktail Boulder II here. Registration is free, but consider making a small donation. Better yet, considering joining Lijit and TechStars as a Tech Cocktail sponsor (more info on sponsorships here).

I hope to see you there!

37 Signals Jason Fried speaking July 31

Crispin Porter + Bogusky asked me to post this information here on the blog.

You’re invited to a happy hour, informal lecture and discussion about “Getting Real,” featuring Jason Fried, Co-founder and President of 37 Signals. Jason will be speaking about some of the things he’s learned on collaboration, entrepreneurship, hiring people, stumbling into things, scratching your own itch, and figuring things out along the way.

Date: Thursday July 31, 2008
Time: Cocktails and Food – 6-7 Presentation – 7-8, followed by Q&A
Place: Oriental Theater 4335 West 44th Avenue Denver, Colorado
$10.00 NDAC Members $25.00 Non Members Get in free if you buy a membership RSVP and pay at www.regonline.com/JasonFried

Jason Fried, President of 37 Signals Jason Fried is the co-founder and President of 37signals, a privately-held Chicago-based company committed to building the best web-based tools possible with the least number of features necessary. 37signals’ unconventional approach to business (don’t hire a PR firm, don’t have meetings, don’t pay much attention to the competition, don’t work together in the same physical space, etc.) brings a fresh new perspective on how to be an entrepreneur and build a successful business today. 37signals’ products include Basecamp, Highrise, Backpack, Campfire, Ta- da List, and Writeboard. 37signals also developed and open-sourced the Ruby on Rails programming framework. 37signals’ products do less than the competition — intentionally. Jason believes there’s real value and beauty in the basics. Elegance, respect for people’s desire to simply get stuff done, and honest ease of use are the hallmarks of 37signals products.

Blast from earFeeders past

Robert Reich of Me.dium, who does a fantastic job of running the Boulder New Tech Meetup, just tagged me in this video on Facebook in which I present earFeeder at one of the first New Tech Meetups in Boulder (there were about 25 people there, now there are usually 300+).

I just watched it, and towards the end he asked me “What happens if you get on TechCrunch? Are you scalable?” I of course replied, “Uh… no.”

Then TechCrunch covered it about 5 days later. Amazingly, it didn’t fall over (much) and was interesting enough that SonicSwap.com acquired my little side project just 39 days later.

Looking back, this project magically allowed me to meet the original goals I stated in this original New Tech Meetup presentation. I learned a ton about RSS which has helped me with a bunch of my other investments, learned and wrote about The TechCrunch effect, and solved my own problem. In the end I even got a little something out of it. SonicSwap has since been venture funded and continues to look promising. In case you’re wondering about earFeeder itself, it was highly integrated into SonicSwap itself and now no longer exists as a stand alone product. If you dig music and want to share your playlists, give SonicSwap a try.

At TechStars, I spend alot of time telling people to focus and not do side projects. Before they all write me to complain, let me clarify: this was a side project for me when I had no “main project”. At that time I was only doing investing because my previous startup (iContact) had just vaporized. So TechStars founders: hush, and focus.

iPhoneDevCamp set for August 1-3

 
 
 
 
ID345 is hosting iPhoneDevCamp from August 1-3 in Denver. This is a satellite event that will include the ability to watch the keynotes and participate in the nationwide Hack-a-thon. The event should offer something for every skill level and be very “un-conference” like. If you’re interested in all things iPhone and iPhone development, you’ll want to be there.

More info about iPhoneDevCamp is here.

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