Silicon Prairie News

RockDex wins $50K at Invest Nebraska competition

Lincoln December 14, 2009 by Dusty Davidson

dan-and-jimmy

Dan Hoffman of Invest Nebraska Corporation poses with Jimmy Winter of RockDex following Friday's competition.

Congrats to Jimmy Winter of RockDex for winning Invest Nebraska Corporation's first-ever East-2-West – The Nebraska New Venture Competition! Jimmy and RockDex take home the $50,000 equity investment, which they will use to expand their server capacity.

According to Jimmy, RockDex is a web-based tool that analyzes the trends, buzz and popularity of bands online. It helps the music industry make better decisions on where they're spending their marketing money and time, so they know that its all going to the right places.

RockDexHorizontal

Congrats to RockDex and all the contestants!

Additional coverage:

The contestants:

MileStone Local Surfaces Josh Shear, Jen Carlson and Brendan Wamstad-Evans of Lincoln

MileStone is a licensing company for sustainably manufactured surfaces from local recycled materials. This company sells the right to use a patent pending process of creating surfaces for commercial and residential applications.

LeYef, LLC Luke Alexander and Andrew Curran of Lincoln

LeYef, LLC will be an internet based platform enabling every hometown in the United States to have its very own free integrative website and is a comprehensive local website designed to facilitate the free flow of information throughout a community.

HempRev Mark Pluta, John Lupien and John Carpenter of Omaha

HempRev provides innovative technological solutions that support the production of bast fiber for the global textile market for a number of economically valuable products. These include, but are not limited to: paper, specialty pulps, composites, textiles, building materials, health food, nutraceuticals, and bioenergy feedstock.

RockDex Jimmy Winter of Omaha

RockDex collects and analyzes data such as song plays, fan interactions, and online buzz about artists from several social networks and presents that information to users in a convenient dashboard. This presents a high level view of how artists are performing online as well as the effectiveness of marketing campaigns.

Invoice+ Brad Coughlin of Lincoln

Invoice+ is a web-based application which seamlessly merges time tracking and invoicing, eliminating wasted time and energy spent entering data into two separate web sites. Invoice+ will also offer essential accounting tools, make creating printed invoices more customizable, and integrate powerful e-mail marketing features.

Giftance Rory Berry of Los Angeles, California

Using a proprietary algorithm, Giftance analyzes salient personality and consumption attributes to determine an optimal gift for any intended gift recipient. Users can create a profile at this web site to track personality information for multiple gift recipients, which are then used to make very accurate recommendations.

Dally Up Kenis & Carrie Byam of Rural Deuel County

Dally Up will be offering a variety of products for the horse lover including tack, home décor, clothing, jewelry and items that spark the fancy of horse enthusiasts. The company’s means of sales and distribution will be based on the premise of “relationship marketing”, utilizing a combination of direct selling techniques.

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COMMENTS

ARCHIVED COMMENTS

Sally Hager

So...equity investment. How much equity did RockDex have to give up?

Dec 14, 2009 at 05:42 PM

The equity stake that Invest Nebraska takes is calculated based on the valuation of RockDex. Since RockDex is currently in the process of raising money, they've already established a valuation. This basically means that they can A) raise $50,000 less money from an investor, or B) add that $50,000 to whatever they raise, converting at the valuation of their first round.

Either way, it works out very well for them.

Dec 14, 2009 at 05:56 PM

Thanks to InvestNebraska for the opportunity and everyone who judged and participated! Dusty is correct, the equity stake is very small however that was a concern when I first heard about the competition.

Go Nebraska!

Dec 15, 2009 at 10:11 AM

I looked into Invest Nebraska and would agree... A very compelling and fair option for those entrepreneurs who have decided to raise funds.

Dec 15, 2009 at 03:25 PM

I will be interest to hear how this plays out when RockDex seeks serious funding from other VC's. In my experience many investors don't like to see a lot of hands in the pot. Most companies now a-days need hundreds of thousands of dollars (at the very least) if not millions of dollars in funding to be able to lay the basic foundations to make a company scalable to a large audience. Maybe in Nebraska $50,000 seems like a lot of money when it comes to starting a business that would be scalable to a mass audience of millions of people $50,000 is not a lot at all.

I'd also like to see full transparency in these types of competitions. How much was given up as far as equity? Does Invest Nebraska take a board seat in exchange as well? I like the idea of competitions but if you're going to promote the $50,000 cash prize then you should also fully disclose what all comes with that $50,000 cash prize.

I don't agree with Dusty that since Jimmy won $50,000 now he can just ask for $50,000 less or simply add it to whatever he raises. It's not that simple when seeking VC funding. The type of business that Jimmy has will require hundreds of thousands to potentially millions in funding to continue to build out and scale to a mass audience. RockDex doesn't appear to be some mom & pop business that will sit in the corner store and slowly grow. It looks like (based on the website) something that can grow significantly and need a lot of technology to continue to build/keep up with demand as it becomes more popular. While it's great that he won the 50k and serves as a good pat on the back for him, 50k is still not a lot of money for what he is going to do and I sincerely hope that this doesn't impact RockDex's chances for raising money in the future.

Dec 15, 2009 at 08:31 PM

@Jimmy - congrats again, you certainly deserve the recognition and prize. RockDex is an amazing product.

@Tim - There is no need to take away from RockDex's victory by postulating on what some VC's may or may not think, especially when their (both the VC and RockDex's) situation may be very different from yours or anyone elses.

Dec 15, 2009 at 09:21 PM

@Tim - You bring up some valid concerns, but from my conversations w/the Invest NE crew - the most appealing aspect about the Invest NE offer is that their contribution - in this case, $50K - isn't valued until later, once VC $ is injected into the company.

I invite Dan from Invest NE to chime in, but here's how I understand it... If, for example, RockDex accepts $450K from a VC sometime in the future in exchange for 45% of the company, then Invest NE's $50K contribution will be valued at 5%. Here's the compelling part... in the interim, Jimmy gets to use the Invest NE money to juice his company so that it is that much more valuable for the day that the VC's come knocking. Not too shabby...

Oh yeah - and if VC $ is not needed, then Jimmy has to begin paying back the money with 0% interest. I suspect most high-risk, small businesses would be hard-pressed to find someone willing to give them a long-term zero-interest loan, let alone anything south of 10%. Thank you Invest NE.

Pat

Dec 16, 2009 at 03:25 AM

Very exciting to see the Invest Nebraska process in action. Congrats to RockDex and great work, Dan on helping propel Nebraska-based business forward. Very cool!

Dec 16, 2009 at 03:34 AM

The Chamber has been a strong supporter of Invest Nebraska since its inception. Like most organizations in innovation in this state, continued viability and sustainability is important. I think the East 2 West Venture Plan Competition is an attempt to balance this by 1) getting cash directly to entrepreneurs at a time when the entrepreneur needs the money and 2) creating a mechanism for sustainability to attempt to break the cycle of exclusively receiving dollars from the State legislature without the ability to mark impact and have tenured experience in key areas to ensure long-term viability. Is it a perfect mechanism? No its really not. I think if you asked Dan Hoffman or the Chair, Matt McNair, they would prefer to have other means to help capatalize companies in the area as either additional monies or additional more grant related funds. But, the organization has really tried to be pro-entrepreneur while also being responsible so that when it goes back to the legislature, it has a compelling story with documentable safeguards and impact.

The total budget for Invest NE is not large, and so $50k is a significant chunk of money. In this environment and in this state, this is a significant investment...period. In this year, it will likely be in the top ten largest equity infusions in our state. While I think this is terribly unfortunate. I wish that Jimmy and his clearly excellent company could find $1million as easily as if he were in LA or the Valley. However, I think that as part of the process - Invest NE is really trying to lead us to greener pasteurs by showing the impact that even relatively small amounts of money can have on companies. So thanks to Dan and the Invest NE crew. This is the sort of story that has to happen for the next Chapter to be written from a policy, grant and outside investor to be willing to commit more money and time to Nebraska based companies.

On a slightly different note, I think that the other component of Tim's comments above are both valid and have some areas that I might disagree. First, the comment appears to assume that venture capital retrospectively is a fair way of judging prospective ways of doing business. I think that more complex structures - including state and federal grants, angel money and smaller VC commitments - are more likely everywhere including the Valley due to the poor investment returns in the VC world over the last decade. It is much more difficult for VCs to find large institutions to invest when their returns are lower over a relative time period (1, 3, 5, 10 yr) than common stock. Thus, I think the VC industry itself is changing. Within this change, how will a commitment by an organization by Invest Nebraska be received - maybe positively and maybe negatively - but I don't think universally by all VCs. Moreover, I trust certain individuals and the tenor of the conversation at the Board level of Invest Nebraska - to understand the pros and cons of their equity investment. Specifically, I am sure that between the many advisors (some of whom I have met) and individuals like David Milligan, John Gustafson, Ken Moreano, Matt McNair, etc. that they are thinking through the long-term effect of Invest NE capital on companies long-term fundraising needs and viability. Frankly, if for no other reason, then they are going to have to go back and ask for money from the State at some time. But, I also think these are men (and women) of good spirit and standing who want this place to be really good for entrepreneurs, inventors and innovators.

(Jimmy and) RockDex is an example of exactly the type of company that we need to do everything to help - even when that help may not be perfectly structured or aligned. Its closer than it was three years ago - when there was nothing. We are improving as a place for entrepreneurs, but we need to continue to grow. And, I think Tim's comments above are well-reasoned and legitimate. Disclosure of terms and transparency of process are critical elements of funding and creating a financially viable pipeline. This is a good piece of advice for the next time and the next group. Let's do better there as a community. So, I think that it is also a bit unfair for us to simply throw Tim under the bus because there are things that we may disagree with. I think his points are useful and should be strongly considered by Invest Nebraska for the next go around.

How do we take the next steps? Deliberately and unfortunately slowly than many would like. But, finding funding is hard in any environment and particularly the one that we face. Thank you to Invest Nebraska and Congratulations to Jimmy. Really well done. Your presentation was sharp and your company is smart. Nice.

Dec 16, 2009 at 05:08 AM

@Matt - I highly doubt that I can take anything away from what Jimmy has won or will win in the future. Raising concerns and beginning a dialogue is not postulating. This is the problem with new communities that are starting to grow and change. I don't know how often you've gone to seek VC funding or how many internet based companies you've started but based on your response I'm going to guess none. Unlike you, I've been down this road. I know what this experience is like and the things that turn VC's off from investing. This isn't about taking away from Jimmy. Far from it. It's more about making sure that good intentions don't end up screwing someone in the long run. The concerns I bring up are real and if this state wants to be known as any kind of a tech sector then these issues need to be addressed. I don't like the idea of having a competition where money is announced and then you find out that the money that they're giving to the winner is only in exchange for a % of the company. Especially considering how very little $50,000 is in the grand scheme of starting a web company. Maybe in the future Invest Nebraska will split this into two different categories. I'm sure if someone wanted to open up some sort of corner store $50,000 would go a long way but for startup tech businesses you'll blow through that in a month.

Jimmy wasn't even going to compete in this competition but since he was able to talk to one of the members of Invest Nebraska they assuaged some of his concerns. What about all the other people in the state of Nebraska that may have wanted to compete but had similar concerns but were too intimidated to ask someone? There was a guy on one of the other posting here (Jacob) who felt to intimated to participate in some of these things because he's a college student. I wonder how many other college students feel similar?

Like I mentioned before I'm a big fan of transparency and full disclosure. When we had the Gov 2.0 Innovation Challenge competition we offered money and a paid internship (about 15k total for first place) to build out their idea and mentor them but we made it very clear from the start that there are zero strings attached to that prize. It is up to me as the owner of Graffiti Tracker to show the winners that we have the established contacts to be able to get their government focused idea to market. But at the end of the competition and internship if they tell me to go pound sand they can absolutely do that but then I have failed as a business owner to illustrate to them the value we would bring to the table.

Let the bashing being now.

Dec 16, 2009 at 07:44 PM

Tim's cautious approach is understandable. As we all know, Nebraska is a flyover state for venture capital. In a recent Kauffman Foundation study, Nebraska tied with Alaska for last place in attracting venture capital for start-up businesses. This was confirmed by a later CNBC study.

The competitions are only one piece to this puzzle. We know that some venture capital is finding its way to start-up companies in the state and we applaud SPN for highlighting those companies. Our bigger problem is that we don't have a continual pipeline of high-growth businesses that excite venture capitalists. What we do have are some great ideas that need extra help with capital and mentoring services.

As a soon-to-be shareholder of RockDex we have no intention to jeopardize the future success of the company. It's now in our self-interest (one of the tenets of capitalism) to make sure RockDex succeeds at the end of the day.

Most of the directors of the Invest Nebraska Board have extensive experience in these transactions and are very comfortable with our competition model. Some have worked for VC firms and some have founded VC firms. We are excited about the competitions and are currently planning the 2010 East 2 West Competition to be in Omaha next fall.

This is a great dialogue and we welcome more skepticism and apprehensive comments. We will be a better state for it in the long run.

Dec 17, 2009 at 02:46 AM

@Tim - I reread you earlier comment, and realize that my interpretation of it was negative, when there was nothing negative about it. Ironically, that is what I was trying to suggest in my comment: there is no need for negativity and we should be supportive of the process. I apologize for my misunderstanding.

Dec 17, 2009 at 04:52 AM

@Matt - I appreciate the clarification. My concern with all this really comes down to the prize amount and what's taken in exchange for that prize amount. I know that $50,000 is not a lot of money for a start up tech company and I'm opposed to any kind of model that has a competition with strings attached.

Dec 17, 2009 at 06:48 AM
kJM

I am not trying to beat a dead horse, so I will limit my post. I would be surprised to see the $50,000 limit subsequent investment. I too have pitched, raised, etc. There are a number of reasons that could make a deal unattractive to future investors. I do not believe this is one.
I too appreciate the comments and skepticism. Hopefully the award serves a validation for Jimmy as well as an opportunity to engage well intended folks from our community that have yet to fully participate. Good work Jimmy!

Dec 17, 2009 at 09:42 AM

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Through August 22, help us decide the winners of our inaugural Silicon Prairie Awards, which will recognize 12 companies and individuals. You can vote once per day per category.
Winners will be announced live on stage at
our August 30 event.

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