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Catalyst MINDS Features Jim Andelman: Early Stage Web-Based Businesses

High-tech entrepreneur offers advice on how startup companies can trigger their own human avalanches

Catalyst for Thought is a local nonprofit organization with a goal to advance the community by educating and motivating individuals to create, develop and act on their entrepreneurial ideas. Through its MINDS series, Catalyst for Thought seeks to create a unique synergy between featured speakers and a small group of local entrepreneurs to empower each individual to help create solutions that affect society and inspire others.

Jim Andelman, co-founder and managing partner of Rincon Venture Partners, recently spoke to an intimate and sold-out crowd at the University Club of Santa Barbara.

When asked to describe his most valuable business lesson, Andelman answered without hesitation: The Golden Rule. In business as in life, Andelman’s adherence to treating others the way he’d like to be treated, along with his amiable demeanor and straightforward approach, has served him well throughout his many different ventures.

Andelman earned his MBA from the Amos Tuck School at Dartmouth College, where he graduated first in his class, and his BS in economics (magna cum laude) from the Wharton School at the University of Pennsylvania.

Jim Andelman
Jim Andelman

Although Andelman once held a job as a human avalanche-starter at Mammoth Mountain, his career truly began at Symmetrix, a boutique management consulting firm where he specialized in strategy formulation and economic modeling. He then went on to work on equity private placements, mergers and acquisitions, and initial public offerings for software companies at Alex Brown & Sons, followed by his stint leading software investing at Broadview Capital Partners.

In 2005, Andelman partnered with John Greathouse to found Rincon Venture Partners. Rincon focuses on investing in early stage Web-based businesses located in Southern California, creating partnerships with “extraordinary entrepreneurs” and assisting them as they build world-class businesses. Since its inception more than six years ago, Rincon has invested in 17 companies, 15 of which have been located in Southern California. Rincon believes these early stage companies benefit greatly from support at the local level, and as investors they can help recruit and/or recommend team members and local service providers, and be engaged in the companies’ growth.

“I’m inspired by helping others succeed and by finding talented people and helping them achieve their goals,” said Andelman.

He went on to discuss how his father, who was a tax lawyer, was his greatest influencer.

“Every time I called my dad he would take the call,” he explained. “It didn’t occur to me until later in life that that meant he stopped whatever he was doing to talk to me. Today I aspire to that with my own family as well as in my business. I aspire to be accessible and available to the people who mean something to me.”

Rincon is currently working with 12 companies in its portfolio. When asked if he has any projects that he’s particularly excited to work on, he answered that that’s like asking “which one of your children do you like best?”

“It’s a very gratifying experience to invest with a company at the early stage, when it’s past an idea and in the range of potential that can turn into reality,” said Andelman.

He said Rincon seeks to invest in scalable Web-based companies that are founded by experienced and cohesive teams that employ proven business models and have a clear path to profitability with modest capital requirements. Andelman also advises companies to always remember the value of a dollar and to make sure you spend money carefully.

“When speaking to companies I want to know: Can you go a long way on little money?” Andelman said. “Sometimes that involves short-term sacrifice, but it always pays off in the long run. Your career should be treated like a marathon, not a sprint. If you optimize for the long term, you have a better chance of succeeding.”

As we take a look at the world today, it would seem that the venture capitalist industry is only going after “moonshots” — those billion-dollar outcome outliers that are few and far between, he continued. But as he pointed out, the good news is that there are a record number of venture capital-backed ventures in the sub-$100 million range with a median disclosed value of $50million.

“The VC (venture capital) industry is very heterogeneous,” Andelman said. “Not everyone thinks the same way, which is good because otherwise we’d end up with the same companies.”

Although Rincon says “no” to 99.5 percent of the companies that approach it, Andelman points out that it’s like spending most of his time saying “your kid is cute, just not my kind of cute.”

Andelman went on to offer several pieces of good advice to companies that are or will be seeking help from venture capitalists:

» Target big markets: “There’s a tremendous premium on being a market leader, but the problem with a winner-take-all market is that there will be a bunch of losers. So look for markets where there can be multiple winners, because sufficiently talented teams will be able to carve out a big enough piece for themselves.”

» Have a clear idea of the problem and how you’re solving it: “You don’t have to be better in every way, you just have to be different enough in a way that people care about.”

» Team, Team, Team: Ideally, work with people you’ve been successful with before.

» Find Traction With: Third-party evaluations, beta customers, channel partners (proxies in the market), subject matter experts who can attest to the value of the solution, affiliates and advisers who are willing to put their name with the product, alignment with people who make introductions to venture capitalists.

Ultimately, Andelman believes that “start up” is a state of mind, and he encouraged the small group of entrepreneurs to seek that mentality of perpetually growing and changing.

“Big companies are successful because they remain in the start-up frame of mind,” he said.

Andelman lives in Santa Barbara and is currently reading Do More Faster: Lessons to Accelerate Your Startup by David Cohen and Brad Feld.

Catalyst For Thought’s next MINDS event will be held at 5:20 p.m. Oct. 20 at the University Club of Santa Barbara, 1332 Santa Barbara St. Cost is $15 per person, which includes wine and cheese. There are only 10 seats available to hear Jason Womack speak about “Leadership: 3 Areas of Focus Leaders Need.”

Click here for more information about Catalyst for Thought. Connect with Catalyst for Thought on Facebook. Follow Catalyst on Twitter: @CatalystSB.

— Carolyn Turner is a writer for Catalyst for Thought and works at Avalan Wealth Management as its client care director.

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