The return on investment couldn’t be any better. TGX Medical Systems CEO Michael Good brought Joe Muldoon on board in April to help his company land some venture-capital funding. A few months later, it had a check for $1.5 million in the bank.
The cost of Muldoon’s help: zilch.
As the first Entrepreneur-in-Residence at Indiana’s Venture Center, Muldoon spent seven months this year giving a handful of young, high-growth Indiana companies free advice on everything from budgeting to fund raising.
It paid off for TGX and two other companies that soon will announce they have received outside funding, said Steve Beck, president of the Venture Center.
The Venture Center is a privately funded not-for-profit organization. Beck declined to give details on its funding, but according to its most recent Internal Revenue Service informational tax return, the Venture Center had assets of $534,387 at the end of 2004.
“It’s one of the best resources … that we’ve dealt with in the past five years,” said Good, whose Carmel-based company manufactures software that helps hospitals keep track of their scalpels.
The program is a good way to “combine the peanut butter and chocolate and make a peanut butter cup” by bringing together eager small-business owners with seasoned entrepreneurs, Muldoon said.
In his six months of working with TGX Medical Systems, Muldoon helped Good refine his sales pitch and target specific investors. The $1.5 million the company received will help hire as many as five new employees by the end of the first quarter.
The lack of quid pro quo helped Mul- doon gain Good’s trust.
“[Consultants] always want something in return,” Good said. “[The Venture Center] exists solely to help Indiana companies succeed.”
True to form, Muldoon has since returned to his entrepreneurial roots. He’s now president of Midwest Engineered Products, an industrial centrifuge maker. Hammond Kennedy Whitney & Co. bought the locally based company recently and hopes Muldoon can help double its annual revenue within a few years.
But the Entrepreneur-in-Residence program won’t miss a beat.
Beck has hired Jeff Ready to sit in Muldoon’s former office. Ready already has started seven companies-even though he’s still in his early 30s. Last March, he sold one of them, the Internet spam-blocker Corvigo, to Redwood City, Calif.-based Tumbleweed Communications for $41.5 million.
Similar to Muldoon, Ready will spend two or three days a week in his office at the Venture Center. He’ll review the business plans of every company that walks through the door before the organization chooses as many as five for his personal tutelage.
He hopes to have as much success as his predecessor, but he’ll put his emphasis on a different stage of the game.
“I’d like to see more focus on early-stage investment,” Ready said.
Ready recently lived in California, a state he said offers more alternatives for startup cash. In the Midwest, companies inevitably end up begging and pleading with neighbors and acquaintances for funding. It can sometimes take more than a year to raise a few hundred thousand dollars-and 20 people contributing $10,000 is a “messy” way to start a business, he said.
He’d like to encourage more venture-capital firms to invest from the outset so companies can get off to a faster start.
Regardless of how successful he is, Ready doesn’t expect to be around for very long. Just like Muldoon, he expects to leave within a year.
That’s fine with Beck-as long as he stays in Indiana.
The gravitational pull of California, New York and Boston has siphoned off too many of the state’s best entrepreneurial minds. All too often, Beck said, they leave because they don’t realize how many opportunities exist in Indiana.
“There’s no reason in the world why [entrepreneurs] can’t do their next deal here,” he said.
He hopes that after Ready sees all of the back-stage wheeling and dealing through his time at the Venture Center he won’t be tempted again by the golden horizon in California.
It worked for Muldoon.
“[Steve Beck] wanted me to be encouraged by what was going on in Indiana, but I wasn’t sure that I was until I got my hands dirty with some of these companies,” Muldoon said. “It’s renewed my confidence in the state.”
While companies such as TGX Medical Systems won’t have to pay for Ready’s expertise, the Venture Center will pay him a daily rate. Beck declined to say how much.
Beck’s compensation was just over $250,000 for the year.