Go solo or find a partner: When a startup needs a co-founder

By DeForest Mapp
Medill Reports

Today’s startup inventor often brings revelation to fruition by returning home from a fulltime job to start a second life. The inventor may catch a few hours sleep, push forward on design in pajamas until 4 a.m., get a little more sleep, show up for work and do it all over again.

For an entrepreneur in the tech space, this is living the life, according to an article from the U.S. Bureau of Labor and Statistics’ Career Outlook. But every founder goes through a series of life-changing steps needed to build a successful startup. While some steps revolve around people and establishing culture, the startup is equally hinged upon a good idea that solves a problem.

“Before you build something that nobody gives a shit about, why don’t [you] go back, make sure that we really understand the problem that we’re solving, that you’ve got a customer that cares enough to pay you for it,” said Billy Banks, associate program director of the Garage at Northwestern University. “If you don’t have that, you haven’t nailed the problem, yet.”

Founders who have spent countless hours designing the look, feel and tone of an experience, app or invention cannot believe what they have. That said, the next crucial steps include building a team, finding resources and hopefully scaling the business. According to an article on TechCrunch, there’s at least one way a founder can streamline that process – bring on a co-founder. The new partner may lack  business acumen but could work to pick up the skills or fill a gap as the tech whiz.

Paige Edmiston encourages healthcare startups to apply to MATTER, a non-profit and no-equity collaborative based in Chicago.

“We offer workshops in business [for our founders],” said Paige Edmiston, marketing manager of MATTER. “It’s really hard… there’s so much complexity [in a startup] that very few people know everything they need to know.”

Bringing equity to a startup, without diluting it, should come with a price, according to another TechCrunch  article. Skill sets such as programming, designing and JavaScript all seem easy enough – that is until a non-technical founder actually starts spending time in those environments. They will quickly learn they’re better off hiring someone else.

“The best way to hide your imperfections is to keep it simple,” said Scott Kitun, CEO of Technori. “It is much better to go into a little bit of debt… to hire the right person that does the job exceptionally well and faster and more efficiently than you, as a founder, spending your time doing something you’re not great at.”

Finding this kind of coveted type of talent might be easier if the founder lived somewhere near the Mission District in San Francisco, for example. It might be nice if a Bumble app existed just for technical and non-technical founders, allowing users to swipe left and right until a match is found. But until someone recognizes this as a problem, The Meetup app will do just fine.

“If you’re young, and you want to be in tech, your best bet is probably to go to SF because you can get a bunch of roommates, eat [obscenity] food and you can make it work in San Fran,” said Banks.

While twenty-something software developers in the Bay Area play the field and hold out for as much money as possible, the eager startup founder might consider relocating to Chicago, another hub for successful startups such as Groupon.

” [This] is why [you have] companies like Google and Facebook hiring more people here,” said Banks. “That’s why you have Amazon considering Chicago as a place to put their [headquarters], too.”

But even if the founder brings the startup to Chicago and finds it more affordable, he or she may face a potential dilemma. If the startup does not find a chief technology officer, it will more than likely not receive any rounds of capital from potential investors until this team member and a product is in place.

“You really have to have the business-model figured out of who’s going to pay for [the product],” said Edmiston. “Not only [having] a promising product and business model [is essential], but [we] also have [to have] confidence in the vision of the founder and the early-leadership-team.”

After months of searching and courting the right technical co-founder, the founder offers a candidate a partnership role, all contingent on his or her ability to deliver on a minimum viable product (MVP). And in exchange, the new startup is now defined by the efforts of two co-founders, partners in a new dream company.

The candidate accepts, thanks the founder and immediately begins assisting in building their future. But now the senior co-founder may start to anticipate how angel investors, venture capitalists and private equity firms receive the new team and idea-in-development.

“As you go into these meetings, you’re going to hear no a lot,” said Banks. The word no is “just an opportunity to ask a follow-up question and understand what the no is, so that when you get the next meeting, you’re starting to figure out how to overcome objections.”

The Startup Cycle and the Investment Stages: (DeForest Mapp/MEDILL)
Photo at top: A startup founder seeks a co-founder. (DeForest Mapp/MEDILL)


In Chicago, Apple unveils faster, cheaper iPad for students

By Ang Gao
Medill Reports

Apple is returning to school with a new iPad and enhanced educational resources.

The new iPad costs $299 for educators and students, but $329 for everyone else, the same price as that of the iPad released last year. Unveiled at Chicago’s Lane Tech College Prep High School on Tuesday, with Apple CEO Tim Cook on hand, the new iPad boasts increased online storage for students of 200 GB, up from 5 GB, on its A10 fusion chip, with a faster speed and 10-hour battery life.

Tim Cook spoke at the event about Apple's educational efforts.
Apple CEO Tim Cook spoke at the event about Apple’s educational efforts.(Ang Gao/MEDILL)

The new iPad works with Apple Pencil, which previously could be used only with the expensive iPad Pro. The new stylus, Logitech Canyon, costs $49 for students, and may also be applied to iWork, including Numbers, Pages and Keynote.

“We deeply care about education,” Cook said, linking technology to the liberal arts. Continue reading

How college friends built a $100 million blockchain business

By Ang Gao
Medill Reports

When China banned initial coin offerings, or ICOs, in September last year, a number of Chinese blockchain projects started looking for ICO opportunities abroad but encountered difficulties including foreign regulations, legal issues and language.

That was when Minhui Chen, who graduated from Columbia University in 2015 and was working as a consultant at Ernst & Young, sensed an opportunity.

“We saw a huge demand for consulting business at that time,” Chen said. “There were plenty of good Chinese projects with good technologies but lacked overseas experience.”

Global Blockchain Innovative Capital, or GBIC, founded by Chen and two friends from Columbia, started consulting for these projects and helping them connect with overseas cryptocurrency exchanges, investors and legal consultants. They also helped them in building token communities and expanding overseas.

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A neckwear business rooted in China prospers in Chicago

By Charlene Zhang
Medill Reports

“My daughter was given a Harvard logo shirt a decade ago by the school president, when Becky’s father Arnie mentioned me as the Harvard logo tie manufacturer in China,” said Michael Yin, the proud Chinese supplier of custom-made neckwear for Shop4Ties, a Chicago wholesaler and distributor.

Shop4Ties was founded in 1982 by Arnie Kapp, who quit his job at a tie shop on Michigan Avenue and started the business in a basement.

Becky Galvez, Kapp’s daughter, joined the company in 2011 after teaching Spanish at an international school, and took the reins as CEO with her mother Rhonda Kapp as chief financial officer in 2014 after Kapp passed away from colon cancer.

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FHFA House Price Index up 0.8 percent in January

By Charlene Zhang
Medill Reports

Single-family house prices rose in January 0.8 percent from December, according to the Federal Housing Finance Agency’s seasonally adjusted House Price Index. The rise beat the forecast of a 0.4 percent increase.

From January 2017 to January 2018, house prices rose 7.3 percent, also beating the forecast, of 6.5 percent.

“Home prices have been on an uptrend for a number of years now. The main reason is there are not a lot of inventories available for sale,” said Tendayi Kapfidze, the chief economist at LendingTree, an online brokerage headquartered in North Carolina.

Historical data suggest demand has been normal, but the shortage of supply has played a bigger impact in both new home and existing home markets, according to Kapfidze. He explained, “Home builders haven’t ramped up the production to the level of they were prior to the crisis. There were also difficulties of finding land; cities have regulations on specific types of house one can build.”

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Wrigleyville memorabilia shop brings history to life

By Sarah Foster
Medill Reports

Tom Boyle can’t help but poke through his shelves. He’s in search of a movie poster that only he can visualize. It’s somewhere among the newspaper clippings, the vinyl records, the buttons and the books.

“Let me see,” he says, furrowing his brows and shuffling through his inventory.

After searching for a few minutes himself, he sends his colleague over to the other corner of the store, hoping he can help find it. Poking and prodding through the posters, the pair finally pull it out of the pile: “A Stratton Story.” Their eyes glance over the picture depicting the 1949 film about an injured baseball player. They notice the faded red-and-white hues and the way James Stewart embraces June Allyson.

“This is it,” Boyle says with a smile.

But they weren’t searching through their inventory for fun. They were hoping to retrieve the poster for a customer, who has the same last name as Stewart’s character.

“It’s like finding a home for abandoned children,” Boyle said. “When we can find a good home for these items, it makes us happy.”

Intimate customer service and an ability to provide rare items from the past are exactly how Boyle’s store, a memorabilia shop called Yesterday, has managed to stay open for 42 years.

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ChiHuo Chicago builds a bridge between foodies and restaurants

By Minghe Hu
Medill Reports

ChiHuo means foodie in Mandarin, and a two-year-old online promoter of Chinese food called ChiHuo Chicago has a growing following in the Chinese community. It’s one of nine such ventures around the country operated by Chinese parent ChiHuo.

As a startup, ChiHuo Chicago has grown from a personal social medium to an online social influencer platform with 300,000 subscribers in Chicago. And its user base is expanding to English speakers.

Photo at top: Foodie Map of ChiHuo Chicago.(Minghe Hu/MEDILL)

Cboe outlook just fine despite VIX-related angst, analysts say

By Minghe Hu
Medill Reports

As inverse-VIX trading dried up during the stock market’s 10-percent correction in February, shares of VIX originator Cboe Global Markets Inc. plummeted a startling 18 percent. But, buoyed by reassuring words from Cboe’s chief executive officer, the high-flying stock partially recovered and the exchange’s outlook remains solid for 2018 in the eyes of analysts.

CEO Richard Tilly, in a conference call as the market bottomed out, pointed out that Cboe’s revenues from inverse-VIX products account for only 5 percent of total VIX futures revenues. The VIX, or volatility index, rose sharply and volume boomed as the market peaked and plummeted, but trading in the VelocityShares Daily Inverse VIX Short-Term ETN (NYSEARCA: XIV) and ProShares Short VIX Short-Term Futures ETF(NYSEARCA: SVXY) collapsed.

Chief Strategy Office John Deters added that “people did not flee the short-VIX strategy.”

He went on: “Buy side users are coming into the VIX market that generates activity from the market-maker community in a ratio of about 3:1. So every new contract that comes in from a customer, spins up three new contracts from market-makers approximately. And that’s the kind of benefit of having more participants doing more business in the VIX futures markets.”

Richard Repetto, an analyst at Sandler O’Neil & Partners LP said in an interview via phone this week, “I think they will continue to grow and powered by proprietary products, and the technology platform migrations [from Cboe’s 2017 acquisition of the BATS stock exchange] will help them as well. Their stock grew dramatically last 15 days,” suggesting that the further appreciation in the near future is unlikely. The price/earnings ratio of Cboe stock is still a lofty 44.93, far above the S&P 500 trailing P/E ratio of 25.68.

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Dom and Tom: twins’ $11-million firm is still friends and family

By Alexa Adler
Medill Reports

Dominic and Tom Tancredi, the twin brothers who co-founded Dom and Tom, a privately-owned, nine-year old digital product development company with offices in New York, Chicago and Los Angeles, believe the “secret sauce” behind their company’s success is working with friends and family, because they are “people who trust you” and whom you can trust.

Armed with this philosophy, the Tancredi brothers have grown company revenues from $4.13 million in 2013 to $11.87 million in 2017 and almost doubled the number of employees over the same period from 34 to 66.

While their basic business model of receiving “dollars for expertise and services” is “thousands of years old,” according to Tom Tancredi, their close-knit staff has proved adaptable in providing the corporate clients they serve with a menu of products and services that has evolved over time, beginning with their core expertise of “web services and development on an engineering level, to project design, development, ownership, quality assurance, project management and visual project development from inception to completion.”

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Ulta Beauty posts strong growth, price surges

By Charlene Zhang
Medill Reports

Ulta Beauty Inc. (NASDAQ: ULTA) stock soared 7.6 percent on Friday after the company announced strong fourth quarter results Thursday following market close. Helped by a tax benefit, net income increased 48.5 percent to $208.2 million, or $3.40 per diluted share, compared with $140.2 million, or $2.24 per diluted share, in the same period a year earlier.

“We achieved strong sales and earnings growth in the fourth quarter, while continuing to gain market share and make significant progress on our strategic imperatives,” CEO Mary Dillon said in a prepared statement during the conference call.

Adjusted earnings per diluted share excluding the tax bill benefit were $2.75, missing the analysts’ estimate by 3 cents.

Net sales increased 22.6 percent to $1.94 billion from $1.58 billion in the fourth quarter a year earlier.

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