This episode is for all of the entrepreneurs our there with big ideas. Bo Megginson is the Mobile Area Executive Director for an angel investor group called Angel Investor Management Group. He is part of the movement of change for the start up community here in Mobile. AIM's existence in our start-up ecosystem means if you have an idea, and know that you will need funding, you have options. Their last investment was $6.4 Million... but it was for a company out of Atlanta. And frankly, Bo wants to see some of their investment dollars stay in the Mobile area. So tune in to learn more about Bo and the AIM Group.
Transcript:
Bo: I'm Bo Megginson. I'm the Gulf Coast executive director for the Angel Investor Management Group, or AIM Group. We're an early stage venture capital group here on the Gulf Coast. Been here in Mobile for four and a half years, and we invest cash into early stage fast growth companies.
Marcus: Awesome. Welcome to the podcast, Bo.
Bo: Well, thank you Marcus. I appreciate you guys having me.
Marcus: Yeah. I know we're going to dive into a little bit more what AIM group is and why I'm excited about having you on the podcast, but we're very interested in the story behind the entrepreneur, the businessperson that we're talking to. Why don't you go back in time and tell us a little bit about yourself, like did you grow up here in Mobile? Did you go to school here, college, all that kind of stuff?
Bo: Yeah. I'm from here in Mobile, born and raised. Went to then UMS Prep, now UMS-Wright High School. Graduated from there. Went my freshman year to Rhodes College in Memphis, and then after my freshman year was transferred to Auburn and finished up at Auburn. Then did some post-graduate work at the US Sports Academy. I was a sports writer, believe it or not, coming out of college, but managed to overcome that to be I think a productive member of society anyway. Went to the sports academy to try to get a masters degree and skip a couple of rungs on the ladder and ended up actually being offered a position there and working there at the sports academy for a little more than a year, or almost two years. From there went into the family security equipment business. Was with that company about seven years and made the fateful recommendation that we look at doing internet security. There was this new service being provided to commercial businesses called the internet, and there was this stuff called email that you could use to communicate just totally-
Marcus: You're dating yourself.
Bo: Yeah, well that's the case. In the spirit of trying to find some type of mechanized way for our company to have recurring revenue, because that was the magic and back in the last 90s alarm companies were being acquired because of their monitoring contracts and it was all about recurring revenue, or what we would call today software as a service, or service revenue. I made the recommendation that we look at doing internet security, or email security, for small businesses. We got the green light to write the business plan, do the feasibility study, and then I was asked to go out and try to raise the capital to do that.
That's where I met Jim Corman, who is my current boss and one of the principals of the AIM Group, Angel Investor Management Group. AIM is our acronym. From there we launched that business and then sold it in late '04, early '05 and then moved on from there into some other entrepreneurial activities, some learning experiences, some more successful than others. Then from there Jim came to me about again four and a half years ago, and he had launched the AIM Group concept, which is a network of individuals who invest in companies. Rather than everybody or a single person putting all of their capital at risk, and doing all of the due diligence work themselves, and doing all the research, and having all of the exposure, it was a way to incorporate a lot of people with a lot of intellectual assets and a lot of subject matter expertise, and for everyone to do a little bit but to conglomeratively create a big whole for lack of a better ... W-H-O-L-E, that H-O-L-E.
Marcus: Sure.
Bo: He had launched his chapter in Auburn. We teamed up a with a gentleman in Huntsville who had been doing that for a while. Of course Huntsville is technologically a much farther, a much more advanced community than Mobile or even Birmingham. They started the Birmingham group and then shortly after getting that group launched, Jim came to me and said, "Hey, we want to get a Mobile group launched. Would you be interested in being the point person?" To which I obviously said yes. That was four and a half years ago, and since that time we've invested in 27 total deals. I know as a group we've done 33, five of which were before Mobile, six of which. We've invested a little over $26 million in that time period. Last year in calendar '16 we invest right at $5.2 million in in nine deals, excuse me, 11 deals. Year before that we were at 6.1 in nine deals. This year we're actually beyond that. Just in the first quarter of this year we've already invested over $7 million, which makes us one of the 10 most active and largest sources of organized early stage capital in the entire US, which I think is pretty good for Podunk Alabama.
Marcus: Yeah. As you and I have kind of gotten to know each other and I guess this is be a good segue into that discussion, I've mentioned to you that I traveled to Chattanooga and saw the changes there from the infrastructure that was put in by the city with the fiber throughout the city. For those of you that are listening that may not be aware, Chattanooga saw a huge boon as far as entrepreneurial growth. They've got all these startup companies that have become prevalent in that area. There's co-working spaces that are spawning off even more. There are groups like Bo's that are helping people get funding. Then I've also been to Huntsville. I'm good friends with Antonio Montoya and Matt Jones. Matt Jones has recently just taken over as executive director or Rocket Hatch, which just to be clear is not the group that you're talking about because they haven't been around that long. What you were saying about Huntsville is very true. They are much further along than Mobile, but the nice thing is as somebody who is a transplant here, seeing some of that trickle down into the southern City of Mobile from those cities, so Chattanooga, Huntsville, Birmingham, and now into Mobile, is a really exciting thing for me.
On a little tangent, one of the whole reasons why we started the podcast, if you haven't been listening from the beginning, is that I want to expose people to the business owners and the cool things that are happening in this city because I think hearing success, and you mentioned this in our discussions earlier, that hearing success begets more success. The more people that we can change the mindset of here in Mobile about what is possible the better off the whole community will be in that rising tides raise all ships. I've got kids. I want this place to be a better place, and so anything that we can do, no matter how small or significant, we want to do. All that to say I'm glad that you're here because if we can connect you with somebody here locally that has a great idea that fits your profile, which we'll get into here in a second, then fantastic.
Bo: Well, and that's what I really appreciate about what you guys are doing here at Blue Fish, Marcus, is that you're exposing success and you're exposing talent to the masses. That's one reason I appreciate you allowing me to come is that as I mentioned, we've done 33 deals with AIM, none of which are in Mobile. We write half million-
Marcus: Come on, Mobile.
Bo: We do a deal every month, and the minimum check we will write for a deal is half a million dollars. None of that's gone to a Mobile company yet, and I'm trying to fix that. I'm trying to find an opportunity, although our fist obligation is to our members and to bring the best deals possible. If the best deal that month's from Atlanta instead of Mobile, well that's just the way it goes. But hopefully that incentivizes and incites us to find some great opportunities here, and there are some that are germinating right now. If anyone out there hears this podcast and says, "You know what? I've got something I've been working on that my company needs and everybody in that industry needs and I just need some capital," I'd love to hear that idea, hear what that application is and talk to that entrepreneur, because I've been in that seat. I've been in that position with what I thought was a good idea and needing the capital and needing the direction-
Marcus: Not being able to get it or find it.
Bo: And worse, not knowing where to go. It's one thing if you know where to go and you can't get it, but it's worse if you have no idea where to go. You have no idea who to call. Gratefully and thankfully I asked enough people who directed me to Jim Corman, and at that time I found more early stage risk capital in Brewton and Atmore, Alabama than I did in Mobile. Now-
Marcus: Things have changed.
Bo: ... context. This was 1999, 2000.
Marcus: Yeah, I was going to say.
Bo: Right after the internet bubble burst, and so some of that's understandable. But that said, there is a shift I think, and people like with what back then we had Jim Busby and Mike Dow who had taken QMS, which was probably before you guys' time.
Marcus: No, well I'm familiar with the company and the story though, yeah.
Bo: They had taken that off and done very well with it. Then Robert Ross with Xante, which was a spinoff of QMS, and his success. It'd shown people that homegrown, early stage startup companies could be viable. It didn't have to be all about real estate or pine trees or something therein.
Marcus: Right, which is typically what Mobile has been known for, right?
Bo: Or the port, or something port-related. Absolutely, or natural resource. They were the pioneers who really did the hard work, so it showed people like me, "You know, this is possible." I was lucky that both Mike Dow and Robert Ross, they offered to spend time with me and give me some guidance on what to do or what not to do in some cases, some of which I listened to and some of it regrettably I didn't. Again, that's something that I hopefully can convey to the people that we talk to or that call me that, "Look, here's what I learned, and please try not to relearn this if you don't have to, because learning is very expensive." If I can save someone that time as much as the money from having to go through that, well then it'll be time well-spent on my part.
Marcus: Nice. This is a little bit more on the business than what we normally spend, but I feel like it's really important to get this message out because if we're going to continue to see things change in this area, then people have to be aware that they can stay here and they can have a viable future, and I would argue an even better future. Like I've lived in D.C. I know that that entails, the traffic and the headaches, and then you go to hire people and it's salaries that are just insane because of the cost of living, and this, that, and the other thing, plus you're nowhere near a beach and forget trying to go out and go fishing or anything like that. It's not the same lifestyle that we enjoy down here. I want people that are listening to understand that you have an opportunity to build something here in a city that will love you for it and will provide you with the people that you need in order to staff it and so on and so forth, and that there are investors here locally that are dying to hear your idea that they'd love to invest in that. I know there are some exciting things going on. I don't know if you are also involved in anything that the chamber and the city are doing with is it Innovation PortAL?
Bo: Innovation PortAL. Yeah, Hayley Van Antwerp is heading that up, and that's going to be a great incubator for lack of a better term. I think they haven't announced it yet, Marcus, but there are some pieces they're trying to put together that will hopefully add some funding components to that. I was a judge last week at the Coastal Innovation Contest out at South Alabama. Out of all the applications they had there were four student presenters who had business concepts, and the top four all got money. The winner got $4000, the second place was $3000, third place was two, and fourth place was one. That was done by the Melton Center out at South Alabama. Now, can you build a large company on $4000? No, but you have to start somewhere. Mark Zuckerberg started with less than that at some point, so that's the beginning. The fact that those four people walked away with cash, and when you're a 19 year old college student and somebody hands you a $4000 check ...
Marcus: Yeah, that goes a long way.
Bo: That's significant.
Marcus: And it's also the recognition, right?
Bo: Mm-hmm (affirmative).
Marcus: It's very much like okay you've got a valid business idea. Having somebody that has business experience look at you and say, "You really need to pursue this, and by the way, here's money to show you that I really mean it," that means a lot.
Bo: That words spreads quickly. Couple years ago there was a seminar talking about incubators and tech transfer on college campuses and how colleges and universities have the intellectual property and the value of that intellectual property on their campus. South Alabama is a great example. I know that they have a couple of medical technologies they've licensed, one of which brings in at least $2 million in licensing fees a year. But the point of this lady's talk was, and she was coming from the University of Texas where their tech transfer program is probably if it's not the gold standard it's one of them. She was saying even right before Michael Dell did what he did for Austin, which was maybe the transformational event, she said that they would talk to their professors and say, "Here's what we'd like for you guys to do." Typically they would get the ivory tower academic response of, "Well, we're not really in this for money. We like teaching. The raw research of it is what [crosstalk 00:15:03]
Marcus: I'm rolling my eyes for those of you that can't see us right now.
Bo: Exactly, and doing a good job [crosstalk 00:15:06]. She said that the day after a new Mercedes pulled into the faculty parking lot everything changed. She says they started getting more submissions, more requests for grants. It's amazing that human nature doesn't change. There's some people who are strictly academicians and just want to do research and that's fine, but the vast majority of people are people. She said as soon as somebody had a win, they started seeing a great flow which created more wins, which created more licensing dollars, which created more Mercedes. The university and the whole community, and course now Austin is one of the hubs of entrepreneurial incubation really in the country.
Marcus: Over the US, yeah.
Bo: Yeah, maybe west of California, or excuse me, east of California. That's what created it. There's no reason that we can't do something like that. Now, we don't have the oil money that Texas has, but I'm convinced, and you mentioned Chattanooga, there's nothing Chattanooga can do that Mobile can't do also. If Chattanooga can create this type of environment and the success that they've had and are having with Dynamo and the other accelerating programs that they have, certainly we can do it too. Now, there are components of any accelerator program that historically have been required. Doesn't mean new ideas and ways to do it can't be pioneered, but there are certain to this point consistent components that make that work. I think we're starting to get some of those pieces to come together here in Mobile now.
Marcus: For those that may not be familiar with the world of investment, educate us a little bit. You basically you have an idea, you're going to self-fund for a while. You may get some funding like you were talking about through winning a contest or something like that, but then you're going to be looking to an incubator that's going to get you a bit more funding. Then after an incubator you're looking at an accelerator, and then after that you're either selling off portions of the business or just selling the business outright.
Bo: The typical life cycle, Marcus, is going to be you're going to self-fund, and then you're going to do what's called friends and family round. Some people add a third F, be friends, family, and fools. Then there'll be a seed capital. Along the way, the two terms that are real important that we look for are proof of concept, does your widget actually widget and does it do what you say it can do, and number two is market adoption. Can you get people to use your widget, and will they hopefully separate themselves from their money to get your widget, and hopefully it's enough money that you can cover your costs and actually make a little profit at it. If you can cover those two things, and those are what we look for. Proof of concept, does your software, does your component, does your whatever, does it do what you say it'll do, and does it create a value, and by extension will people then pay for it? Those are what you kind of go through the life cycle.
The best opportunities for that typically come from within an industry where someone, and a great example is Robert Ross at Xante, where you're in a industry, you see a need, you say, "You know what? This is kind of outside what our company does, but there's a market here," and you develop that opportunity. Robert was working for QMS years ago. He'd be a great guy to have on your show, by the way. Robert saw an opportunity with high definition printing that QMS was not pursuing. At that time QMS was doing about I think 175 million in revenue, and this is in 1980 dollars, okay?
Marcus: Yeah.
Bo: They projected this to be a 25, maybe $30 million division, so it really wasn't worth their time. Robert got the higher ups at QMS to sign off on the intellectual property rights to go off and do it himself. He took off, ran it, kept going, and a couple years later QMS was down below 150 million and 25 million a year looked pretty good to them.
Marcus: Pretty good. Yeah.
Bo: Now, I'm not trying to indict anybody at QMS because there's some issues there, but anyway, he took off, he saw an opportunity within a market, understood it, did his research, and then built a solution to that need. That's where the best opportunities usually come from.
Marcus: Yeah, that's interesting. Transitioning back to where we normally go, so if you were talking to someone who has that idea, that kind of kindling if you will of a business, what would you say to them? What's the one bit of wisdom that you would say to them to kind of encourage them on or to point them in the right direction?
Bo: Well, we've got some great resources here in Mobile to help people just like you're talking about, who have ideas, and these are free services, and free people who will help give you direction on what your next steps might be, or at least who to talk to. One of those services is the Small Business Development Center at South Alabama. Mel Washington is a fantastic resource, and again, he's free. I'm all for free. In fact I use a term I've borrowed from someone, says, "If it's free, give me three." The chamber has a lot of these resources too, and that's where, and you've probably seen this, the Mobile Chamber of Commerce is one of the best that I've seen anywhere at being an active resource, not just a promotional piece to take people on tours when they come into town to look for sites. They actively are providing services and resources to the local inhabitants to help foster and grow their businesses, which not every chamber does, certainly not as well as ours does.
Marcus: Yeah, the chamber right now is offering an emerging leaders course, which I admittedly didn't find out about until too late and so I'm kind of bummed that I'm not part of that, but that kind of thing. Most chambers don't take something like that on. I think one of my buddies who's in that program was saying they're saying that the typical company will see what a seven or eight X out of the growth because of the knowledge that the owner gets from being in that business. It's not insignificant, but yeah. And I know Mel. He's a phenomenal person in the business community. I've not spoken to him in regards to what he does, but I know he genuinely cares about the business community here locally.
Bo: He does, and as much as anything else, Marcus, building your network and getting input from other successful people is what's vitally important. If I had to do anything differently, I probably would have sought out the counsel of other successful people more and tried to learn from their experience rather than my own bloody knuckles. Because I heard once that the difference between knowledge and wisdom is knowledge is gained by your own effort, wisdom is gained from somebody else's effort. If you can do that it's much less expensive and much less painful.
That's one thing that the chamber and Mel both do and I'm willing to do as well is plug someone in. If they've got an idea that's with biomed, I'm certainly not a biomed expert but I know people who are. Most of the folks that we deal with are more than willing to have a cup of coffee or talk to somebody who has a burgeoning idea, who has something they think is an opportunity, and at least give them some feedback. For example we had a guy I talked with yesterday. We went and saw someone he thought would be a potential customer for his company. Turns out he's not a customer for his company because of some details in the business that the gentleman wasn't aware of. However, the company that we talked to said, "You know what? This doesn't work for me, but I think it would work for these three companies, and I'll give you their names. I know them and I'll tell them that you may give them a call."
Marcus: Yeah, that's a valuable thing, just pointing people in the right direction like that. You can't pay for that. All right, so let me ask you what do you like to do in your free time? You have any hobbies? Because I know you're pretty involved so I smile as I say this, but yeah.
Bo: Well, my wife is an incredible cook so I try to exercise when I can. You wouldn't know it but I run 10 miles a day. No, I really don't, but there's so much that this area offers. I love being out on the water, just doing nothing than dropping an anchor and just letting the boat bounce while you watch the clouds go by. The water's incredible. I love the people here. Course I graduated from Auburn and I have two sons that are at Auburn, so we enjoy going up seeing them and doing football games or basketball games or anything related there. But there's so much from as you mentioned the quality of life here. The warmth of the people enables you to do all kinds of social things, whether it's Mardi Gras or whether it's the Chamber of Commerce Member Appreciation Barbecue, or the St. Patrick's Day party at Callahan's where everybody's Irish for a couple of hours. There's so much to do here that is related again, to the quality of life that I try to do. I tell my wife, "We're not buying things anymore. You know, we're going to spend our money on activities and experiences."
Marcus: Experiences. Yeah. I'm going to have to nail you down and have you take ... I know you have a sailboat if I remember correctly, and so I'm-
Bo: Not a sailboat. We have a small 22 foot boat, yeah.
Marcus: Okay. Yeah, I must have seen wrong on Facebook or something. You were out kind of just cruising around. I have to finagle you down and get a trip on your boat sometime soon. But tell people where they can find you.
Bo: Certainly. Our web address is A-I-M as in Mary, G-R.com, aimgr.com. You can look at the different type of companies that we have invested in over the past five years, look at what our profile company looks like, what kind of things we look for in companies that apply for funding from us. We get about 40 to 45 applications a month, more I guess than as opposed the shark tank model that most people are familiar with. We don't take three companies, we take one every month. We write a check just about every month. We're actually looking for companies, looking for submissions, and if you think you have an idea that you believe has scalability, has the potential not just to be a good company but a transformational business, we want to hear about it.
Marcus: That's awesome. I want to thank you again for coming on the podcast. To wrap up, any final thoughts or comments you'd like to share?
Bo: Again, I appreciate you guys and what you're doing here in downtown Mobile. It's exciting to see more non-restaurants. Nothing wrong with restaurants in downtown Mobile, but having businesses domicile here to create that vibe, I hate sounding trendy, but the vibrant, the tangible enthusiasm that's down here in downtown Mobile, because I don't know of any successful city that doesn't have a vibrant downtown of some kind.
Marcus: Yeah, it's the epicenter that kind of spreads out so it's the bullseye. Right. The vibe, which is actually a very good word, the vibe that comes from that center extends its way out into the suburbs. Yeah no, I appreciate you saying that.
Bo: Absolutely. Thank you guys.
Marcus: Yeah, well I appreciate your willingness to sit with me and share your journey as an entrepreneur and business owner
