IVCA Community Conversation: Illinois Technology Development Alliance President John Noel

April 8, 2008

IVCA: How can the ITDA best interface with the Chicago venture capital community?
JN: There are a number of ways. First of all, we can provide deal flow for early stage and seed investing. The majority of the companies we assist are in the pre-revenue stage. If there are investors willing to invest at this stage, they can contact us with their criteria and we will send them qualified deal flow.

We can also provide deal flow for Series A investors. We have connections with a number of early stage investors. When their portfolio companies are ready for the next round of investment that's greater than what the early stage investors are willing to invest, we would like to have a place to send them. Again, if we know the criteria for investment, we will provide qualified deal flow.

Lastly, investors can refer companies to us that aren't quite ready for investment and need mentoring or if their portfolio companies might qualify for government technology development grants but are unsure of the process.

IVCA: From where does the ITDA receive its funding?
JN: The ITDA has a number of revenue streams on which we focus. First, we have contracts with government agencies that perform research (i.e. NASA and the U.S. Navy). They are interested in us acting as an intermediary between them and small businesses to develop technologies that meet their mission needs.

We also develop relationships with other regional economic development agencies that are interested in starting a technology-based economic development program and need help understanding and developing that program. We perform due diligence services for seed and early stage investors for a fee. Lastly, since we are a 501(c)(3) non-profit, we accept donations.

IVCA: How has your role changed since being appointed president of the organization earlier in 2008?
JN: Before being appointed president in Jan. 2008, I was the interim president of the ITDA for about 16 months. That said, the role has changed significantly. As the interim president, my role was to hold the organization together and maintain the status quo.

Now I am responsible for setting the strategy and direction to take the organization to the next level. While that's a big change, I'm very excited about the opportunities for the organization in the future.

IVCA: Please describe how the quality of entrepreneurs and early stage companies have evolved since you began working with the ITDA.
JN: The quality has definitely improved. We're not seeing companies with just an idea any more. They are taking those ideas and are developing the product and business plan before we see them and before speaking with investors. A greater number of our clients appreciate the different skills that are required to develop a good idea into a good business.

Most companies we see now are not just scientists or technicians. They have pulled in businesspeople to advise and assist them in understanding the overall market and potential strategies for getting to that market. First-time entrepreneurs are starting to hear that they have to have a good business - “ not just a good product - “ to be successful.

IVCA: The ITDA also helps established companies launch new divisions. How can the later-stage private equity community better get involved with that practice?
JN: The ITDA assists established companies that have developed a technology with an application in a market different than the one in which they're established.

We work with them to determine if they want to keep that product line within the same company as a new division or spin it out. In most cases, the company will need outside capital in order to fully develop the technology into a commercial product and go to market. Later-stage private equity firms interested in funding new divisions should contact us and let us know the criteria needed for a potential investment.

While we are interested in providing deal flow to the venture community at all levels, we want to make sure to provide the right type of deal flow to the right investor. We understand how busy investors are and don't want to waste their time.

IVCA: How would you gauge the overall health of the technology industry in Illinois today?
JN: I believe the overall health of the technology industry in Illinois is good but not as good as it could be. This is because there is no real reason to focus on implementing programs to build technology-based businesses. The Illinois economy is very diverse such that when one industry takes a hit another industry can cover for the fallout.

As a result, there is no perceived need to truly develop the industry into what it could be. With the great technical and business talent, research institutions and basic infrastructure, Illinois has the potential to be a real powerhouse in the technology industry. That potential will hopefully be acknowledged and realized in the near future.

IVCA: What predictions do you have one year out? Five years out?
JN: The next year will show that the slowing economy will not have an impact on the quantity of early and seed-stage deal flow. In fact, the deal flow will most likely increase due to recently unemployed workers attempting to start their own businesses.

Five years out, I think we will see angel investors becoming much more organized and sophisticated as they gain experience in investing and improving their processes. As a result, the deal-flow quality will improve as these sophisticated angels advise more early stage companies.

IVCA: What philanthropic organizations does the ITDA support?
JN: We support organizations that promote science and math literacy along with education. Some of these would be the Illinois Science Council, the Museum of Science & Industry, the Adler Planetarium and the Illinois Mathematics & Science Academy.

On a personal level, I have made some microfinance loans through Kiva. If you want to see entrepreneurship at its most fundamental level, check out http://www.kiva.org.

IVCA: What do you do for fun when you're not helping to grow technology-based businesses?
JN: While growing technology-based businesses is fun, it can be time consuming. I have four children - “ ranging from four to 14 - “ so I spend most of my free time with them.

However, I am a home brewer. Whatever free time I have left I spend brewing my own beer. My latest batch was a Sierra Nevada porter. I think it turned out pretty well, but after three or four of them, nobody really cares.