There has been quite a bit of debate in the past few days about the 2008 GRA/TAG Business Launch Competition here in Atlanta. Scott Burkett was spot on in my opinion and was one of the first to publicaly call this insanity out. There were some tweets by some local entrepreneurs and Lance Weatherby attempted to quell the crowd with his peacemaking around trying to turn this into a positive and looking for suggestions about how to improve it.

A little background for those just trying to get up to speed on what’s happened.

The 2008 GRA/TAG Business Launch Competition is a cool annual event that is intended to help provide funding and value-added services in-kind to the lucky startup that is launching a business here in Georgia and looking for help. We had quite a number of companies apply, that was widdled down to a much smaller group and then to a final set of four companies. I’m an advisor to one company, Skyblox, which I think is worthy of the top 4 status and one of the cooler startups here in town. I’m biased and I freely admit that. But, that’s not really the point here.

Where this all breaks down is that the winner was a company called ATMDirect. I freely admit I know jack about these guys, except that the hidden secret that’s come out since the win is that they’re not really a startup per se. Maybe to the letter of the law, but certainly not the intention of it. You can technically say they’re just launching the business, but really they’re reinventing a company that has had literally millions and millions invested in it and its IP and taking some smart advantages of a bad bankruptcy situation. (And good for them).

Here’s the stated purpose of the event (from their press release):

The purpose of the GRA/TAG Business Launch Competition is to support economic development in Georgia by encouraging and supporting the creation and growth of new companies that will strengthen and expand Georgia’s strategic high tech clusters. To accomplish this, the competition has two specific goals:

• to motivate and support entrepreneurs in creating new high tech businesses in Georgia that will support and expand existing strategic clusters, and
• to create greater awareness within the investment community that Georgia is a great place to launch and grow high tech businesses.

(SIDE NOTE: I have issues with the purpose, especially the clusters concept, but that’s an opinion for another day).

OK, here’s the rules:

Entrepreneurs interested in launching a new Georgia company within targeted technologies and industries are invited to compete for a $100K cash prize and a suite of related professional services (including priority consideration for ATDC membership) that is valued at more than $200K. The competition offers entrants the opportunity to be mentored by a successful high tech entrepreneur.

Entrants must legally reside in the State of Georgia. All awards will be conditioned on the company launching and/or maintaining its operations in Georgia. If the winning company moves a majority of the business outside Georgia within 3 years, the winning company must repay TAG for the $100K cash prize plus 8% annual interest. TAG will make a final determination as to whether a company “moves a majority of the business outside of Georgia” and will have discretion to negotiate a variety of forms of repayment of the cash prize plus interest.

Entrants can be existing companies under certain circumstances. The competition is aimed at “new” businesses, however the time and effort required to launch a successful business in the targeted areas may require that an entrepreneur form a company and begin certain limited functions before any meaningful business operations occur. These functions could include prototype or Intellectual Property development and for these or similar reasons up to $500K in external funding may be allowed. Market trials may also be required and for this or a similar reason some limited revenue may be allowed. The judging process will take all these factors into consideration when making a recommendation to TAG’s President and the decision made by the TAG President is final.

OK, that’s where it gets a little fun. I think the rules are fair. And, it’s their money and their rules - Tino can do what he wants here.

An interesting comment on Lance’s post from John B. Frank:

ATMDirect was neither founded, NOR funded by Nandon Seth. It was founded nearly a decade ago by an individual named Robert Ziegler who raised a couple million dollars. Nandon Seth acquired ATMDirect for $600k during the Pay By Touch bankruptcy. Thus to state that he “founded” and “funded” ATMDirect is simply a misnomer. Just thought I’d set the record straight. FYI: You can visit www.biometricpayments.blogspot.com or www.pindebit.blogspot.com and do an ATMDirect search to learn more about ATMDirect’s history as well as PIN Debit for the Web…

Even on the ATMDirect website it states:

ATM Direct was purchased by Accullink, LLC of Atlanta, Georgia in March 2008.
See our press release for more details.

(Side note: i can’t find the press release they mention specifically from their website which is terrible).

This is from the about page:

ATM Direct is a privately held alternative payments provider offering a suite of products that enable PIN debit payments over the Internet. The technology underlying our products are backed by a suite of intellectual property that includes 10 patent families. Our technology leverages a revolutionary encryption and authentication framework which is easy to implement and integrates seamlessly with existing payment processing protocols and systems.

OK, a “business launch” for a “new startup” doesn’t have 10 patent families. Ten fully prosecuted patents families would be worth at least a million or more dollars alone most likely.

Also, they seem to have violated clearly the investment criteria of less than $500K (at a minimum, not including their post purchase investment if any).

ATMDirect looks like a pretty awesome company with a stellar management team and looks like they’re very sophisticated entrepreneurs that have taken advantage of a great IP issue. They are creating value it appears and looks like their attempting to monetize something that was on the shelf. I applaud them for this. That’s really not the point to some of the discontent we’re hearing and feeling right now — myself included.

We’re all humans and error prone. I’ll be the first to admit I make lots of mistakes and misjudgments on a daily basis — WE ALL DO.

I think there’s really a silver lining in this whole fiasco and some very positive things can come from this - if it’s handled correctly.

First, I think Tino and the TAG/GRA need to somehow address this issue with the community directly. Engage the community and create some dialog around it.

Second, don’t just assume that me and some of the other talking heads around the community are just loud mouths that are unhappy and can’t be satisfied (that’s true by the way). I think most people understand that it’s quite the contrary. (a) we’re not unhappy and generally are trying to work hard to improve the community overall and putting our own time, money and passion into it through various events, etc. (b) we’re only the vocal ones — there’s plenty of people who won’t/don’t/can’t speak out and are talking around the water cooler. I’ve talked to a number of people who wouldn’t dare speak out that aren’t too thrilled about this.

Third, use this opportunity to maybe refine some of the rules (or at least, the intentions and instructions for judging in the future) going forward. Lance has suggested some good ones.

Fourth, understand and acknowledge that social media and the community-at-large will continue to play a very important role in the evolution of TAG/GRA and that this is an opportunity to embrace it.

Fifth, it might be worth spending time thinking about how to fund more companies instead of less. Maybe in the future we can get $100k to 3-4 companies instead of one. The cost of “launching” a startup is much lower than in previous years. It might be worth it to investigate the merits of doing a scaled model. 1st gets $50k, 2nd gets $30k and 3rd gets $20k. 4th place can have the services.

I think what we want to avoid is the image that these awards are really a waste of time.

P.S. Drop the silly pitch videos which were goofy and a waste of money/time in my opinion. Or at least get someone to really do a better job in the production. I would suggest Grayson Daughters.