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Investing in the Startup Ecosystem

John Vecchio on Creating a Groundswell [By Felicia Solazzo]

Corporate America was not the arena for John Vecchio.

1611-john-vecchio-0681-editAfter earning a degree in Mathematics with a concentration in Computer Science from Florida State University, he worked as a software engineer for a small defense company in Melbourne and then made his way to the Kennedy Space Center. Unhappy with the pace of the work, Vecchio joined Scientific Atlanta in Melbourne, a manufacturer of video systems for cable, telecommunications companies and satellite providers. The faster pace was a better fit, and the company helped him translate the technical realm into the business world.

Vecchio was brought to their Atlanta headquarters where he helped manage an engineering group that was launching a digital video product. “Like with all jobs, I got tired of that one too,” he said. Vecchio joined The Weather Channel in Atlanta and found that wasn’t a quick enough pace either. Eager to escape corporations, he moved to startups.

The first was N2 Broadband, focused on providing the video on demand infrastructure for cable companies. “We started it in March of 2000, which was just about when the dot-com bubble burst.” Venture capital dried up and markets went south, but the company thrived. “Recessions are really good for startups. There are a lot of engineers available; people want to take control of their lives,” he said. N2 Broadband was acquired for $140 million in five years, and Vecchio’s team was awarded a Technical and Engineering Emmy for the Video on Demand system in 2007.

VideoAscent, Vecchio’s second company, was an attempt to recognize video’s move toward the Internet. “It was probably premature, a little bit ahead of its time. People didn’t quite see the market yet,” he said. The company was sold over a year later.

Then came Clearleap, founded on the premise that television video consumption would happen over the Internet, not just through the cable systems. The big recession hit during their launch, but Vecchio and his team were able to keep things going. “The recession triggered change in behavior,” he said. “The dynamic of the whole industry changed; people were consuming video online.” The software at Clearleap took the content of publishers, such as HBO, and made it multipurpose. Clearleap’s life span, before being purchased by IBM, was about seven years. Vecchio left after year five.

Vecchio met Sig Mosley of Mosley Ventures, a venture capital fund, investing in technology startups, when N2 Broadband was looking for funding in Atlanta. “I stayed in touch with Sig over the years. When I was looking out for something to do, they invited me to join the partnership.” Mosley Ventures has invested in 17 companies, and one was acquired. It was Clearleap.

Bringing a Startup Ecosystem to the Space Coast

After working at Mosley Ventures for a couple of years, Vecchio wanted to move back to the Melbourne area. “It’s a good thing for the funds. I have two partners in Atlanta, so we’re covered there. Now I can very easily cover the state of Florida.” While working his way back to Melbourne, Vecchio met Mark Mohler and Jenna Buehler. The three saw a need for an incubator in the area. “Growing up here, I always knew that there was a lot of tech,” Vecchio said. “It is amazing how much technical capability there really is, but there really is no startup scene. When I looked around to what was available, it became apparent that we could do something.”

Bud Deffebach joined as a fourth partner and together they founded Groundswell. The nonprofit works with early-stage companies to gain access to funding and generate jobs. “If there is a really strong team with a disruptive idea in a growing market, they can get funded here,” Vecchio said. “Melbourne is not the center of the startup world, but they can get started here. In some cases they might have to leave, but it can happen. I have no doubt.”

Vecchio emphasized the significance of building a strong team within a startup. “When people build a product and take it to the market and it doesn’t quite fit, you have to go back and make changes,” he said. “It takes a very determined team that is smart enough to see what didn’t work, go back to the drawing board and give it another shot.”

In addition, Vecchio and his team assess the level of commitment presented by the early stagers. He shared the story of a company in Melbourne, where the founders are using their 401K to build products and pay salaries. “They’re all in, all the chips are on the table,” Vecchio said. “That’s what it takes. People who play around or have a job and are trying to do something just nights or evenings, that doesn’t work.” When he first started N2 Broadband, Vecchio didn’t have a salary for a year and a half, and even after that it was limited. “People think, ‘When I get funding, I’m going to pay myself what I normally make,’ and that’s definitely the wrong model.”

Another aspect Vecchio gauges during the evaluation of a startup is a sense of ownership from all aspects: Are they going to share, making sure everyone participates, and develop a sense of ownership or are they going to try to keep it all for themselves?

Helping to Grow Companies

Groundswell certainly provides a sense of ownership to its startups. The team’s free resources assure emerging entrepreneurs are receiving support from Groundswell’s network that spans across the nation. “There are definitely models out there where people want to take equity, but for me especially, which my partners also share, it’s a give back thing,” Vecchio said. “We see the potential of the area. There are people out there pretending they want to help startups and taking equity when they shouldn’t be.”

Melbourne lacks the luxury of a broad range of mentoring in commercial sales and marketing; most are defense and aerospace oriented. “Selling products commercially is very different from selling products to the government,” Vecchio said. “At Groundswell, we recognize that. Quite often, we have our startups talking to people in California or Atlanta. We’re finding the mentoring appropriate for them. One of the strengths of Groundswell is that we have networks, and leverage comes with that.”

At Mosley Ventures, the partners look at almost 100 companies before finding one they would like to invest in, using a venture pitch approach. “We’re very friendly, and we’re very honest,” he said. “We give tough love a lot of times with our advice and suggestions. Because we’re focusing on early stage companies, they may not be quite ready.” It’s an evolving process, he calls it. “We critique them, and tell them to come back in a few months to see if they have fixed the problems.” Vecchio calls it the “Guppy Tank,” but it could produce a blue whale. 

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