Fertile Ground

Case in Point

Consider Katherine Hammer of Evolutionary Technologies International in Austin, Texas. A linguistics professor in an earlier career, Hammer traded in the challenges of ancient Norse dialects for the contemporary brain teasers associated with computer programming. In 1991, she founded Evolutionary Technologies along with partner Robin Curle to help large companies handle data integration management and maintain consistency among related data on different systems.

After their stint as software technology researchers at research and development consortium Microelectronics and Computer Technology Corp. (MCC) in Austin, Hammer and Curle moved across town to the Austin Technology Incubator. The incubator's founder was George Kozmetsky, also co-founder of technology giant Teledyne Inc. "George provided us with unbelievably helpful counsel and guidance," recalls Hammer.

He also provided them with introductions to an informal network of angel investors affiliated with the incubator. One of the investors was Admiral Bobby Inman, who had been head of MCC while Hammer and Curle were there. Inman felt they were clearly onto something, and committed $250,000 to the venture, which in turn secured another $1.25 million from other investors-for total first-round financing of $1.5 million.

Looking back at the experience, Hammer says that being in an incubator is one of the reasons that Evolutionary Technologies is successful today. Sure, all the goodies at Austin Technology Incubator played their part. But in the case of Evolutionary Technologies, Hammer suggests there was a more subtle, though massively important, dynamic.

In a word, it was control. In the incubator's nurturing environment, Hammer and Curle were able to turn down prohibitively expensive financing proposals. "It's a huge problem when you lose control of the company in the first round of financing," says Hammer. "If the business goes through a false start or has some difficulties getting off the ground, then the investors feel like they have to take over."

By contrast, in her case, Hammer reports Evolutionary Technologies' founders held a majority position all the way until the third round of financing. "We were lucky," she says. "We were able to build the foundation for the business according to our vision." Apparently, they built it right. Today, Evolutionary boasts some $22 million in sales and has more than 170 employees. The investors haven't fared too badly,
either. According to Hammer, for every $1 of capital invested, the company has generated more than $11 in sales.

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This article was originally published in the August 1997 print edition of Entrepreneur with the headline: Fertile Ground.

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