Entrepreneurs, Be Careful

Here's the full text of a short Pop City story today about what looks like an interesting enterprise that wants to support entrepreneurs. I'm quoting the full text because the buildup is really intriguing -- and the payoff is eye-popping. You have to see both.

Pittsburgh-based Ad-Base Group’s unconventional approach to the business of venture capital seems to be working.

A “one stop shop” for entrepreneurs, Ad-Base Group made the Inc. 5000 list of fastest growing companies in the country in 2007. Last year Ad-Base added six employees to its growing staff of professionals, bringing the total to 36; revenues also jumped $1.3 million for a total net revenue of $17.5 million for the year.

The company started out in 1986 as Computer Comfort and evolved from a tech-based company into an early-stage, technology incubator and investment company in 2007, explains Josh Lucas, marketing coordinator. Unlike the typical investor that provides promising companies with funds, Ad-Base Group goes an extra step, assisting entrepreneurs with a shopping list of services to get them off and running: administrative, financial, marketing, advertising, legal, engineering and development support. And all at less than half the normal cost, says Lucas.

“We’re a non-traditional venture capital company,” Lucas explains. “Our unique business model gives the entrepreneur the resources to jumpstart their dream.”

In exchange, Ad-Base assumes control of the company’s intellectual property. Most recently Ad-Base added Inspira to its portfolio, a Pittsburgh-based IRA management software company. [Bold added!]

Talk about burying the lede! The first time I read that next-to-last sentence, I just about fell out of my chair. The next-to-last sentence reads like companies have to assign their IP to Ad-Base in order to secure their services and support. Ouch! Holy indentured servitude! On reconsideration, I have to assume (or at least I have to hope) that this isn't the case. I hope that "control" means that Ad-Base offers legal counsel that helps its portfolio companies license and otherwise exploit their IP.

Lesson: If you're an entrepreneur, get clear on ownership of IP *before* signing up with any firm that wants to "help" entrepreneurs!


5 Responses to "Entrepreneurs, Be Careful"

Anonymous said... 2/21/2008 4:15 PM

This might warrant a whole post but it seems apt in reply a well:


Seems like the perfect thing for students who are about to graduate and are saying "Should I try my own thing while I'm young and without responsibility?" Or, for people who have been pondering making the jump.

I know the idea has been done before but I'm glad to see it happening in Pittsburgh.

Big fan, btw.

Anonymous said... 2/22/2008 1:30 AM

Umm, does the right hand in town know what the left is doing. Isn't AlphaLab doing exactly what Idea Foundry does? Granted, I don't think we can have too many resources in the region, but the messages sure seem muddied. We've got Idea Foundry, Innovation Works, Life Sciences Greenhouse, Tech Collaborative, this new AlphaLab group of IW, Gary Rosensteel's Help Startups, Ad-Base Group, and others.

FWIW - the Ad-Base Group model seems great...for them. I'm an entrepreneur and am aware of most of the groups in town, but have never heard of them.

Jefferson Provost said... 2/24/2008 8:53 PM

To the extent that these groups provide concrete help (i.e funding) to startups, the more the merrier. Idea Foundry's transformation fellowships fall into this category.

Non-profit groups that provide other sorts of intangible "help" that doesn't involve actually funding good ideas are of dubious value, IMO.

Anonymous said... 2/26/2008 9:43 AM

More support for regional entrepreneurs is always a good thing. Folks looking to cash in on this sentiment is not new.
I'd advise any entrepreneur looking to engage the cadre of assistance organizations to make certain they talk to 3 or more clients of the organization before moving forward -- in many cases I expect they will get a big thumbs up, but I am leery of any provider that doesn't start their story with successful happy client lists. I'd bet that most clients will give high marks to IW, Idea Foundry, TTC and PLSG. Non- philanthropic incubators on the other hand, have come and gone by the score.
After all, it is supposed to be about the entrepreneurs and their companies' success, isn't it.
I have no knowledge of the Ad-Base folks and they might be terrific -- but only their previous clients (and their track record with them)can offer real insight into the effectiveness and value of the providers.

Anonymous said... 2/29/2008 9:31 PM

Instead of government funded bureaucrats picking investments - why don't we change the tax code to incent this in the private market.

IW folks are nice, but their not capitalists

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