SproutBox

Tuesday night at the Baker Place, local startup SproutBox presented their business idea to a few dozen local movers and shakers in the political, tech and entrepreneurial community.

SproutBox is a startup for startups

The evening at the snazzy downtown digs had the feel of a Bloomington Startup Weekend reunion. At least ten participants from that event were on hand to christen SproutBox into the local business community. The fact that SproutBox exists at all can be considered the most important outcome of that weekend in February.

The mission of SproutBox involves two core goals. The first is to eliminate the obstacles preventing people from turning their ideas into viable enterprise. The second is to make Bloomington into a “hotbed of high tech startup activity.”

Transforming the local Startup culture
Mike Trotzke, the spokesperson for SproutBox Tuesday night, used a movie metaphor to describe what SproutBox does. Traditionally, investors and entrepreneurs place too much control in the hands of venture capitalists to do the scouting, investing and decision making. This “Hollywood” model mimics what movie studios do—they put many talented people together to work on a single project, and then move on to another when it is done. Trotzke wants to make the entrepreneur the director of their project with SproutBox being the producer.

“What venture capitalists want,” Trotzke said during his presentation, “is a paradigm shifting, socially viral, semantic networked, widgetized platform with integrated user-contributed synergies and enterprise ready monetization—sold to Google while in beta.” What SproutBox wants is to develop a sound million-dollar business first before considering it a potential billion-dollar one.

For the first time since 1978, not a single company backed by venture capitalists went public last quarter. Since VC firms typically invest in 10 ideas hoping to get one to take root, young businesses taking VC money are partnering with people who expect them to fail.

Part of the reason for this may be an accepted philosophy for startups that leads to questionable business decisions. It is not uncommon for money to precede a revenue strategy, for example, relying on a build-it-they-will-come plan. The money that is invested tends to be spent recklessly—buying a lot of equipment and making quick hires—as a tactic to scare possible competitors away from the field.

SproutBox wants to shift the focus from investing cash in probable failures to providing the services and skills needed to take the product to market. They will do this by being practical in their selection of development projects, emphasizing the cultivation of predictable revenue, and targeting Software-as-a-Service (SaaS) as the preferred business model.

Mike Trotzke introduces Bloomington to SproutBox

A startup for startups
In a nutshell, SproutBox is a startup company looking to develop startups. Like Y Combinator and Tech Stars, it is a form of incubator investing resources to get fledgling businesses off the ground. Unlike such organizations, however, SproutBox is trying to measure success by revenue and stability.

Investment of human and financial resources will be limited to two companies at any time—one in development, and another in transition to the permanent owners. Projects will undergo a selection process that ends when an offer is made. The development cycle lasts about three months, followed by three more months of transition.

The first “sprouts”—the term owners Trotzke, Brad Wisler and Marc Guyer give to the accepted applicants—will be internal businesses run by the principals and used by the company to help future sprouts. New external projects won’t be selected until late spring 2009, after the development process has been iterated and refined. (This works out very well for second-year masters students and undergraduates working on capstone projects to complete their degrees.)

Most importantly, SproutBox is committed to developing Bloomington businesses. The SproutBox Manifesto includes the following:

• Good companies involve and enrich their communities.
• Ideas are less important than the entrepreneurs that have them.
• The Midwest is a great place to start a business.

SproutBox is counting on the IU School of Informatics and other university programs to become the seed for innovative new business ideas. As SproutBox becomes more successful in cultivating new sprouts, the hope is that students will choose Indiana after graduation because of the many opportunities afforded the local tech and business culture.

The team is also planning a new building located on Rogers and 11th, in the Certified Technology Park. The four story structure will sit on one of the highest points in Bloomington, offering office space to sprout companies and space for two retail stores on the street level.

Congratulations, SproutBox. Thanks for sharing.