Tegic and startup funding

October 19th, 2006 by Hugh

Exbiblio’s friend Bill Valenti joined the team for the regular Wednesday lunch. Bill and Martin King were both founders of Tegic which created T9 text-inputting for mobiles, and eventually sold to AOL. Bill’s current venture is Melodeo which puts music and podcasts on mobile phones. Martin asked Bill to reminisce a little about Tegic days, and the experience of raising funding.

Bill recalled that in 1996 the company was running perilously low on funds. They had turned down some offers to licence their technology to mobile phone makers on an exclusive basis, as they saw that as limiting its potential. But an opportunity to discuss putting T9 on mobiles in the Korean market with Samsung. Tegic saw that an exclusive deal in the Korean language contained the downside quite nicely. This first Tegic agreement also included a license for the US market, but was not exclusive and was for a limited term.

Bill and Martin flew out to Seoul for a few “extremely intense” days of negotiations. They were two entrepreneurs from a Seattle startup dealing with a global corporation. Fortunately Bill had been a banker in Seoul in the 1970s and had lent money to Samsung in that capacity. He brought out the business cards of the first chairman of Samsung and the people he had helped 20 years back. He also speaks enough Korean for social chit-chat and singing (karaoke). All in all, they got on well and came back with a deal worth 1.6 million which was paid up-front without any loss of equity in the company.

The first revenues in-the-bank led directly to Tegic’s very-well received first round of external funding, completed only a few months later. Bill thinks it preserved 25% of the equity in the company for the existing investors, management and employees. And Martin believes that this transaction and relationship with Samsung was the making of the Company.

“Timing is everything” concludes Bill, and he endorses Exbiblio’s approach of waiting until it has a product in hand before it goes to investors. It’s entirely logical to want to negotiate from a position of strength, and there’s nothing like revenues for breathing life into a startup.