Popular Articles

Sweet marketing music

Tanner Montague came to town from Seattle having never owned his own music venue before. He’s a musician himself, so he has a pretty good sense of good music, but he also wandered into a crowded music scene filled with concert venues large and small.But the owner of Green Room thinks he found a void in the market. It’s lacking, he says, in places serving between 200 and 500 people, a sweet spot he thinks could be a draw for both some national acts not quite big enough yet for arena gigs and local acts looking for a launching pad.“I felt that size would do well in the city to offer more options,” he says. “My goal was to A, bring another option for national acts but then, B, have a great spot for local bands to start.”Right or wrong, something seems to be working, he says. He’s got a full calendar of concerts booked out several months. How did he, as a newcomer to the market in an industry filled with competition, get the attention of the local concertgoer?

read more
by Andrew Tellijohn
May 2004

Related Article

How bankers judge the quality of company's books

Read more

Upsize Growth Challenge: GateKeeper Systems Inc.

Upsize Growth Challenge: GateKeeper Systems Inc.

GateKeeper seeks new
markets for technology
that controls vehicles

by Neil Orman   After proving the viability of its product in one market, GateKeeper Systems Inc. now aims to diversify its customer base, cut costs and find more sources of recurring revenue.

The Apple Valley company develops systems for vehicle access control at airports, and it is one of the top three vendors of these products. Its systems are being used or implemented by major metropolitan airports in Minneapolis, Los Angeles, Denver, Chicago, London, Las Vegas and Houston, among other cities.

Now, GateKeeper aims to diversify into new markets including parking, auto-rental, freight and postal services. It also wants to structure better customer support agreements to bring in more revenue from post-sale service. Finally, GateKeeper seeks to reduce its debt and is considering raising additional equity.

To help it tackle those challenges, CEO Lynn Richardson consulted experts assembled at the Upsize Growth Challenge first workshop in early March.

Richardson says diversifying the company is his biggest growth challenge.

Other than airports, the one market GateKeeper has begun to penetrate is parking. The firm has installed its systems in 25 parking facilities across the country, including several ramps for the city of Minneapolis.

“We want to apply our product in environments that are similar to airports, but may not have exactly the same problems,” Richardson says.

Based on radio frequency identification technology, GateKeeper’s systems include credit card-sized devices that are placed on vehicles, giving security-conscious airports the ability to control and monitor the movements of taxis, limousines and courtesy vehicles.

For example, airports using GateKeeper’s systems can ask taxis to stay away from their limited curb spaces in waiting areas, calling them in only when they’re needed. Or parking customers could use the technology to identify regular customers automatically as they enter their facilities.

Airport experience
The company’s success with airports has been driven partly by Richardson’s experience in that market. He spent 18 years as one of the senior staff members of the Metropolitan Airports Commission. In 1997, he founded GateKeeper with three former software consultants with whom he previously worked. But Richardson’s airport experience hasn’t helped the firm with other types of customers.

“Our experience doesn’t buy us a whole lot if you go to talk to the postal service about their problems,” Richardson says.

He says his company is looking at markets featuring a lot of vehicles, to see whether they have problems GateKeeper’s product can address.

Steve Kolar, who works for Eschelon Telecom, suggests GateKeeper explore other airport-related applications, such as using radio-frequency tags to track baggage and cargo.

“You could do more to exploit your ‘in’ with airports,” says Kolar, senior director of IP network ops & engineering.

Richardson says his firm is looking at airports “in an expanded way,” including considering new applications and vendors that operate at the airport, such as auto-rental companies.

To help sell GateKeeper’s product into new markets, Clare Scott, director of marketing for law firm Fredrikson & Byron in Minneapolis, suggests Richardson should consider hiring salespeople with experience in its new target markets.

Richardson asks if any of the panelists could recommend a good model for service and support agreements. Eschelon’s Kolar speaks up, describing the tiered service plans that have worked well for his customers.

Today, GateKeeper charges clients for annual service agreements, covering software-related problems that customers might experience. It doesn’t charge separately for phone support, and the firm’s 10-employee staff fields phone queries as they come in.

Finding new sources of recurring revenue — such as the possible introduction of tiered service plans — is important for GateKeeper. The company has turned a profit in three of its six years in business, but on the whole, its profits and losses have just about evened out. This year, Richardson predicts GateKeeper will generate $1.6 million in revenue and turn a profit.

In addition to its erratic profitability, the company has had difficulty raising venture capital because it’s on a trajectory now to be a $4 million to $5 million company, Richardson says. Most venture capitalists are only interested in firms on a path to achieve $50 million or more in revenue, and that have shorter waits for some type of liquidity event than GateKeeper likely will.

Debt reduction ideal
When you throw in the weak fund-raising climate for tech companies, GateKeeper has been forced to rely upon debt more than Richardson would have liked. Richardson declines to specify exactly how much financing has been raised, but said it was less than $1 million. Of the funding raised, about half of it was equity and about half debt, he says.

Richardson explains that he had relied partly on individuals to guarantee the firm’s loans. Banker Kevin Howk says that was typical of small software firms, which have fewer tangible assets that can be used for collateral. Howk is executive vice president of Crown Bank in Edina.

Another financial expert, Bryan Ross, a certified public accountant with EideBailly in Minneapolis, says GateKeeper needs to reduce its debt.

“At a minimum, assets should exceed liabilities,” he says.

Ross also suggested that GateKeeper form a “small but dedicated” advisory board to help it develop a debt-reducing plan of action for the next three years.

On the legal front, Richardson asks about the importance of obtaining a patent, something GateKeeper doesn’t have today.

“It’s my opinion that we don’t have any IP involved in what we’re doing,” Richardson says, referring to intellectual property. “We’re taking an existing technology and applying standard software development practices in a very specific industry.”

Still, Patrick Kelly, an attorney with Fredrikson & Byron, advises GateKeeper to investigate software- and process-patents, and to make sure its software contractors were signing over all rights to their work to the company.

Venture capitalists “like to know that there is one; something you can protect, and angels do, too,” Kelly says.

To keep costs down, GateKeeper is trying to outsource software development when possible. Richardson gets advice from tech consultant Kirk Hoaglund on how to manage that challenge. Hoaglund is the managing partner and CEO of Clientek, a Minneapolis-based information technology outsourcing firm.

Hoaglund says that, before consultants could be used effectively, a company needed to have a well-organized “software development life cycle” in place, which he defined as a “system for pushing a version of a software product through the steps necessary to turn customer requirements into a cost effective solution.” Without such a system, and internal software experts who understand it, it’s difficult to manage and direct consultants to achieve a firm’s desired objectives.

Richardson points out there are only so many gems that can be gleaned from a 90-minute discussion, the Upsize Growth Challenge workshop. But nevertheless, he says the feedback from the panelists has already helped him.

“It helped my ability to know more people and find out sources of information,” he says. “Sometimes it’s just questions they ask that get you to look at things from a different perspective.”

Lynn Richardson, GateKeeper Systems: 952.891.1291; ldr@gksys.com; www.gksys.com