Startups needed to create jobs: Bozeman’s Elixiter in on ground floor of online marketing

December 18, 2011 Chris Leonard

By TOM LUTEY

Billings Gazette | Sunday, December 18, 2011

BOZEMAN – Even when the economy’s gone cold, when the iron glows hot, a person has to strike. Andrew Hull did. The Billings native was leading product marketing efforts for Bozeman software overachiever RightNow Technologies when he decided to plunge into the shark tank that is self-employment.

Hull aimed for an Internet marketing niche so new he sensed he was getting in near the ground floor. Now he’s renting a cubicle in a loft above Main Street and working accounts in Austin, Texas; Seattle; San Francisco and Irvine, Calif.; Louisiana. His company, Elixiter, is picking up steam.

“Elixiter just hired its first full-time employee and my intention is to hire another one in January,” Hull said. “These are high-paying, technology-oriented positions.

“I’m actually less concerned about the economy than I am about actually finding people who understand network marketing.”

Elixiter specializes in helping businesses connect with would-be customers through tools like email and then closing the deal. The company helps them find the right customers and provide them the right information at the right time, something that’s easier said than done for companies reaching out electronically to multiple customers. The service takes business marketing beyond impersonal mass email blasts by making sure prospects have the interaction needed to become buyers.

Startup businesses like Hull’s are generating plenty of discussion among economists who say the Elixiters of the world are crucial to getting America’s 6 million jobless back to work.

The Kauffman Foundation, the nation’s largest private researcher of entrepreneurship, reports that from 1977 through 2005, there were only seven years when existing businesses created more jobs than they destroyed. Kauffman concluded that without startup businesses, U.S. job creation would have been negative long before the Great Recession.

Startups account for 3.4 percent of total employment, but more than 20 percent of new jobs every year.

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But the economy hasn’t been kind to startups. Startups often show up in statistics as “non-employer” businesses, a category comprising businesses so small they have no payroll employees. Small, one-person companies and real estate agents are examples of non-employer businesses and they’ve been hit particularly hard in the current economy.

The nation lost 600,000 non-employer firms between 2007 and 2009, according to the U.S. Census Bureau.

Financing has become more challenging for startups. The Census Bureau also reports that the majority of startup businesses relied on personal savings, while another 8 percent borrowed against their homes. Bank loans were just 19 percent of the equation, only slightly more relied on for financing than credit cards.

Since the recession, the federal government has tried to step up funding for startup businesses, but hasn’t been successful. One federal loan program, the Small Business Lending Fund, had $30 billion to spend, but issued only $4 billion before the program expired earlier this year.

Congressional politics haven’t helped, said John O’Donnell, executive director of TechRanch, a nonprofit business incubator. TechRanch has given some of Bozeman’s best startups the push needed to get going, but has fallen on hard times.

A ban on earmarks by House Republicans, including U.S. Rep. Denny Rehberg, R-Mont., put a kink in TechRanch’s ability to arrange for funding targeting it directly in 2009.

Earlier this year, partisan fights over the federal budget in Congress delayed support to TechRanch.

TechRanch could no longer afford office space, which it once allowed new businesses to occupy until they could stand on their own. The incubator had created 500 jobs in Montana over the last decade. O’Donnell said he’s now meeting with startups in coffee shops.

Hull was able to tap RightNow Technologies’ stocks to launch Elixiter. Employees of RightNow were able to acquire stock when the company went public in 2004. Common stock at the time was valued at $7 a share. Shares of RightNow stock have been selling for $40 or more since late October, when Oracle Corp. announced it would buy RightNow for roughly $1.5 billion.

Hull likes his chances. The automated marketing industry is growing rapidly now. One of Elixiter’s partner firms, Marketo, grew 100 percent from 2010 to 2011.

“All my customers are outside Montana. It’s a good mix of national companies and international companies that are outside the region,” Hull said. “We’re bringing in new business.”

Reporter Tom Lutey can be reached at (406) 657-1288 or at tlutey@billingsgazette.com.

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