“The risk of losing control always goes up whenever an entrepreneur raises capital from outside investors, but there are many things that can be done to minimize the risk.” — Matthew Michalewicz, co-founder, SolveIT Software.
_______________________________________________________________________________________The founder of NuTech Solutions has learned one of the biggest lessons about life that business teaches: Take care of No. 1.

Having learned the risks of taking outside money and dilution, Matthew Michalewicz has launched a new software company in Australia. Fired by NuTech’s board in September of 2003, Matthew eventually headed Down Under along with his father, Zbigniew, and several NuTech employees to launch SolveIT Software. Lech Walesa, the former head of Solidarity and president of Poland who served on NuTech’s board, is also part of the new venture as a founder.

“The risk of losing control always goes up whenever an entrepreneur raises capital from outside investors, but there are many things that can be done to minimize the risk,” Matthew told Local Tech Wire via email from his Adelaide headquarters in southern Australia. “These include, among others, entering into iron-clad employment contracts, maintaining a 51 percent ownership stake, owning super-voting shares, and putting a ‘buy-back’ clause into the investment term sheet (which allows the company to buy out troublesome investors).

“I encourage all entrepreneurs to thoroughly evaluate this issue during the set up of their company, or, at the very latest, before they raise their first investment dollar,” he added. “Obviously, after the lessons learned at NuTech, I did a lot of things differently with SolveIT Software.”

NuTech was on a fast-track of growth, increasing revenues 50 percent a year, according to Matthew. But acquisitions and taking $15 million in investment put him in a precarious position.

“By late 2003, NuTech had completed four acquisitions and raised almost $15 million from more than 300 individual investors, so my ownership and control over the business were severely diluted,” he recalled. “Hence, when some board members got the idea that the company could make better progress under the auspices of an older CEO, there wasn’t much I could do.

“Of course, I disagreed with the board’s decision at the time, and I still disagree with it today. However, it’s important to note that the decision to terminate my employment without cause wasn’t a unanimous decision, and my father, Lech Walesa, and Zbigniew Brzezinski all resigned from NuTech’s board after I was dismissed.”

Matthew has wasted little time in reaching out to other entrepreneurs in Adelaide, which is a city of more than 1 million people and is home for the University of South Australia. The university is widely respected for its investments in technology and is closely linked to a Technology Park. He is participating in mentor programs to share his experiences.

“I offer advice and guidance to up-and-coming entrepreneurs,” Matthew explained. And he’s open to inquiries from folks back in the USA. “(I)f anyone has any specific questions about these issues they should feel free to send me an email, as I would be more than happy to help,” he said.

A New Company, a New Environment

LTW caught up with Matthew recently to talk about more than lessons learned — especially the focus on SolveIT and why he and its other founders chose to relocate to Australia.

“In the 1980s I spent seven years living in this part of the world, so moving to Australia was, in many ways, a return home,” he said. “Both of my parents moved here as well, as did several ex-NuTech employees with whom I founded SolveIT Software. All of us were attracted to Australia’s robust economy, which is in its 14th year of expansion, the strength of corporate IT spending here, and the fact that there is very little competition for the kind of Artificial Intelligence solutions we offer.

“Given all of this, I believe we’ll achieve greater levels of success in a shorter period of time in Australia than would otherwise be possible in the US, which currently has sluggish IT spending and fierce competition for AI-based solutions.”

Matthew’s father, who ran the computer program at UNC Charlotte, provided much of the knowledge and skill in creating the intellectual property portfolio for NuTech. He quite NuTech’s board when Matthew was fired. He and Matthew also recently sold what stock they had left in the firm, citing differences of opinion with new management about its direction.

Second Time a Charm?

The Michalewicz duo learned more than the “don’ts” of financing from their days at NuTech, which was launched in 1999.

“It’s so much easier to start a software business once you’ve already been through the entire process, and it’s amazing how straightforward everything is when you know exactly what to do and how to do it,” Matthew explained. “For instance, it took me more than two years to secure the involvement of Lech Walesa back in Charlotte, and now, at SolveIT Software, I had his support from day one.

“Things like that make the road far less bumpy, and so I’m very happy with the progress the company is making. People can expect big things from us in the years to come, and we’ve already got some big announcements in the works.”

Matthew also believes that SolveIT will soon be on the cutting edge of artificial intelligence development.

“The field of Artificial Intelligence (AI) has made some significant strides forward during the past six years, so by starting with a clean slate at SolveIT Software we were able to build our technology platforms using the absolute latest advances in AI, rather than incorporating these advances into preexisting, out-of-date solutions,” he said. “I also found that when you remove scientists from an academic environment and put them into commercialization roles in a company, much of their focus on innovation and research goes away. As a result, technologies that are state-of-the-art when scientists emerge from academia quickly grow obsolete.

“When I created SolveIT Software, I overcame this problem by forming a research relationship with the University of Adelaide, which is one of the premier research universities in the Asian-Pacific rim, and by establishing a scientific advisory board of more than a dozen international thought-leaders in the field of Artificial Intelligence.

“Also, from a science point of view, the founders of SolveIT Software have written more than 500 scientific publications, and if you include the advisory board as well, the number goes well into the thousands. All of this allowed us to make a quantum leap forward in the technology we used to build our core technology platforms.”

Life on the Beach

The Southern Australia climate has made the transition easier as well, he said.

“The seasons are reversed here, that’s true, but it’s hard to label 60-degree sunny days in June as ‘winter-time weather’. The climate here is nothing short of phenomenal,” Matthew said. “As far as a direct comparison with Charlotte, I have to say that Adelaide has many unfair advantages. To begin with, 30 miles of golden beaches surround the city on the west side, and more than 50-miles of mountains surround it on the east side, and on both the north and south are countless vineyards that produce more than 50 percent of the country’s wine output – hence, the scenery is marvelous, and the city center is less than 30 minutes from the beaches, mountains, and vineyards.

“Next, Adelaide has a dry climate with very little rain and 80 – 90 degree days in the summer and 50 – 60 degree days in the winter, giving you the perfect weather for outdoor living. Because of all these geographical and metrological differences, it would simply be impossible for me to enjoy the lifestyle I have here back in Charlotte.

“For example, my house is situated directly on the beach (my backyard opens up on to the sand), and so I’m able to go jogging or horseback ridding in the sand and surf each morning, eat breakfast on my balcony while watching the waves roll in, and then commute 20 minutes to the city center for work. That’s something I couldn’t do back in Charlotte, even if I lived on the best real estate in town.”

SolveIT: www.solveitsoftware.com