By Rhett Morgan
Copyright © 2018 TulsaWorld.com, 315 S. Boulder Ave. Tulsa, OK
Things are looking up for John Morad and not just because he works on the 27th floor.
Morad is getting his MBA from Harvard and teaches artificial intelligence and machine learning four times a year as a visiting instructor at Stanford. He also is founder and CEO of a new Tulsa company, iRecommend Software, that has offices in such faraway lands as London and Dubai.
But until he hooked up with i2E Inc., he admittedly was a visionary who lacked focus.
“I walked into their class in September 2016, and I had no idea what to do with this piece of technology,” Morad says from his suite in First Place Tower.
“We couldn’t raise the money through other venture capital firms. They refined the market, refined the product, refined the message.”
i2E, which receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology, will turn 20 years old this fall with a resume that gets longer by the day. With almost $60 million under management, i2E has advised 709 Oklahoma companies, making 266 investments in 163 firms, says Scott Meacham, i2E’s president and CEO.
“The mission of i2E has changed pretty dramatically over that 20-year history,” he says. “Originally, we were an advisory company. Then we were an advisory company that had a little money. Now we are a capital company that provides advice.”
According to the 2017 Tulsa MSA Economic Impact Summary, 52 percent of i2E Tulsa-area clients were in IT/software. In addition, the 29 Tulsa MSA companies that responded to the survey reported current annual revenues of more than $76 million.
Started in the garage
Well Checked Systems of Prague is among the startups i2E has benefited.
In June 2014, i2E closed on a $1.4 million Series A preferred equity investment in the company, which specializes in event-driven, remote well site video monitoring and reporting. SeedStep Angels and other investors joined the round.
“Basically, (i2E) gave me a backstop to say, ‘This is what we’re looking at doing,’” says Mike Haines, the company’s CEO and co-founder. “That was probably the most helpful. I got to ask people with experience questions and I got answers to those questions. Actually, I usually got questions for my questions and they gave me answers.”
Along with Matt Villareal, Michael Tate eight years ago founded Tulsa-based Infinite Composites Technologies, which designs, develops, and manufactures advanced gas storage systems for aerospace, industrial gas and transportation applications. ICT received significant backing from i2E partner OCAST.
“It’s huge,” Tate says. “You’re able to say you’ve put money into the development of a product, and it helps develop prototypes and prove out your concept. A lot of OCAST funding was very important to the development of our work as well as fundraising.”
Named a top 50 global startup during 2013 Global Entrepreneurship Week, ICT now has 13 employees and 11,000 square feet of facility space in Tulsa, Tate says.
“We basically started in the garage in an incubator,” he says. “We’re finally kind of turning the curve on the startup experience, and we’re more of an operational business.”
The genesis of i2E
The oil bust of 1980s, when the per-barrel price of WTI crude dropped nearly $100, “really affected the psyche of our state immensely,” Meacham says.
The state’s per-capita personal income was almost the same as that of the nation’s in 1982, figures show. Just five years later, the state’s income relative to the country’s had dropped back to 81 percent.
“The ’80s were terrible for Oklahoma because it hit not just the oil and gas industry sector but also the real estate sector and the banking sector,” Meacham says.
In the years that followed, discussion by Oklahoma leaders centered on how do diversify the economy, as well as how to keep homegrown talent in state. Illustrating the latter was a 1992 Connecticut-based biotech startup called Alexion Pharmaceuticals, which was formed around patents licensed from the Oklahoma Medical Research Foundation.
“We were either exporting our technologies to other states or they were dying on the vine here,” Meacham says.
To help remedy that, lawmakers did a number of things, changing the constitution to allow OCAST to hold equity investments, and then in 2007, putting aside money called the Oklahoma Seed Capital Fund, a venture capital fund to provide equity financing to small, high-growth companies. It was created with state funding managed by i2E and provided through OCAST.
Today, about 80 percent of i2E clients go through its Venture Assessment Program, which includes three weeks of classes, Meacham says.
“It’s really simple,” he says. “They have to determine is there a customer for your product and what does the competition look like and how could you be a successful company. Because at the end of the day both the entrepreneur and i2E need to know if it’s worth our collective effort pursuing the idea.”
Hard road to innovation
Son of an Egyptian father and Greek mother, Morad grew up in Egypt, sold his first tech company to Amazon in 2004 and moved to the United States five years later.
His inspiration for iRecommend, his artificial intelligence and machine learning startup, dates to 2006 when he was a developer in Amsterdam and wanted a piece of software that could act as a personal assistant. So he coded the software — naming the agent Sophia — to assemble information from the public domain to help people make decisions.
The process is designed to spit out the most highly relevant, user-specific recommendations across retail, recruiting, real estate, entertainment and health care industries.
“The software learns you,” Morad says.
He spent four years on research and development and $2.2 million of his own money before connecting with i2E, where he underwent a Venture Assessment Program and weeks of cold-calling potential clients. In December, i2E announced the closing of a $1.85 million Series A investment round with iRecommend. i2E led the funding, with participation from co-investors Warren Foundation (Tulsa), Falcon Partners (Houston) and other strategic investors.
“You can go from being in R and D (research and development) for 10 years, 12 years, forever, without making a dime to an actual company where you are refining the product and refining the message and hitting the market,” Morad says.
“Money really makes the jump easy for startups. If you have a good product, you need to tell people about it. And to tell people about it, you need marketing and you need sales.”
His company iRecommend, which also has domestic offices in Oklahoma City and New York, now employs eight people in Tulsa and 22 companywide, he says.
“The first thing young entrepreneurs do is knock on doors in San Francisco because everybody wants to be in San Francisco,” Morad says. “But that’s the problem. When you talk to venture capitalists there, they tell you we can do this but you have to relocate.
“I don’t think i2E is as well-known to entrepreneurs as it should be. Having i2E was a wake-up call for me to realize that you really can’t build everything from scratch just on your own. … In order to really scale and build an enterprise, your role needs to go down and your team role needs to grow.”