Rainer Frost – Interview

A conversation with Rainer Frost, principal of Clarity Consulting Group concerning his decision to return to his consulting practice.  Clarity Consulting Group assists emerging and moderate-sized companies with business strategy, and accelerates their funding process by troubleshooting their business model and then introducing them to appropriate investors.  The firm helps companies gain access to the angel investor community, venture capital firms and institutional investors.

Your executive involvement with major financial institutions required that you put much of your consulting work on hold, so I was surprised when you informed me that you were returning to your Clarity Consulting practice.  So let’s begin there, why have you decided to return to your consulting practice working with start-ups and emerging companies?

Three words:  I love it.  Clarity clients are individuals who care deeply about what they are doing, and are pouring their hearts into a dream.  Often, I find that although clients are inspired and strongly driven, there are elements of business that they do not fully understand.  These may comprise weaknesses in their strategy that will be clearly visible to investors and preclude successful funding efforts.  I help each client to look at their business through the eyes of an investor.

You have a somewhat unique perspective on the innovation sector having been an entrepreneur, a start-up consultant, corporate counsel as well as working for major financial institutions.  What is your take on the current status of the innovation sector?

It is an exciting time on all fronts in this sector!  The investors that did not disappear during the downturn have shed their non-performing baggage, and are poised to invest in fresh ideas, and there is a new wave of entrepreneurs ready to engage them.

When I was heading up a venture forum, you conducted a series of workshops for us on how to prepare a business plan as well as investor presentation skills.  Do you plan to conduct these types of workshops again?

Yes, in fact, I have already begun to.  I gave presentations last month for the TiE Boston/Babson Entrepreneurial Boot Camp, and for a city-wide business initiative.  In the Fall, I am working with a major national firm that has asked me to present a series of workshops for entrepreneurs.  I have done a lot of speaking on this topic and presented many workshops, and the word is getting out that I am available again, which is great, because I really enjoy it.

We also collaborated on a national initiative to teach entrepreneurial skills to college students.  Do you see yourself becoming involved again in teaching entrepreneurial skills to the next generation?

I do Clarity because I love the work.  While working for major financial institutions I was often precluded by conflict rules from taking outside compensation, so I continued doing a modest amount of Clarity work on a pro bono basis.  I love participating in the energy, creativity and commitment that is central to start-up work, and it is very fun to share the energy generated by college, graduate and even high school students as well as those who have already been in the workforce.

One of the subject areas we will address in the Business Leader Post is the innovative economy.  Would you be interested in participating in a series of panel discussions concerning topics such as start-ups and venture funding?

Of course, Dennis.  I would be happy to participate in any panel that you run, or I would be happy to run a panel for you on a topic myself.

In every field of consulting there are people out there without the skills or experience to deliver on what they promise.  What advice would you give someone considering hiring a consultant to help them prepare a business plan or VC presentation to ensure they are spending their money wisely?  A common question concerning consultants and funding is the issue of finder fees.  We could also add to that discussion broker-dealer licenses.  Care to tackle that subject?

I have actually never run across anyone else who does the kind of consulting that Clarity does.  I have run across a few people that try to help companies get funded and work on a contingency basis.  Many people do not realize that this is not legal unless the person is a registered broker-dealer, which in general only applies to investment bankers working in a much higher-end space.  It is important to understand that taking this approach could present serious problems for both the company and the service provider.  This is particularly true if there is a possibility that the company will one day go public.  As long as you are talking to a consultant who seems smart and reputable, the principal questions that you should ask are: how do you work, what do you charge, and what can I expect to get for the money that I pay you?  Any good consultant should be comfortable responding to those questions, and giving you enough information to make an informed decision about hiring him or her.

Is your consulting practice specific to a market or industry?

Our practice is largely industry agnostic.  In general, the skills, perspective and intelligence that we bring to the table are applicable across industries.  This is because we view the company through the eyes of a prospective investor, and share that perspective with the client.  This allows the client to correct flaws in their plan that would be perceived by an investor, and allows the client to be the principal industry expert, which investors will want to see.  No investor wants to invest in a company because they have a smart consultant.  Rather, they want to invest in a company that has a viable plan and understands the space that they are entering.  We help companies to ensure that their plan is viable, and that they understand their industry and market.

How about giving our readers some examples of the typical and not-so-typical companies that have hired you?

Clarity has worked with a lot of technology companies, ranging from hardware to software and online applications to online content.  I have also worked with companies in industries as diverse as major medical appliances costing millions, to financial services companies offering services for free.  We have worked with various media, breweries, gaming, medical devices, biopharmaceutical lab tools, and jet engine retooling facilities.

I realize that large funding events are certainly not the best or only criteria for judging a consultant’s record; however, were you not involved in the largest funding event in Massachusetts during post-bubble 2001?

Yes, that year I closed a $37,000,000 round for a financial services company.  It was a very tough environment in which to raise capital, and we had to be very aggressive and very creative, but we generated the necessary interest and got it done.  It was a satisfying accomplishment.

Recently you served as a judge in a business plan competition.  In the decade you have been involved with these competitions does anything stand out?

What really stands out to me more than anything else is the benefit that these contests provide to entrepreneurs.  Many entrepreneurs do not understand that the principal benefits that they will gain from entering these competitions are not the potential prize dollars.  Rather, the benefits are overcoming the hesitance, felt by all entrepreneurs, about telling the world what they are building, and the valuable feedback that they get from the judging panel and the audience, if there is one, on the strengths of their plan and the areas that need improvement.  The Merrimack Valley Venture Forum contest that you referred to is a case in point: several of the entrepreneurs in the contest contacted me after the event to thank me and discuss working with Clarity Consulting Group.

The current state of the economy has a lot of people looking at other options for employment.  Are you finding that you are spending more time than normal talking to individuals who are really not committed to becoming an entrepreneur?

No, not more time, but I have always found that an important part of the value that Clarity provides is counseling entrepreneurs out of business if they have fatally flawed plans.  Fatal flaws can include anything from nonexistent markets, plans that are unprotectable from competitive entry, or ideas that cannot be funded for a variety of reasons, to a lack of commitment or understanding on the part of the entrepreneur.

What advice, if any, would you give to someone in transition who might be thinking that starting a venture funded start-up is a solution?

The first and most important thing for any prospective entrepreneur to consider is what their own start-up runway looks like.  Take a realistic look at how long you can drive the process forward without funding and without income for yourself, and look at where you will be standing if funding comes later than planned, or does not come in.  While Clarity has a strong track record of accelerating the funding process for fundable companies, no company can ever assume that funding will occur on a planned timeframe.

I am going to wrap this interview here and be back to you shortly to discuss organizing a panel discussion.  In the meantime are you willing to respond to questions from our readers?

I am very happy to respond to questions from your readers, and look forward to hearing from them.  Thanks for your time!