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War Stories: Pittsburgh almost loses one

Thursday, June 15, 2000

By Astro Teller, CEO, Body Media

Last winter, BodyMedia came extremely close to relocating to Boston. An unusual byproduct of the event was the discovery that almost the entire company actually wanted to stay in Pittsburgh. The pressure built up in this situation brought out the true colors of both the VC firm in Boston and our city.

 
Astro Teller, Body Media 

BodyMedia spent the summer and fall of 1999 trying, unsuccessfully, to raise money from local VC firms. Our lack of success was particularly odd given the strong lip-service we'd been receiving from all corners of this city on how BodyMedia was exactly the kind of company Pittsburgh needed to keep and nurture. For the most part we had avoided out-of-town VCs because I was concerned that they would pressure us to leave the company's home, where we were interested in staying for both professional and personal reasons.

By September, after months of searching for local funding, the only VC that was clearly ready to back BodyMedia was from Boston. The firm didn't describe themselves as a classic incubator, but in retrospect, that is very much what they were.

 
 

We were, as a company, very excited by the contacts and exposure they could offer and the close mentoring that they were clearly qualified to provide and inclined to give. The $3.3 million didn't hurt either.

 
    BodyMedia

The company provides fashionable, wearable health monitors that sense and automatically record important body stats. These monitors combined with the BodyMedia Web site form a system that helps people define, develop, and maintain a healthy, balanced lifestyle. BodyMedia's products and services are designed to lead a person through an engaging process of self-awareness of body, mind and emotions.

 
 
The terms would effectively have given them immediate control of the company. This was obviously not what we were looking for. But the combination of our unusually good rapport with them, the "bigger piece of a smaller pie" mentality, and the fact that Pittsburgh had been world-class in its unresponsiveness to us, pushed BodyMedia to sign the Boston term sheet in early November. According to the agreement, BodyMedia's entire operations would leave Pittsburgh by January of 2000.

Soon after the term sheet was signed, I moved to Boston, honestly assuming that I would probably never spend another full workweek in Pittsburgh. By December 1 I had leased an apartment in Charlestown, Mass., and by Christmas, my wife, Zoe, had wrapped up the projects around our house so it would be ready to go on the market in January. To make a long and painful story quite a bit shorter, during November and December, the relationship between BodyMedia and the Boston VC began to crumble.

In their defense, the Boston VC group spent considerable time and resources on and for us before a contract was ever signed. In addition, they wasted no time in plugging BodyMedia into their extensive, valuable network of experts and advisors. On our end, we were genuinely wrapping up our operations in Pittsburgh, preparing for the move, avoiding hiring people we were eager to get who wouldn't be able to follow us to Boston, and confiding in our soon-to-be partners.

But there was one giant catch.

This firm wanted intellectual and emotional control in addition to legal control of the enterprise. They had tried to articulate this need to us early on, but it wasn't until the final week of the millennium that the BodyMedia founders really emotionally felt the contract's implications.

We were in a tough position; BodyMedia was $270,000 in debt with no cash reserves and the very real possibility of having to close up shop in about two weeks. Under these circumstances, and given the lack of real support BodyMedia had received from Pittsburgh, it looked like our only option was to sign with the Boston group.

Based in part on urging from a few isolated individuals to give Pittsburgh another chance (and in part on our eagerness not to sign any contract "because we had no choice") we ended our potential funding relationship with the Boston group on January 7 of this year. We had about two weeks to raise at least $400,000 so we could clear our debts and have a month to find a long-term solution.

To our great surprise and delight, Pittsburgh came through for us this time. In two weeks we raised nearly three times the $400,000 we had been hoping to raise, 85% of that from local individuals and corporate sources.

Since then we have solidified our relationship with Pittsburgh. Two VC firms are scheduled to make investments in BodyMedia on May 30 and several million more in local money has already been pledged for an investment round later this summer. The only moral here for BodyMedia is "persevere." As for the Boston group, they'll hopefully have learned something by having scared us away and Pittsburgh will hopefully have learned something by having nearly lost us.


Earlier War Stories

Matt Miller of Internet Venture Works on how Pittsburgh must start talking to the rest of the tech world

Sanjay Chopra of Online Choice on finding investors sometimes means finding yourself.

Dave Nelsen of CoManage on the physical challenges of managing in the New Economy


More on BodyMedia

The New Economy: Welcome! Now justify your ideas (5/9/00)

Wired for wellness (5/2/00)



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