“The MBA program gave me all the tools I needed to get the process going, the initial momentum and the ability to understand what I needed to do and to avoid the early mistakes that really could have torpedoed us.” – Daniel Nelson, MBA ’06
Idea for Class Project
Daniel Nelson’s life-long friend and UT undergrad roommate, Robert Reeves, convinced Nelson to use his idea for a new software application for a business plan class project. Nelson recalls, “I didn’t think Robert’s software worked but agreed to use it for my class project.”
Based on Nelson’s class project, Reeves and Nelson later co-founded Phurnance Software. The software makes it quick and easy to install Java-based enterprize applications and updates, eliminating costly manual, error-prone processes. “We have a product that addresses a very specific pain,” said Nelson. “Money might be tight, but when you’re on fire, you’ll gladly pay for a fire extinguisher.”
After working in the software industry for eight years, Nelson wanted to leverage his skills and pursue an entrepreneurial venture. In 2004, he started in the Texas Evening MBA program while he continued his full-time job and took classes at night, focusing on entrepreneurship.
Nelson used his New Venture Creation class to formalize the business plan for Phurnace Software. Using the content from class, Nelson interviewed potential customers about the new software product and used the results of this market validation process to determine marketing, sales, pricing and distribution strategies for the company.
In addition to core classes in accounting, economics and finance, Nelson took the Advanced Venture Development Practicum and Advanced Corporate Finance as electives to further refine his plan. He credits his course work with developing additional skills to put together and analyze financial statements and understand the fund raising process. “Just having the language and ability to understand what venture capitalists are offering makes a huge difference,” Nelson said.
Phurnace Software took advantage of the university’s Austin Technology Incubator (ATI). While at ATI from 2006-2007, Nelson and Reeves continued to raise money, generate revenue and evolve their business strategy.
Nelson competed with Phurnace Software in the 2006 Texas Moot Corp Competition, the business-plan competition hosted annually at The University of Texas at Austin. The company won first place. “Moot Corp was the driving force that made me get everything ready by competition date,” Nelson said. “Just by competing we were able to significantly improve the clarity of the plan and express the demand from the market. And more importantly, our first investors were my judges there.”
After launching, Rob Adams, director of Moot Corp, became a board member and adviser to the company. He continued to work with Nelson and Reeves as they raised their financing and later introduced them to Larry Warnock, who became CEO of Phurnace.
Phurnace Software’s first investment came from Phil Rawlins of Lone Star Capco and angel investor John Hime, who were both judges in Texas Moot Corp. In 2007 Phurnace raised its first professional seed capital from DFJ Mercury, a Houston-based early stage fund affiliated with Draper Fisher Jurvetson. In mid 2008 Phurnace completed its Series A fund-raising with an investment led by S3 ventures, a Texas-based technology venture firm.
January 7, 2009 was a big day for Phurnace – it was announced that the company had been acquired by BMC Software, a Houston-based firm.
“This is a great example of a company finding compelling market pain and aggressively pursuing it. In this environment of difficult fund-raising and exits for start-ups, this team did an amazing job of execution from idea to multiple rounds of financing to exit in four years.”- Rob Adams, Director of Moot Corp