It Takes a Village

Tyler Paxton, MBA ’11, leverages campus connections to turn his idea into a startup.

Tyler Paxton, MBA ’11, entered the Michigan Ross MBA Program with an idea. Two years later, that idea has become Are You a Human LLC.

Tyler Paxton, MBA ’11

“One of the things that attracted me to the University of Michigan was the availability of funding and resources for entrepreneurs,” he says. “What I gained on campus was invaluable.”

Are You a Human (AYAH) provides an alternative to conventional CAPTCHAs, the distorted text and number images consumers must retype in a blank box to validate their authenticity as users. AYAH’s software uses task-based CAPTCHAs, such as dragging a slice of pepperoni into a pizza, which can be branded with a manufacturer’s product name and serve as an interactive advertising tool.

Paxton is no stranger to startups. Prior to Michigan Ross, he launched an IT services and consulting firm that still is in existence. But he says AYAH is a different ballgame. “The firm’s costs are directly correlated to making money, since we bill hourly by project. With Are You a Human, we’ve got a lot of upfront cost, so the failure rate is higher.”

But AYAH has a lot of support in its corner. The startup netted two Dare to Dream grants from the Ross School’s Zell Lurie Institute for Entrepreneurial Studies to support business feasibility and integration work. It also landed a $10,000 Norman C. Harbert Summer Accelerator grant from TechArb, a student start-up accelerator where the team conducted extensive customer research. “These programs and grants got us to the point where we felt comfortable about raising money,” Paxton says. In July the Ross School’s student-led Frankel Commercialization Fund joined a syndicate of investors in a Series A round, $750,000 investment into the company. The investment in AYAH was led by Detroit Venture Partners, of which Earvin “Magic” Johnson is a general partner. The AYAH investment also includes participation by Detroit-based First Step Fund.

Paxton knows money can only get you so far. At Michigan Ross, he also found the human capital to make his idea happen.

Ben Blackmer, MBA ’12

“Are You a Human is an opportunity I didn’t think I would get until two or three years after graduation,” says co-founder Ben Blackmer, MBA ’12. “I came to Michigan knowing I wanted to focus on entrepreneurship, but there are more opportunities and resources here than I ever expected.” Paxton and co-founder Reid Tatoris, MBA ’11, sought out Blackmer because of his previous experience in digital media and advertising. “I talked to them a few times to give them advice, and in the meantime I got to know more about the idea. But that was about it,” Blackmer says.

Until he talked with Paul Kirsch, then Zell Lurie’s associate director. “I told him what I wanted to get out of my two years at Ross, and he urged me to go out and find an idea to work on. I realized I already had.” Blackmer talked further with Paxton at Ross’ annual West Coast Forum, and the rest was history.

In the meantime, Blackmer also had secured a spot on the competitive Frankel Commercialization Fund. It is one of three student-led funds at the Ross School and focuses on early-stage ventures. By signing on with AYAH, he found himself in the unique position of having his own company approach the fund.

“The Frankel Fund is the best thing I’ve done at Ross,” he says. “Thinking about how venture capitalists view opportunities is immensely valuable. Putting ourselves in their shoes — particularly when I’m working on my own venture — makes it so much easier.”

Working on the fund puts students in close contact with area entrepreneurs, other VCs, and industry experts. Observing their process allows students to learn to really focus on a startup’s weak points, Blackmer says. “Deciding whether to kill a deal or move it to the next level is an experience you can only have with real money and real people who are passionate about their ideas.”

The lessons were applicable to AYAH’s own pitches, although Blackmer would leave the room when fund members discussed AYAH in order to avoid a conflict of interest. “We learned what those key questions would be, so we could prepare for them,” says Paxton. “It made us much more comfortable than we would have been otherwise.” Paxton praises the thoroughness and excitement the Frankel Fund brought to the table. “They asked us the tough questions, and they also made us privy to their research, which a normal VC might not do. Having these students right there on campus and in class with us was a unique advantage. It was like having a whole other team helping us develop our business plan.

“We eventually got funding through the Frankel Fund, but we got so much more,” Paxton continues. “There was so much value in terms of the feedback we gained, the connections we made, and the opportunity to expand our network and access people in the field.”

AYAH went on to place second at the 2011 Rice University Business Plan Competition. In addition to $115,000 in funding, the group also garnered a lot of attention. “The interest that sprung out of that competition was unbelievable,” says Blackmer. “Participating in and succeeding at a competition on the scale of Rice was a tremendous achievement, both for the team and for the growth of Are You a Human,” adds Paxton.

It also positioned them well for the Series A round.

Now Paxton and Tatoris work full time with AYAH, with Blackmer poised to join them after graduation this spring. “To be able to work with a company that is venture capital-backed right out of school, with people who were my classmates, is so rare — especially in the technology space,” he says. “It makes me realize that every day I get to work on this is a special opportunity, and I need to live up to the expectations.”

View a Video about Are You a Human

—Amy Spooner