I attended a Venture Capital pitchfest recently. The setup was that 3 VCs in attendance would listen to 2 minute verbal pitches from 8 entrepreneurs drawn at random, then ask questions for 2-4 minutes.
After this each would give a rating: No Thanks, Email Me, Call Me (in order of interest). The best pitch would then have the entrepreneur invited to a dinner the following week with VCs for a formal presentation.
The number of prospective entrepreneurs was about 50; 3 rows of 5 tables with 5 per table, but not all individuals and also attendees from the entrepreneurship group.
The forum was great because it provided the opportunity to hear out other people's ideas and to see how VCs think/react, as well as get examples of actual pitches (good and bad).
I'm leaving out specific company names as well as VC names and the forum information; if interested PM me. My comments are at the end of each summary (c1ue)
In general the first real question was always: how do you make money? with the second question being: how will you go to market? Many of the actual first questions had to do with the product - many pitches were not coherent enough to ascertain what the product actually was.
Product for "credit professionals" to build mobile apps. Company switching from content provider to business back end.
VC Question 1 (VCQ1): How will you make money?
Some revenue from consumers (c1ue: advertising?), interest from enterprise.
VCQ2: What is the actual price?
$105 per deployment
VCQ3: What is your market strategy?
Be promoted via technology partners
No Thanks (NT), NT, Email Me (EM)
c1ue: I had no clue whatsoever what the actual product was except perhaps some type of app builder for a specific niche. The VCs apparently did. Extremely short pitch (45 seconds).
Web application which helps restaurants be sustainable and efficient. Said application to help restaurant bottom line by helping manage maintenance, resupply, and reduced waste.
VCQ1: Is your goal to be profitable or sustainable? or both?
VCQ2: What is the percentage of technology vs. services? (answer was confused) As broken down by revenue?
not gone to market yet
VCQ3: How will you get to market? Restaurant owners are very busy.
Meet them one on one
NT, NT, NT
c1ue: The idea is admirable, but the one on one meetings with restaurant owners was a complete non-starter. Not ramp-able at all. The business model was also somewhat fuzzy: attract interest via helping be sustainable, but make money off commissions on products sold (referral commission) through web site. Lacked either evidence of traction, obvious differentiation, or big name/reputation.
Science and math extra curriculum classes for K-12. Build well equipped classrooms to provide hands-on experiments to spark interest and learning.
VCQ1: How to scale?
Building 1 to 2 centers now besides original one.
VCQ2: What are the economics?
$595 to $695 per student for a 10 week course.
VCQ3: Do you plan to offer a web based version?
NT, NT, EM
c1ue: Again, an admirable goal. Founders were very highly qualified and motivated. However, another difficult to scale business, plus one which has very high capital requirements. The business side also seems pretty difficult: the classes are outside normal schooling so billable hours per week are very low: after school or weekends only. 5 simultaneous classes of 20, 5 times a year nets only $350K which isn't much if we're talking a full outside facility for 20+, equipment, and one or more teachers.
An app which helps find people you want to meet at events (social networking). For example, you go to a concert and want to meet Google executives.
VCQ1: How do you scale your reach?
We are a mobile app which leverages LinkedIn or Facebook profiles to provide background information.
VCQ2: How do you monetize?
Freemium in the LinkedIn model
NT, NT, NT
c1ue: Not an original idea or an original problem. VC summary comments: The problem with the proliferation of different social network platforms (LinkedIn, Facebook, Twitter, FourSquare, etc etc) is that it gets tiring to check in constantly on so many different platforms, and the utility is debatable. The people you want to meet have lots of other people who want to meet them and these people generally don't want to be disturbed in their relaxation time.
Revolutionary new medical device which provides a better outcome and lowers costs. A new tool for use during surgery.
VCQ1: What exactly have you created?
For sutures or wiring, apparently the existing device used is similar to pliers from a hardware store. After cutting, the remnants must be fished out by hand and often have pieces left behind. The new device prevents this by capturing the cut piece and integrating the suture/wire into a spool.
VCQ2: What is the present state of FDA approval?
Because the device is not actually involved directly in surgery, it is a level 2, not a level 3. 6 to 12 months to approve.
VC Responses: How will you sell the product?
Work directly with hospital procurement
c1ue: Very enthusiastic and seemingly knowledgeable presenter. However, no one had any idea what the actual product was until the VC question session. Did not address either approval or business model in pitch. Did have a good reference to a Harvard doctor.
Ex-HP WebOS manager put together a team to create a window cleaning robot a la Roomba (Windowba?)
VCQ1: How did you go from WebOS to robotics?
Undergraduate degree and personal interest in robotics. WebOS provided the background for hardware/software integration. There are existing kits today which handle the hardware aspects, the WebOS/software aspect provides the remaining piece.
VCQ2: Who would you sell to?
malls and small businesses
VCQ3: What is your gross margin?
40% for $400 product (VC): Really?
VCQ4: How big is the opportunity?
$12 billion, counting also small home/small office and residences
VCQ5: How would you scale? Small business owners are very busy.
Web marketing, once ROI established then word of mouth
NT, NT, NT
c1ue: An interesting variant of Roomba, but many many operational questions. For example, how well would a suction cup robot operate? liability? How much actual cash is saved from employees or outside services no longer being utilized for window cleaning? VC greatly questioned the gross margin estimate. Another high capital, difficult to scale product. Another VC also noted that many people had Roombas, but he had never personally heard of anyone praise it - i.e. nice toy.
Revolutionary solar cell which brings true under $1/watt home install solar using a special magnifying glass package
VCQ1: How much capital needed to manufacture?
VCQ2: Will you be cash flow positive with the $4M?
VCQ3: Why is your product better?
The package allows greater efficiency via light redirection as well as lower cost by reducing the need for positioning - 3 degrees vs. 1/2 degree. The higher tolerance for degree offset, the lower the positioning system cost.
NT, NT, EM
c1ue: Again a fairly incoherent pitch. The product was solar, but given the extremely low manufacturing cost, I'd bet the actual product is the glass package with the solar cells bought elsewhere. If this is correct, then the pitch was all wrong: pitch should be that a low cost add-on to existing solar offerings would offer material benefits with low cost and capital risk.
Consumer internet product. Recommendation engine for activities.
VCQ1: How will you monetize?
Affiliate marketing with 2% to 5% cut. Advertising.
VCQ2: Plan for adoption on consumer side?
Strategic partners - 3rd largest dating site has technology partnership agreement.
VCQ3: For customers, you must have content (affiliates). To attract affiliates, you must have large numbers of customers. Which do you focus on? (chicken or egg)
Created a web crawler to provide initial content - 1000+ activites in SF
NT, Call Me (CM), EM
c1ue: This pitch clearly benefited from being last - had clear strong answers for monetization as well as go to market. Business model also has capability of high leverage on capital.