SXSW notes: The Perfect Pitch

‘The Perfect Pitch – How To Attract Money For Your Digitally Convergent Business ‘

Pitching to investors of both the angel and VC vairety was the topic up for discussion at this session on Monday 13th March 2006, with a raft of investors, advisors and recipients of funding sharing their experiences and recommendations…

CHAIR:
Alex Cavalli – Chairman of the Digital Convergence Initiative
PANEL:
Ashwani Dahr – Venro / Iconixx (bridging early-stage to later-stage funding)
Josh Baer – Skylist
Harlan Beverley – Bigfoot Networks (fight lag in video games)
Sachi Gahan – VC, CentrePoint Ventures
Peter Huff – Blue Sage Capital (do more later-stage funding)

Q: What’s the single hardest thing in developing a pitch?

Harlan Beverly stressed knowing what you want – always go into a meeting with an ideal outcome and if you don’t sign the cheque today, have a thought prepared on what else would be nice.

Josh Baer said a lot of the best business plans that he’s seen have pulled together the market information and presented why their idea will make a success in this scenario.

Sachi Gahan listed (1) People (2) Technology (3) Market – different VCs will judge with different emphasis the order of importance of these. He was sceptical of Gartner and Forrester’s background information (which comes with a price-tag). So it’s great if you have these numbers but he was more interested in the bottom-up set-up and perspective as it shows the intelligence and analytic abilities of the entrepreneur.

What are your key strengths?

Beverly reckoned that the people aren’t so important but Gahan countered that the management team are important.

From Ash Dahr’s point of view, the people and management’s perspectives are paramount but the filter of the experienced entrepreneur has to be there, so it’s harder for the first time entrepreneur.

Angels have lower return expectations but VCs bring a discipline and rigour that makes a real difference.

Baer said the management team is the most common core requirement. Speaking as an angel he said it was very important for them. Also, they were most concerned with the customers – who are they, how are you going to get through to them, and do you understand them?

More than management and moneybags…

A delegate asked the question: as a technologist with a business plan but no management team, would any of the panel see him?

Beverly said that they see a lot of such plans. Dahr replied that as a technologist you need to know who you’re talking to regardless, then they quickly filter. So make sure you know who you’re talking to and how much money you need.

More than one person voiced frustration and disdain at funders’ attitudes, with several saying they’d been turned down once or more for funding but managed to bootstrap quite sufficiently and sometimes with great success.

Whither bootstrapping?

An angel investor in the audience quipped “it’s a bit like the bank, they love to give you money when you don’t need it.”

Others asked about the bootstrapping approach specifically, but they were steered to the session on ‘Bootstrapping Your Digitally Convergent Business’ directly afterwards at 5pm, where this would be the primary focus of discussion.

Filling in the blanks

Gahan added that they will always ask for a full reference list and do due diligence on the names you didn’t give and reference; so integrity is a deal breaker.

[This panel was part of the SXSW Interactive ‘Digital Convergence Initiative’ strand, which ran multiple panels and a few evening parties throughout the festival-cum-conference. The DCI is a project of the greater Austin-San Antonio Corridor Council – the Texas Technology Corridor]

See the motherlode complete list of SXSW Interactive 2006 panels.

SXSW notes: Running Your New Media Business

This session at SXSW Interactive on Sunday 12th March 2006 attracted a broad audience of start-ups, SMEs and freelancers with a variety of experiences, plus some bigger media players. 

The line-up of web entrepreneurs was equally varied, and while the discussion ranged over business models, recruitment and retention, working relationships and funding, the “people” thread dominated the discussion.

CHAIR:
Bryan Mason – Adaptive Path (user experience design, they sold MeasureMap to Google the week before he gave this talk)

PANEL:
Erika Hall – Mule Design (6 people)
Jennifer Robbins – Little Chair, also writes for O’Reilly on web design, blogs at Jenville and Cooking With Rock Stars (1 person company)
Jeff Robbins – Lullabot; also at O’Reilly 93/94, then started a web design company, then his band got signed and he played full-time for 6 years. Lullabot do mainly Drupal consulting.
Evan Williams – CEO & Founder, Odeo; formerly founder of Pyra Labs who sold Blogspot to Google, he also worked at O’Reilly in 1997. Ev added that he always started his own companies – the first couple (pre-Pyra Labs) “were terrible but good learning experiences”.

Growth, success and failure squared

Bryan posed a number of questions to kick off the discussion: How do you know it’s time to grow? What does success look like? Can you fail and what is the cost of failing?

Erika Hall said it’s a continuous process of making mistakes and getting over them fast.

Where does the money come from? Bootstrap or take someone else’s? How much should you take?

Evan Williams explained that VC money had enabled Odeo to grow a lot faster. However, it’s difficult to get a lot people at the table early on and it’s harder because it limits your manoeuvrability and makes getting everyone on the same page more cumbersome.

Odeo now (March 2006) has 12 people (but in October 2006 he bought Odeo back from the investors). However, growth means there’s an added communication tax on everything you do. In terms of funding, at the start they were just looking for an angel round.

Adaptive Path’s algorithm for hiring staff
(1) Billable (core team)
(2) Support admin
(3) Contractor vs staff

Start-ups – lifestyle careerists beware!

In terms of hiring, Odeo have used blog posting (that approach keyed into the Rails community); referrals (50%); and used 2 executive recruiters (2 of whom charge $75k per hire!).

Who do you hire? Contractors vs staff. Where do you find them? How do you pay them? How do you structure your company? A legal entity that’s structured for retention? Should you be traditional or inventive?

Erika replied that her company is more fun to work for than any other, and fosters the culture whereby staff have a real say in what goes on. Mule Design is also open to learning from people.

Evan observed that O’Reilly was / is basically a lifestyle company. It’s harder to do that with a start-up, he reckoned. If you’re a start-up there’s an assumed model that you go with and that drives you.

Transparent expectations

Jen Robbins said that she works with people that she knows and that she gets a along with. Adaptive Path’s Bryan Mason wondered is that structure and management where we want to put our energies?

Odeo aren’t a billable company as there’s no revenue and no revenue is predicted for a while, Evan explained. Erika stressed that because they are often working with contractors who are also friends – you have to be absolutely clear about expectations regarding what you want to get out of it, how they see it working and what they want to get out of it.

Jeff Robbins concurred – if you keep expectations really clear then the contractor will know when they’re screwing it up and you won’t even have to say anything about it.

Business essentials

With MeasureMap, Jeff recounted, they had unbelievable discipline and they paid around a 25% communications tax, but that worked because the people were in disparate places. They had a daily 10.30 conference call.

Evan noted that there’s a great blog on this called Founders Frustrations and he recommended trying Adminstaff for covering all your employee benefits.

How important is the written business plan for getting VC funding, someone asked. With time running out Evan said Pyra didn’t have anything like a plan and they were okay. Odeo had a PowerPoint presentation and just creating that was a good exercise for him to think the business plan through.

That was then, this is now…

Keeping established patterns intact, my report on the first Beers & Innovation has arrived 6 months after the fact.

The night was a great foundational event to the evolving series, as we heard from Skype‘s Saul Klein and Matt Ogle of Last.fm on how their businesses had evolved, and the challenges facing UK-based tech entrepreneurs and start-ups.

As for thorny issues raised and unresolved threads left hanging, take your pick:

VCs, angels and bootstrapping….

Saul Klein:

“There’s a lot of benefits to be had from not having a lot of funding early on, and the VCs can be your best critics”

Matt Ogle said that their angel investors had similar mindsets to them so they were able to grow more organically. He also praised affiliate programmes as excellent as they had enabled Last.fm’s growth.

Government support for innovation & start-ups

Saul had strong views on this point. He said the government’s role was zero. The BBC is a negative presence, he added. It takes talent out of the market and cannibalises media. The BBC creates a service industry around itself and is quite narrow.

Matt Locke, Head Of Innovation at BBC New Media disagreed. He spoke of the BBC Innovation Labs which provide “money and time to develop ideas.” Of 170 new ideas submitted, the BBC took forward 29 in the Labs.

Global or local?

Tom Coates noted that the English language makes us more permeable to US services, while Saul reckoned that

“media needs to be more local. Communications or search businesses are horizontal and can be more international”

Stuff to think about at every juncture. But that was 6 months ago. Good grief! So what, if anything, has changed?

Innovative start-ups need networks & expertise more than capital

In the lexicon of headlines, this is a low for journalists, bloggers and me personally.

And yes I’m on holiday, but this just came through, and I thought it was worth posting. It’s a press release from NESTA (the National Endowment for Science, Technology and the Arts in the UK).

It’s so hot I’m posting it on the stroke of midnight (with aforesaid clunky headline), just as the press release embargo ends but a nanosecond before the carriage turns into a pumpkin 😉

Their headline is equally un-zingy in its literalness.

“Business support vital to bridging “equity gap”, says NESTA chief executive”

But hark at the content:

“The UK’s innovative start-ups require greater assistance in becoming “investment-ready”, NESTA chief executive, Jonathan Kestenbaum said today. Speaking in response to a new Library House report into the “equity gap” in the UK innovation economy, Kestenbaum commented:

“The debate around the so-called “equity gap” has raged for sometime and is likely to continue to do so. However, more importantly, this report points to the emerging consensus of an “investor-readiness gap”, especially for innovative start-up businesses. These enterprises often lack the business acumen and sense of the market to effectively commercialise their concepts and the crucial issue is therefore not one of the equity availability but of accessing equity.”

“Access to capital is only one of the critical ingredients required for embryonic businesses. Access to networks, mentors, role models and expertise is often more important than capital.”

I think Mr Kestenbaum might be onto something… he should come to the next Beers & Innovation on 14th September.

In case you’re none the wiser about NESTA, they are:

“working to increase the UK’s capacity for innovation, investing in all stages of the innovation process, backing new ideas and funding new ventures that stimulate entrepreneurship. It is the largest single source of early stage financing in the UK, and combines this investment with the provision of high quality mentoring and networking support for innovative business start-ups.”

And FYI, NESTA are currently reviewing their strategy.

Now, where’s that carriage?

[8th December update: NESTA have relaunched their website and the Innovation Gap report published in October 2006 can be downloaded from here]

TechCrunch Web 2.0 London event

News just in: TechCrunch is hosting a get-together this Monday 22nd May in London.

Billed as a chance for Web 2.0 entrepreneurs and enthusiasts to congregate and swap notes, it's also an opportunity to meet TechCrunch editor Mike Arrington who is over in London for a few days after attending the Innovate Europe '06 expo in Zaragosa, Spain.

While you can signal your attendance on Upcoming or on Mike's CrunchNotes blog, entry is open and no pre-registration is required.

[NOTE: two different venues are listed on Upcoming, and I've left a query about this, but Mike's blog says Pitcher & Piano, Dean St – familiar to 30th March and 27th April B&I attendees – so I guess it's that one!]

Should be an interesting evening.