Thursday, August 21, 2014

venVelo Nominated for 2014 Tech Investor Award

Congratulations! venVelo was nominated for a Tech Investor Award for the Schwartz Tech Awards 2014 hosted by the Orlando Economic Development Commission in partnership with the Orlando Tech Association and Florida High Tech Corridor Council.

The Tech Investor Award recognizes an organization that has financially supported the region’s tech industry. The Orlando EDC invites you to join us for the Schwartz Tech Awards 2014 celebration on Sept. 30th from 6 p.m. to 8 p.m. at Orchid Garden at Church Street Station in downtown Orlando.

Tuesday, August 19, 2014

Jockey or Horse: How One Early-Stage Investor Handicaps a Race

Jockey or Horse: How One Early-Stage Investor Handicaps a Race
By Allen H. Kupetz and Dan Lyons*

The views expressed may not reflect the opinions of venVelo’s board or its investors.

Horse racing fans and early-stage investors share a high risk tolerance. Both will likely also argue the key to success: is it the jockey or the horse that matters most? Secretariat probably wins the Triple Crown irrespective of the jockey, but most races – and start-ups – require someone in the saddle with the right skills and passion to win.

Frank Sinatra crooned, “You can’t have one without the other” and no serious fund would invest in an opportunity that didn’t have a strong business and a management team they believed could execute. But rarely do you see the perfect combination of both jockey and horse (perhaps one reason so few businesses get funded). And thus the question remains, jockey or horse? 

venVelo has a 13-person board that doubles as its review committee. It reviews pitch decks that come in via the web, through the vast relationship the board members all have, and leads from other funds. The board reviews new venture proposals every week, narrowing the field to about half a dozen quarterly candidates that pitch the board and our broader friends of venVelo (invited guests with domain expertise). venVelo has averaged about four investments per year so if a company makes it to pitch day, it is past the second turn and headed home.   

It is at the pitch stage that venVelo asks itself what is the most important ingredient to success:  the jockey (the entrepreneur who will lead the way and deliver results) or the horse (the business idea / model). 

Much has been written about this question. (For those who want to read more, we recommend David Rose's 2014 book, Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups, and David Maris’ 2012 Forbes article, Bet On The Horse or The Jockey: Investing Lessons From an Italian Horse Race.)

For venVelo, there are a number of requirements for a business to be deemed investable.  Does the business solve a real need or problem? Is the market size attractive? Is there unique and powerful competitive advantage?  Is the plan realistic, yet aggressive enough to attain significant revenue and profitability in a 3-5 year window?  Is there an attractive exit strategy?

Equally as important, venVelo carefully listens to and engages with the entrepreneur who is championing the idea and tries to assess some important characteristics: domain knowledge; a real passion and personal connection to the mission; experience – both successes and failures – that will help to guide the journey; and personal chemistry – is this a person we can trust, who will look for advice and counsel, and who can bring others (investors, employees, and customers) on board along the way.** 

These two sets of criteria make venVelo’s bet clear: we look for a great jockey and a great horse. Of course we do. Everyone does. But we don’t often see both together. So if faced with two opportunities – one 60-40 jockey-horse and the other 60-40 horse-jockey – how do we choose?

venVelo’s experience with the companies we have invested in – certainly a small sample – does not clearly support either side of the jockey-horse argument. We have bet on brilliant jockeys almost solely for that reason. This had led to successful companies and those still finding their way. We have also bet on what appear to be fast horses – companies in vertical markets that our collective instincts tell us show great promise. Here too we have found success, but also the need at times to consider (and sometimes demand) management changes.  

Because venVelo often invests in very early-stage companies, we probably weigh the jockey more heavily. A leader who listens well, reads the signals from customers and employees, and who seeks and values feedback from a core group of seasoned advisors has an edge in being able to make the strategic pivots so often required. We believe an entrepreneur’s ability and desire to learn, coupled with strategic agility, are characteristics that make the difference between the jockeys who just run the race and those who will win.

Do you agree or disagree? What have your experiences been? Please share your comments.


*The authors are board members of venVelo, a venture fund and business accelerator in Winter Park, Florida focused on early-stage opportunities. Formally launched in 2012, venVelo quickly established itself as one of the most active venture funds in central Florida.

**One of the authors of this article, Allen H. Kupetz, published an article in 2013 titled The Seven Deadly Sins of Early-Stage Funding Requests that discusses venVelo’s investment criteria in more detail.

Saturday, August 16, 2014

How to Pitch to Investors in 10 Minutes and Get Funded

by Caroline Cummings

I know what it’s like to pitch to investors—both angels and venture capitalists. I’ve raised close to $1 million from angel investors for my previous technology start-ups. Sometimes you only get 10 minutes to pitch your business opportunity to the investors (or less in some cases). Below is a format I’ve successfully used, as well as helped many other first-time start-up CEOs raise investment capital.
If there’s one thing I can’t stress enough, it’s the importance of rehearsing your pitch. I’ve seen too many entrepreneurs think, “Oh, I know my business inside and out—pitching will be a breeze!” Good luck! I’ve also seen many entrepreneurs crash and burn when delivering their investor pitch—and ramble on and on. There’s nothing more frustrating then being told, “I only need 10 minutes of your time,” and then 20 minutes later you’re still on slide #5.

Additionally, investors will want you to be able to back-up your claims. Have a well thought out business plan on-hand to share, so investors can read more if they’d like to. The intention, after all, is that you deliver a powerful pitch, and their hands are out asking for either your executive summary or your complete business plan.

These are the most important things to keep in mind when you prepare your pitch:

1. Tell a Story
Begin your pitch with a compelling story. This will engage your audience right out of the gate. And if you can relate your story to your audience, even better! Your story should address the problem you’re solving in the marketplace.

2. Your Solution
Share what’s unique about your product and how it will solve the issue you shared in the previous slide. Keep it short, concise, and easy for the investor to explain to others. Avoid using buzz words unless your investors are very familiar with your industry.

3. Your Successes
Early in the presentation you want to build some credibility. Take some time to share the relevant traction you’ve had. This is your opportunity to blow your own horn! Impress the investors with what you and your team have accomplished to date (sales, contracts, key hires, product launches, etc.).

4. Your Target Market
Don’t say that everyone in the world is potentially your market,  even it it could be true one day. Be realistic about who you’re building your product for and break out your market into TAM, SAM and SOM. This will not only impress your audience, but it will help you think more strategically about your roll-out plan.

5. Customer Acquisition
This is usually one of the most skipped sections of an investor pitch and a full business plan. How will you reach your customers? How much will it cost? How will you measure success? Your financials should easily allow you to calculate your customer acquisition costs.

6. Your Competition
Again, a VERY important part of your pitch, and many people omit this section or don’t provide enough detail about why they’re so different from their competitors. The best way to communicate your value proposition over your competitors’ is to show this slide in a matrix format—where you list your competitors down the left side of the page, you have your features/benefits across the top, and place check marks in the boxes for which company offers that service (see example in presentation above). Ideally, you have check marks across the top for every category, and your competitors lack in key areas to show your competitive advantage.

7. Your Revenue Model
Investors tend to care about this slide the most. How will you make money? Be very specific about your products and pricing and emphasize again how your market is anxiously awaiting your arrival.

8. Your Financial Projections
Show what you’re projecting in revenue (per product) over the next three to five years. You MUST back-up your numbers by sharing your assumptions. You’ll see investors taking out their smartphone calculators to make sure your numbers make sense, so give them the information they need to see that your calculations are accurate. If your financial chart shows “hockey-stick growth,” be sure to explain what happens to cause those inflection points.

9. Your Team
Investors invest in people first and ideas second, so be sure to share details about your rock star team and why they are the right people to lead this company. Also be sure to share what skill-sets you may be missing on your team. Most start-up teams are missing some key talent – be it marketing, management expertise, programmers, sales, operations, financial management, etc. Let them know that you know what you don’t know!

10. Your Funding Needs
Clearly spell-out how much money has already been invested in your company, by whom, ownership percentages, and how much more you need to go to the next level (and be clear about what level that is). Will you need to raise multiple rounds of financing? Is the investment you’re seeking a convertible note, an equity round, etc.? Remind the audience why your management team is capable of managing their investment for growth. In the presentation above, I picked the image of a homeless person holding a cardboard sign that reads “Britney’s sister is going to have a baby and I need money for a nice gift” for a reason. The only thing missing out of this “ask” is the exact amount he needs to buy the gift! This is the level of detail you want to include on this slide: how much you need, why you need the money, what it will be used for, and the intended outcome.

11. Your Exit Strategy
If you’re seeking large sums of investment capital (over $1M), most investors will want to know what your exit strategy is. Are you planning on getting acquired, going public (very few companies actually do), or something else? Show you’ve done some due diligence on this exit strategy, including the companies you’re targeting, and why it would make sense 3, 5, or 10 years down the road.

Wednesday, August 6, 2014

Investing Patiently

By Allen H. Kupetz, COO of the early-stage investment fund, venVelo.
The views expressed may not reflect the opinions of venVelo’s board or its investors.

I heard two different stories on the radio today. Even if I get some of the facts wrong (since I chose not to take notes while driving), I thought the similarities were worth sharing.

The first story was about Warren Buffet’s idea of fat pitch investing. He reportedly said that while baseball has a strike count, investing does not. You don’t need to swing at any of the first six pitches. Or the first 600. You can never strike out. With over a $1 billion in cash to invest, Buffet’s Berkshire Hathaway could afford to swing at some pitches outside of the strike zone. But he chooses to wait for a fat pitch. Patience.

The second story on NPR’s “Marketplace” was an interview with the founder of Yelp. After 10 years – virtually all of the Web 2.0 era – Yelp turned a small profit. It had turned down a nine-figure offer from Google years ago and was only now profitable. Yelp closed today with almost a $5 billion market cap, though way down from its 52-week high. Selling in March would have made you a lot more money. Too patient?

What is the lesson for early-stage companies? Are you more or less patient than your investors? Perhaps that is a question both sides should ask during due diligence. A difference of opinion is certainly going to be problematic later.