Updates from May, 2009 Toggle Comment Threads | Keyboard Shortcuts

  • Peter Lee - Baroda Ventures 4:05 pm on May 30, 2009 Permalink | Reply  

    My version of the elevator pitch – a 100 story highrise with multiple stops along the way 

    In meeting with entrepreneurs, especially those that I haven’t met or heard about before, I often ask them to give me the 5 min overview of the business before we dive into any details or the formal presentation deck. I typically ask for this before I ask for the entrepreneurs backgrounds – for reasons which I’ll get into shortly.

    The commonly heard 30 sec or 1 min elevator pitch is ok when an entrepreneur is pitching a customer or for PR or other audience that isn’t looking at the business holistically but is only interested in 1 or 2 aspects of the business. For a VC though, it is just not enough time to cover the information to get me interested. In the 30 sec or 1 min pitch, there is barely enough time to cover the market and product let alone competitive differentiation, business model, industry trends, financing plans. and key metrics such as customer acquisition and average revenue per user. The entrepreneurs’ ability to convey the business concisely in a compelling manner is a huge indicator of their understanding of the business as well as how they will think and act when running the business. What surprises me is how many entrepreneurs are so bad at this.

    In a startup, one of my favorite sayings is “you can do anything, but you can’t do everything.” With limited time and resources, entrepreneurs must cut through the clutter and focus their time and attention on the most critical issues. A founder or CEO who can’t explain the key aspects of his business concisely and rambles on about un-important details worry me that he will behave similarly when running the business.

    The 5 min overview should be a mini version of the entire pitch but forces the entrepreneur to really hone in on the most critical aspects of the business that will influence its success or failure. Like Mark Twain’s famous quote, “I would have written a shorter letter, but I did not have the time,” the ability to quickly and concisely explain the business indicates to me that the entrepreneur has really thought about and understands his business.

    The reason I ask for the 5 min pitch before the entrepreneurs’ bio is that I actually like to judge the attractiveness of the business independent of the team. When I hear the bios of the founders first, it obviously sways me (which it should) as I hear the rest of the business. While the fit/capability of the team is paramount to my decision, I find it is better left until after I understand the basic premise of the business so that I can really assess the business purely on its own merits. After this, hearing the entrepreneurs’ backgrounds allow me to then assess their ability (and hopefully their clear advantage) in executing on the business.

    In VC, when I am assessing the “fundability” of a company, I find that out of the many many factors that can influence the business, it generally boils down to 2 or 3 critical issues that make the decision. If these 2 or 3 issues are negative and all of the other issues are positive, it still kills the deal for me. The best 5 min elevator pitch is the one that has done this work for me.

    Now…once you have me hooked on the business and then the team, we can have a productive meeting getting into the presentation deck and questions about the details of business.

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    • Zev Posner 8:37 pm on September 21, 2010 Permalink | Reply

      If you have a great idea and BP with a great URL to match – how do you get a good team to help you identify revenue – execute etc… ? if you think you are weak in that area – as for the 5 min pitch – it is the hardest one to do but if you cant you are not ready for the game!

  • Peter Lee - Baroda Ventures 7:27 am on May 27, 2009 Permalink | Reply  

    Socaltech.com interview about Baroda Ventures 

    http://socaltech.com/interview_with_peter_lee_baroda_ventures/s-0021858.html

    Thanks to Ben Kuo for taking the time to chat. He’s done a great job reporting on Southern California and helping to build the community here.

     
  • Peter Lee - Baroda Ventures 10:50 pm on May 24, 2009 Permalink | Reply  

    To advertise or not to advertise 

    This recent NYTimes article is worth a read and sparked some thoughts.

    http://www.nytimes.com/2009/05/25/technology/start-ups/25startup.html

    With the market tanking, the pendulum for consumer internet space monetization, which has largely relied on advertising as their primary business model, is quickly swinging the other way – to direct user charging methods such as subscriptions or virtual goods. I think this is a good, necessary, and inevitable outcome. While I wholeheardly still believe broadly in the internet advertising model, I think too much emphasis had been placed on this single form of monetization at the expense of billions of dollars of venture capital, private equity, and public offerings which funded money losing businesses for years.

    The biggest problem I foresee though is that many consumers’ expectation have now been set – that people believe that internet services should be free. The last decade of internet companies has established this precedence and this will not go away easily or quickly. I personally think of one of the most widely used and under-monetized applications on the web – free online email accounts. This is a prime example of a product that created tremendous value but was not able to capture value.

    The issue becomes pronounced for entrepreneurs when many newly established companies emerge without the benefit of huge and multiple venture capital rounds willing to keep funding money losing businesses. So, what should entrepreneurs do when they are faced with the situation of a) needing to generate revenue quickly because there is less funding available but b) having to compete with so many free services that already exist which may eventually die away but are still plugging along in a desperate race to the bottom.

    While I don’t promise to have the answer, here is how I’ve been thinking about the problem and what kinds of business I’ve been looking at recently.

    1. Look at markets whose customers have been used to paying in the past such as marketing services, gaming, enterprise, SMB, etc. – generally originating from non-internet based roots.
    2. Think about niche audiences from a monetization perspective but build the platform for wider application to make investors believe in the ultimate size of the opportunity.
    3. Timing is everything – be thoughful not only about why your business is right but why NOW is the right time for it.
    4. Focus on product. Great products overcome the odds.
    5. Live and breathe metrics. The two most important for many of the businesses I look at are the balance of a) customer acquisition cost and b) lifetime value of the customer. Make sure your funding aligns with this ramp.

    While most business I see now have multiple revenue streams, many are knee-jerk reactions to the market and haven’t really been thought through to see if they are realistic and viable. Do your homework and don’t force fit a model that doesn’t work. But opportunity is ripe and I do believe the next couple of years will be a wonderful time of innovation around business models.

     
    • Barry 10:39 am on May 25, 2009 Permalink | Reply

      Although its been written about time and time again I still run into folks all the time that don’t seem to grasp the scale necessary to have a successful advertising model. The other thing that people seem to forget is that somewhere along the way there needs to be some transaction to create the funds to pay for the advertising 🙂

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