Startups get honest feedback from VCs in this meetup

By Dennis Clemente

How long does it take for venture capitalists to assess your startup? At the Hatchery meetup, it can be the longest five minutes of your life, not counting the other five minutes of your pitch. But it’s all good, because it’s the most honest and helpful assessment you’ll ever get.

Accern’s Kuwesh Aroomoogan found out about this last January 23, coming as he was from another pitch a week earlier where there was only one venture capitalist assessing or critiquing his startup. At the Hatchery, there were four—the regulars Bill Reinisch of Paladin Ventures, Vincent Tang of Canrock Ventures, Sachin Jade of Klifer Capital and this around, Adam Quinton of Lucas Point Ventures. The honesty comes from the familiarity of these VCs’ roles to the Hatchery’s meetup, now on its fifth year.

To make things more interesting, Hatchery also has GK Training to critique the how-to part of the presentation by Accern, bMobilized, Decode Global, Hubster TV and tenSix at Chadbourne at Rockefeller Center.

Aroomoogan says Accern, a financial analysis engine, is looking to raise $500,000, so it can expedite data-gathering. It has a 3-step process to full market entry–hedge funds, online brokers and financial institutions.

Investors advised Aroomoogan to do more market research and interview at least 50 customers. In terms of customers, however, they suggested approaching a content provider like Yahoo and online brokerage firms

Where web design has been a thriving business now comes bMobilized. The company reportedly has a patented technology to create mobile websites (offered as a software-as-a-service basis) from desktop websites aside from having mobile-specific features like maps, click-to-call and m commerce. Customers include Amazon and Cisco.

bMobilized claims it has more than 500,000 mobile websites in the pipeline, as it looks forward to getting a share of the $6.9 billion market. “How many competitions convert to mobile design? There’s a window.”

Next presenter, Hubster.tv, aims to help us find where to watch movies online. In his startup, founder Ethan Greenspan thinks he has solved three problems– searching, overpaying and forgetting—as he aims to help us find the movies and where they can be cheaper. He is seeking $750,000 in capital.

Greenspan is looking at developing relationships with advertisers. “We can develop relationships through sponsored lists of curated movies and shows, plus provide competitive analytics.”

The feedback cautioned him how hard it is to play Switzerland (or neutral) and take sides. The ideal scenario for him, as suggested by the panel, is to become a sort of Nielsen for movie-streaming sites.

The following presenter, Decode Global, opened up its presentation with a question: How many kids are killing zombies these days? Answer: 64 million.

The question was in line with how Decode Global positions itself in purposeful gaming or in educational mobile gaming for social change. Angelique Mannella, CEO, showed a game that teaches kids about how to solve water scarcity. So far, the company said its app, made within 8 months, has been downloaded on iTunes 100,000 times in the past six months. “We’re going to promote to kids’ content networks and do cause marketing.”

Mannella is seeking $500,000 in funding and is looking to improve monetization. Right now, our revenue model is based on a freemium model; 90 percent of revenues are from in-app purchases.

The feedback it received was about how the idea can easily be replicated and how the learning-game model is a tough one to crack. But to push forward with it, the suggestion was to look into content partners, if not to have the game feature both virtual and physical functions.

Last presenter was Amar Pradhan of ten6, the self-proclaimed airbnb for batteries. He hopes retailers can improve demand estimates and reduce supply costs with ten6.

After all the presentations, Michael Hoeppner, CEO and president of GK Training, talked about each person’s presentation could be improved, pointing how vital it is to spend as much time practicing as one would preparing for a presentation. “Practice your Q&A forward and backwards; practice with combative questions; practice with cork in a mouth, if you need to slow down.”

He also added how important it is to keep the 3 Vs in mind—visual, visceral, variety—and if you want to know more about that, visit GK Training’s offices.

The show-and-tell was hosted by Yao Hui Huang.

Do due diligence because there’s no divorcing investors

Adam Quinton
Adam Quinton

By Dennis Clemente

You’ve heard it before and angel investor Adam Quinton is going to repeat yet again for you. You won’t be able to get rid of investors once they’re in. It’s like marriage but without divorce. This is why it’s important to choose the right investor.

“You should be thinking ‘due diligencing’ the investor as much as they are ‘due diligencing’ you,” said Quinton, CEO of Lucas Point Ventures at The Hatchery meetup last October 18. Quinton has invested in at least eight companies.

Quinton likes to limn his thoughts philosophically. “Due diligence, you can do it mechanically or do with deep thought.”

On how relationship is like with an investor: “If an investor invested $250,000 that would mean you’ll need to be intimate with them compared to someone who invested only $10,000. But if the former gives you pain, it’s not worth it. Go with an investor who is going to be your friend for a long time.”

On the most important way for startups to get funded: “Traction is the new IP (intellectual property.) In the conventional sense, he is really talking about the non-existence of IP and how investors give more weight to your startup’s traction. “(IP) It’s not going to help you in the short term.”

For startups looking to get noticed, Quinton said it won’t hurt to feed investors updates about your company’s progress and that includes people you just hired. “There’s nothing that keeps people more interested than traction. (You can probably do that) once every six weeks through emails or newsletters (to investors). Don’t overdo it or risk being annoying.”

Why is this important? For Quinton, “I may say no now, but I may say yes next time.”

Quality over quantity as a startup’s cache: “Some people are divided between these two distinctions. I’ve tended to go for quality. I look at the characteristics of the founders. With quantity, you’ll be bogged down by analytics. Six months from now, (you’ll have to study new data yet again).”

His thoughts on this pertain to how analytics keep shifting and therefore not always reliable, but he gave some fair share of warning: “Just be prepared when you raise money.”

As for fundraising, Quinton was generous with his tips:
• Be prepared. Document everything.
• Assign those who will take care of the startup information—and who will have ownership of specific tasks
• Don’t advocate people spending time on a business plan
• Have market analysis and market strategy. Have a go-to marketing plan
• Have you financials, especially in summary form
• Include a spreadsheet analysis on your pitch deck

Who to hire in your startup? “Get people who can make quick decisions,” he said.

ON how you can make a quick good impression? “Most of the decisions investors make are highly emotional. You got to be super-organized and super-focused. You get things done. Due diligence is part of due diligence. You can do half-ass fundraising or full-on fundraising.”

On equity and convertible notes, he has this to say: “I’ve done both equity and notes. I know people who will not invest in a convertible note. because someone had a bad experience. People who like control usually don’t like convertible notes. I’m ok with notes.”

“What you want is not somebody always with money, but those who know terms that make sense. And if you’ve got the lead investor, then you’re on your way,” he stressed.

Some cautionary words: “Ninety percent of the time angel investors say no. If you’re early, you may prejudice yourself, if they don’t know you.”

What are red flags for investors? “A disorganized startup, issues on a startup’s individuals or team. (Those with) unpaid debts: If you have any history like that, assume it will be found out.”