Technology Talent Shortage: Is the solution education, immigration or recruiting women?

Technology Talent Shortage:  Is the solution education, immigration or recruiting women?

tech picAttend any tech event in Colorado and you’re sure to walk away with the impression that there is a huge tech talent shortage here.  Even though the startup scene here is collaborative and cordial, things can get competitive when companies are looking to recruit talent.

In a time of high unemployment, how do we explain this shortage of tech talent?  One thing we know is that the shortage is not limited to Colorado – I am hearing of shortages all around the country.

Some people think that the issue is that we are not turning out enough educated people to fill these positions, yet according to research by the Economic Policy Institute, “For every two students that U.S. colleges graduate with STEM degrees (science, technology, engineering, and mathematics), only one is hired into a STEM job.”   At issue may be not that we are not turning out enough graduates, but that they aren’t graduating with the skills that they need to succeed in the job market.  In fact, the Economic Policy Institute reports that only about a third of the IT workforce has an IT-related college degree, 36 percent of IT workers do not hold a college degree at all and only 24 percent of IT workers have a four-year computer science or math degree, so maybe college education isn’t the answer.

Are programs like Galvanize G-School that focus on quickly educating people in real-world application development taking over and producing more cost effective workers?  The G-School guarantees a $60,000 job within three months of graduation or they’ll give your tuition back.  That’s a pretty confident offer – especially since the tuition is $20,000.  That’s a lot to give back in a refund, but it’s about a tenth of the cost of pursuing a full time private college education these days, and the job prospects are better, so I predict we’ll be seeing more programs like this in the future.

Is there really a shortage of skilled labor, or is it an economic issue? 

Another way of looking at the issue may be that there are plenty of skilled people in the US, but that there are better opportunities outside of IT that may be more attractive.  When U.S. talent is not actively entering the tech job market, the international market jumps in to fill the gap. Here are some interesting statistics (also from the Economic Policy Institute):

1)      The annual number of computer science graduates doubled between 1998 and 2004, and is currently over 50 percent higher than its 1998 level, so we’re turning out lots of grads.

2)      Immigration policies that facilitate large flows of guestworkers will supply labor at wages that are too low to induce significant increases in supply from the domestic workforce.

3)      Immigrant worker visas have more than doubled since 1998.

4)      52.7% of STEM graduates who do not pursue technology careers cite pay, promotion and working conditions as their reasons for pursuing work in other areas.

5)      Computer programmer salaries have remained relatively flat in real terms between 1994 and 2010.

These statistics would lead one to believe that immigrant workers are taking all the IT jobs, but on-the-ground experience doesn’t seem to support this, at least in Colorado where we’re seeing high demand and relatively high wages for developers.  The statistics suggest that all or most sufficiently trained U.S. workers are getting work in tech if they want it and that international labor is filling the gaps while also holding down wages in a Thomas Friedman-like flattening of wages globally for similar work.

What about women in tech?

Here’s the big secret in growing the tech labor force – hire women.

Well – if you can get them, it’s great for business.  Tech companies with women have been shown to use 40 percent less capital and be more likely to survive the transition from startup to established company. (From Cindy Padnos, Illuminate Ventures: “High Performance Entrepreneurs: Women in High-Tech,” 2010.)  Nationally, the Department of Labor estimates that our economy will add 1.4 million technology-related jobs to the workforce by 2020; however, at current graduation rates, we’ll produce only enough qualified candidates to fill a third of these jobs. In Colorado, there will be about 4 tech jobs for every 1 graduate with a bachelor’s degree in computing.  Recruiting more women to IT programs can at least double the amount of available talent.

Here are some interesting numbers from the bureau of Labor Statistics. (Department of Labor Bureau of Labor Statistics, Current Population Survey, 2012; Dow Jones VentureSource, 2012)

  • 26% of U.S. technology jobs are held by women
  • 20% of U.S. software developers are women
  • 11% of executives at U.S. venture-backed startups are women

Conclusions – if you’ve got a tech labor shortage, then you need to address all three areas.  Educate your workforce to be able to do the jobs we need to get done regardless of whether it’s a four year or master’s degree or a six month program.   Continue to recruit international labor to fill job gaps.  Think about how many foreign students who earn masters and PhD degrees that we’re sending back home and consider where to prioritize immigration policy.  Educate, recruit, hire and retain a diverse workforce with gender equality to improve performance and meet talent needs.

To learn more about technology investing, staffing and education in Colorado and around the country, consider attending Rocky Venture Club’s “Investing in Tech Companies” event coming up next Tuesday, July 9th in Denver. Register for Investing In Tech Companies event


Are all startups “tech companies”?

tech picSometimes it seems as though all startups are tech companies.  When they are in early stages, we talk about “technology risk”, even if that means figuring out how to outsource your supply chain and get your product manufactured overseas by someone else.  It’s not really “technology”, especially if the item is something that is being sewn or otherwise assembled by hand.  We talk about technology risk in the sense that every company has to figure out how to make and deliver whatever product or service it sells. 

In the original Greek root “techne” is about making stuff.  It refers to craft or art, so it makes sense that every company has to make something, even if what it makes is Intellectual Property or a service that can’t necessarily be held in your hand.

Another reason people seem to think that every company is a tech company these days is that you pretty much can’t start a company without using a lot of technology to do it.  Regardless of whether you have programmers setting up an e-commerce site or creating a SaaS application, you’re likely to be using technology in setting up and running your company.  Those companies that don’t use technology probably won’t have the ability to scale and grow big in the way that Angel and VC investors are going to demand.  Since Rockies Venture Club only deals with companies that can scale and provide a significant return to our investors, we don’t see a lot of non-tech companies.

Some people have argued that no companies are really tech companies any more.  Everyone uses technology to create and deliver their product or service, so it’s no longer informative to distinguish some companies as tech companies and others as non-tech.  The real company behind the technology may be providing banking or financial services, wayfinding on your iPhone, tracking your workouts and fitness levels, providing entertainment through games or graphics and so on.  Even though your company may be a SaaS (software as a service) tech company, ultimately it’s probably providing a non-tech service to someone.

A lot of the companies we look at are healthcare tech companies.  These companies are either dealing in healthcare IT where they are providing some kind of information or communications system to make healthcare delivery more efficient, or they have some new technology to deliver drugs, dispose of toxic waste, or other healthcare related operations.  Are these “tech companies” in the same way that IBM is?  Probably not, yet we still call them tech companies.

Ok, so are ALL venture class startup companies tech companies or are NONE of them tech companies?  When it comes down to venture capital and how decisions are made, the fact that a company is a tech company or not really doesn’t matter.  VCs have expertise in highly specific areas, so if you have an IT data storage company (tech company) that will be of interest to certain types of investors whereas if you have an e-commerce company, that may appeal to others.  Within the realm of “tech companies” e-commerce used to be big prior to 2001 and now it constitutes just about 4% of VC investment.  SaaS and other tech fields have eclipsed this number and comprise the bulk of VC investment these days.  So my conclusion is that it doesn’t much matter any more whether you have a”tech” company or not, it matters what you do and who is interested in investing in that.

To learn more about technology investing, staffing and education in Colorado and around the country, consider attending Rocky Venture Club’s “Investing in Tech Companies” event coming up next Tuesday, July 9th in Denver.  Register for Investing In Tech Companies event

The Guppy Tank: A Way To Swim Around VC Funding

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Guppy Tank LogoPicture this: Your company has a proven business model, consistent recurring revenue, and an obvious path to growth. You’re making money, but need a cash infusion to get to the next level. You aren’t poised to grow the 10-30X VC’s or angel investors might be looking for, and while you have money coming in you don’t have the balance sheet for a bank loan. What do you do?

Guppy Tank, coming to Galvanize in Denver on September 12th, might have an answer. Born from the idea of TV’s Shark Tank, Guppy Tank is a 1-day alternative lending/investing event to help companies that have revenue but need cash. I was able to talk with Founder and CEO Darrin Ginsberg on the phone, and then catch up with COO Jon Engleking after he was on the Venture Banking panel hosted by Rockies Venture Club that evening.

Alternative lending has a few advantages over more traditional methods of acquiring funds. While venture capital may be the sexy way to raise money, only around 1% of companies ever do, since most are outside of the growth potential VC’s are looking for. Even for the businesses in their target range, we’ve seen the Series A crunch, which can fall around the time that companies have proven their model but aren’t profitable yet. Angel investors as a group fund a wider range of businesses, but they’re looking for similar things as VCs. Bank loans mean the entrepreneur gets to keep their equity and upside potential, but they typically loan against either hard assets, or profitability with a strong balance sheet  – neither of which are common in a startup. While alternative lending may involve higher interest rates than a bank, it can fill a gap in the funding landscape for promising companies that are making money but couldn’t get loans otherwise.

The Guppy Tank team has seen success with this concept before. Their first company in the space, Super G Funding, provides debt financing for credit card processing companies (ISO’s), again lending against residual revenue streams. After getting that up and running, BizCash was next, operating on a similar model of revenue backed installment loans, and serving a wider variety of businesses than Super G Funding. 

Guppy Tank is a combination of the ideas from their other companies and the show Shark Tank. Although the events aren’t televised, they are similar in format, hosting 7-10 entrepreneurs to pitch throughout one day. Denver will actually be their first event open for the public to watch. There are a few differences from the show – Guppy Tank will make decisions as a group, so you won’t see them fighting against Mark Cuban for deals. Instead of having a set panel of investors, Guppy Tank invites local angels to participate in events for each city they host events. Although they’re primarily oriented toward lending $25,000-$500,000 per event, The Guppy Tank is also open to making minority equity investments. They’ve hosted events in both Newport Beach and Los Angeles, CA and now have plans to expand to the rest of the country.

“Denver has good vibes,” Jon said at the RVC event. Maybe that’s why they chose Denver as the first event outside of California, ahead of Chicago and New York. They have chosen Denver for investments in the past, as Darrin is an investor in INCOM Direct, SupportLocal, and Zen Planner. Since SupportLocal offices out of Galvanize, they had already had a good experience, and were excited to host the event there.

Applications are due no later than September 8th 2013, but space is limited so make sure to get applications in early. Since the event open to the public, (and just before Denver Startup Week) if you just want to watch, come by Galvanize on September 12th!


Article by Tim Harvey, Regular Contributor to the Rockies Venture Club Blog



A big problem launched a new company

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cancer center

Entrepreneurs John Slump and Jared Garfield have gotten it right. They founded their company for the right reasons and are holding fast to those principles. Many medical device companies have technologies that come out of the lab and go in search of a problem. Not these two. They identified a large clinical need and built their company to solve it. As the company evolved through a tough economy, changing investor environment, and development challenges, they maintained the focus of their efforts. Corvida Medical is dedicated to enabling the safer, more efficient, and user-friendly preparation, delivery, and disposal of hazardous pharmaceuticals. As John and Jared told me, “We are passionately committed to making cancer care safe for healthcare workers”.

Like many entrepreneurial stories, this one starts out with a personal ordeal and the persistence to do something about it. John’s sister who lives in Denver was diagnosed with melanoma, and he saw first- hand how dangerous the administering of chemotherapy drugs was to hospital staff. And like many entrepreneurs, John and Jared were not encouraged to create the company necessary to address this clinical need. They wrote their first business plan as students at the University of Iowa, receiving a B+ and “not viable”.  Undaunted, they pressed on with business plan competitions from around Iowa and then nationally. John told me, “The one thing you have to understand about us is that the best way to get us to do something is to tell us we can’t do it”. They researched the clinical need further, they talked to clinicians and hospital staff, they dug into the market opportunity, and they refined their business plan, which culminated in several awards totaling $100,000.

Here is where they realized they might have something. But it’s a huge step from there to start a company. Around that time, they held a focus group at a clinical pharmacology conference with the leading cancer treatment clinicians in attendance. The feedback was so positive and so unequivocal they took the plunge. They knew if they got the clinical need right, then the solution would follow. To get started, they secured funding from friends and family, the state of Iowa, and angel investors.  That is no small accomplishment for two students with no experience but what is really unique is that they submitted a grant to the National Cancer Institute (NCI, under the SBIR program ( only about a year after starting the company. NCI doesn’t care about what the business opportunity is, it cares about solving real clinical problems and sees small business as a way to develop innovative solutions to those problems.  They contracted an experienced grant writer, a pharmacologist to be their Principal Investigator, and built a scientific advisory board to assist them in preparing the application, but like most start-ups the majority of the work fell on them. “One of the most pivot events for us was being awarded the NCI grant. It validated the clinical need, and as the title of the grant indicates, it validated we had an innovative device to improve the safe administration of chemotherapy”. Two years later, Corvida Medical was awarded the Phase 2 grant.

With the Phase 1 grant and subsequent additional Series A funding, the two entrepreneurs built a team, further developed the device, and engaged many of the leading cancer centers in the US to test their device.  Since then they have brought onboard Kent Smith in 2012, a very experienced medical device executive as President & CEO, they have been granted 5 patents, and they are working on their FDA 510k submittal. But they continue to focus their efforts on getting the device optimized in the clinic. Asked what they are looking forward to in the near future, they said looking forward to the Phase 3 bridge award to complete their clinical studies.  Like I said, they got it right, and it looks like they continue to get it right.

You can learn more about Corvida Medical ( by contacting John Slump, at, or Kent Smith at



Bob Luzzi is an experienced medical device R&D executive and entrepreneur. He currently is working on his own early stage venture, and consults for medical device companies in new product and intellectual property development.

Banking strategies for startups

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Article by Bryant Burciaga, Guest Blogger

Essential tips for budding entrepreneurs seeking funding

Despite banks inability to enter into a Series A round of venture funding, banks can offer the essential “make or break” capital needed during the Series B or C rounds for many early stage companies. The Banking Strategies for Startups event that the Rockies Venture Club hosted on June 11th featured an array of banking professionals’ give insight into how entrepreneurs should strategize when forming a relationship with a bank.

The panel format event featured Charlie Kelly of Silicon Valley BankKen Fugate of Square 1 Bank, Adam Glick of Vectra Bank, and John Engleking of The Guppy Tank.

The four panelists offered an interesting diversity in banking backgrounds. Both Silicon Valley Bank and Square 1 Bank are considered Venture Banks, while Vectra Bank is a more traditional commercial bank, and Guppy Tank isan alternative lender that provides equity investments and loans for select entrepreneurs.

Ultimately the goal of obtaining financing starts by finding what type of bank serves your startup best. As such, the questions were posed: How does your bank serve entrepreneurs? And how are venture banks different from commercial banks? “Square 1 Bank serves entrepreneurs better than traditional banks because our bank is focused solely on offering services to entrepreneurs and venture capitalist that may not qualify for lines of credit or SBA loans,” said Fugate, founder and Senior Vice-President of Square 1. “While investors can also help, one day they want to invest in cloud service technology, another day something completely different, we have the ability to raise money when angel investors and VC’s can’t,” he added.

Adam Glick, now Vice President of Vectra Bank Colorado, used to work for Silicon Valley Bank and made sure to counter by mentioning that despite venture banks having the ability to make loans for receivables and equipment, they still oftentimes command an interest rate on top of stock purchase warrants securing their risk. “We can offer SBA loans with a variety of packages that offer benefits like extended repayment terms on the loan covenant, plus a traditional interest rate and we sometimes will ask for personal guarantees,” Glick said, noting that it might serve entrepreneurs better to have this type of structure in their financing instead of yet another source digging into small companies ownership of shares.

Jon Engleking of Guppy Tank offered a third alternative. “We are not government regulated, we are private, we have higher interest rates, and our average loan size is $100,000,” he said, “But we offer ‘Shark Tank’-like program where you can obtain money when you don’t qualify for all other sources of capital, so you go to the other guys first then come to us,” he added. With this selected by application only program, Guppy Tank receives on average 55 deals a month, taking in 15-20.

Finally, the panel discussion led to dialogue on how to form a relationship with a banker. Adam Glick gave the advice of knowing several bankers—well in advance of asking for funding—to ensure that at least one will be willing to work closely with you when the time comes. “I want to learn the most I can about a person, to properly have a strong relationship,” he said.

As final words of advice, Charlie Kelly vocalized having cash and receivables on a good standing to ensure no problems arise and to keep things running smoothly, and as a tip to always keep in mind the ability to give out more shares to investors, “When investors want more shares it benefits the founder so that ownership percentage isn’t diluted.” Ken Fugate’s final words of wisdom where stating that Square 1, “Doesn’t want to be the largest equity holder,” and supplemented that by adding “ please ensure that you can at the very least pay interest payments.”

Ultimately the final verdict of the night was that entrepreneurs should closely examine their options and figure out what direction will be most beneficial for their company growth.

For those seeking more information on debt structures and convertible debt come meet Jennifer Rosenthal and Carlos Cruz-Abrams, Business Attorneys at KKO law at the RVC Academy: Convertible Debt event on Thursday, June 20th from 5-7pm.

5 Reasons Your Pitch Stinks (When Your Startup Doesn't)

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before and afterYour pitch is often the first impression your company will make with an investor. The company can be amazing and if your pitch is still rough, your company looks rough too.

When you are in front of VCs or angel investors you know it can make or break your fundraising efforts. Combining two of the most challenging things someone can take on (entrepreneurship and public speaking) your presentation can be anywhere between enlightening and embarrassing for both you and everyone in the audience. Here are some ways I see people screw up the pitch of otherwise good startups. This isn’t an exhaustive list, just the most exhausting things I see on a regular basis. 

I’m only talking about the pitch itself here; assuming that you have a company with a real product, a solid team, and traction in the market. You know what you’re asking for, your valuation is reasonable and defensible, and you don’t look like an idiot. Perhaps you even have over a million dollars in revenue and strategic partnerships in place – even those companies can mess it up. Whatever the case, you’ll probably have a short 5 -15 minutes on stage, and only a few slides (at most) to make a first impression.

Don’t blow it! Be mindful of what the audience is here for, and you have a much better shot at closing your round. 

Here are 5 ways to screw up your pitch: 

  1. Too narrow of a talk. Frame the problem you’re solving and why it’s important, and go from there. Hold off on the technical aspects – while they may be easy for you to talk about, it’s not so easy for someone who hasn’t heard of your startup to understand. Most of the time, scientific or detailed answers are best left to the Q&A, or (even better) one on one with the prospective investor after the pitch. Get out of you own head, and make sure you put your idea in context of the problem you’re solving and the ecosystem in which it operates.
  2. Forgetting what investors do. Keep in mind that they are investors, so they want to hear about the investment. Unfortunately, that sense in that isn’t as common as it should be. Know what investors want to accomplish, and learn from CEO’s who have raised and exited successfully before. Understand your valuation and think about the exit, because that’s how investors get paid, and many entrepreneurs forget that. Talking about the cool idea you have without any numbers to back it up might work with an unexperienced angel or a rich uncle, but it won’t work with people who know what they’re doing. 
  3. Acting like you’re in business class.  Avoid industry-specific jargon and MBA-speak. Your audience is smart, but it’s your job to make sure they can understand you. They may have already heard 20 pitches that day, with the same acronym in 3 different contexts, and once you lose their attention it’s very tough to get it back. Also, trying to appear impressive with something other than actual accomplishments may give the audience a signal that you’re not coachable, which is a big red flag. Investors also won’t care about your 50-page business plan like a marketing professor would – be concise (in large font) in your deck and save the business plan for due diligence.
  4. Not practicing enough. It’s okay to feel nervous about the pitch. It is not okay to ignore what makes you nervous. The single best thing you can do to reduce fear is by practicing what you’re going to say, many times over. Practice on your own, in the mirror, and in front of real people. I joined Toastmasters when my career led me to frequent public speaking, and it’s the best thing I could’ve done to improve my presentations. Public speaking wasn’t brand new to me (I had probably spoken to over 1,000 people in public at that point) but the difference I saw was dramatic. I’m still not an expert, but it was a steep and useful learning curve. Not all CEOs will have the time to join a public speaking group, but you at least need to dedicate ample time to practice.
  5. No feedback. Learn all that you can from your practice. Record yourself on video and watch it – it’s probably humbling. Feedback from other people is extremely valuable as well. Toastmasters does a great job of this (on the technical speaking points) and it’s one of the most best parts of the program. Rarely in life are we given honest, realistic feedback (even if it stings) so soak it up when you can. Ask knowledgeable people in the industry like angels or other CEOs to watch and critique both your business and the presentation. If you’re able to get a pitch coach to work with you through the process, be thankful and take advantage of it.

Overall, make an effort to be more aware of what your investors are looking for, and how you communicate most effectively on stage. If you’ve gotten to the point where everything else in your business is solid enough that the only thing holding it back is the pitch, consider yourself lucky. This isn’t an easy process, so learn as much as you can. Then go out, get more feedback and practice, and keep polishing!


Article by Tim Harvey, regular contributor for Rockies Venture Club blog. 



RVC Academy: Due Diligence

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RVC Academy – Due Diligence 

Register for Angel Capital Summit 2013

by Thought Leader: Lauren Costantini, Ph.D. from CID4

When: June 25, 5-7pm

Where: Shift Workspaces, 383 Corona Street, Denver


  • Ask the right questions to uncover the risks that could jeopardize your investment.
  • Learn to devote a short 10-20 hours of due diligence and discover what you need to make a smart decision.


  • Empower your deal by gathering your due diligence materials before investors even ask for them.
  • Close your deal faster by supporting your lead investor.

Taught by Lauren Costantini, Ph.D. from CID4. CID4 is a not-for-profit organization committed to Economic Development Through Innovation Advancement in the life sciences industries, by providing investment capital and management assistance. Lauren also serves on a number of Advisory and Executive Boards for early stage companies.



What alternatives do you have when banks can’t or won’t lend you money?

There are still lots of options available and one is “alternative lending.”  There are several types of alternative lending options available and one is the Cash Flow Loan.

Cash flow loans work by setting your line of credit based on your monthly revenues.  If your company does $100,000 per month in business, then the cash flow lender may give you a 1x line, meaning that they will lend up to one time your monthly sales, $100,000 in this case.  Your payments are made by EFT withdrawal on a daily basis.

In some cases such as companies with recurring revenue like SaaS companies, the multiple may be as high as 5x monthly revenue.  Recurring revenue commands a higher multiple because the streams of cash flow are more reliable than one-off sales that many companies have.

Cash flow loans carry a higher interest rate than a normal banking loan, but they can be a good alternative to selling equity in your company which is pretty expensive in the long run.  Some companies may use cash flow loans as a part of their valuation strategy to get themselves past key milestones to the point where they can raise equity at a higher valuation than they could have without that growth.

Come meet Jon Engleking from Guppy Tank, an alternative lender, at the RVC Banking Strategies for Startups event Tuesday evening June 11th from 5:00-7:30.  We will have great networking, lots of angel investors in attendance, a panel with commercial banking, venture banking and alternative lending viewpoints.Register for Banking Strategies for Startups

What is the difference between a “venture bank” and a regular “business bank”?

You may be familiar with the typical business bank. Names like Vectra Bank, Wells Fargo, Chase or KeyBank may come to mind. These banks loan money based on your demonstrated ability to pay them back with interest out of current cash flows. There are many options these banks use including lines of credit, overdraft protection, SBA loans and more.

Venture Banks are a unique type of bank that offer services primarily to venture capital backed firms. Silicon Valley Bank and Square 1 Bank are two great examples.  They get most of their clients through venture capital deals and VCs often make having a relationship with a venture bank part of their investment requirements. Venture banks serve venture backed companies that may not yet have sufficient cash flow to service a traditional loan. They build upon the relationship that the company has with its VCs and make loans for equipment, accounts receivable or other purposes.

Venture banks also differ from traditional business banks because they will typically have warrants for the purchase of stock in addition to a traditional interest rate. Warrants allow the venture bank to be compensated for their risk by sharing in the upside their companies enjoy when they have an IPO or are acquired by a larger company.

To learn more about venture banking and business banking and what they have to offer, and to meet some of the leading venture and business bankers in Colorado, be sure to attend the Rockies Venture Club “Banking Strategies for Startups” event Tuesday June 11th at 5:00. Register for Angel Capital Summit 2013

Investor Pitch Deck Series #6 – Customer ROI Slide


Dear reader,

This is the sixth of many blogposts in a series that I’m calling the Investor Pitch Deck Series. I am creating a post about each investor pitch slide, why it is important, the common errors, and how to communicate that you have what it takes to achieve your goals for this company.

Posts in this series

(note, this is NOT a suggested order for sides in your deck)




The mantra for this series is, “Above all, make sense.”


The Customer ROI Slide

The customer ROI slide is a new take on the old business model slide. By the end of this slide, your audience will feel confident that your user will use your product, and your payer will pay for it.


User: The person or business who uses your product.

Payer: The person or business who pays for your product.


With traditional consumer goods, the user and the payer are the same person. However, with many business models, the user and the payer are totally different entities and you have to acknowledge both for your investor to really GET your business.

Think about your toothpaste at home on your bathroom sinktop. It’s a simple product. It’s pretty basic. Do you buy the same kind every time you run out. Do you switch between brands? Why? Your investors will need to know why potential users will switch from whatever they are currently using (or not using) and start using your product. This value to the new user is called the User’s ROI or Return On Investment. Users are not investing capital; they are investing the energy required to make a change in their habits. Identify the User’s ROI and your venture capital or angel investors will feel much more comfortable with your product.

Now about the Payer’s ROI. It’s graduation season so I’ll use a college analogy about parents who send their kids to college. Parents are paying for the education, but not directly using it. Of course there is a benefit for Mom and Dad. By paying for college, their kid is more likely to get a degree thereby lowering the odds that they will move back into Mom and Dad’s basement bedroom. How do the parents choose which school to send their child to? The Payer’s ROI often a complicated answer when they are not also the User. The Payer wants a good deal financially, but they also want a perceived value for their dollar that has nothing to do with direct use of the product.

Other examples of payers who are not users:

  • Insurance Companies
  • Companies that pay for advertisements
  • Companies that purchase the data collected from free software
  • Governments who provide free public services
Your goal with this slide is to uncover who your users are, who your payers are, and why these entities are willing to use and/or pay for your product.

Cringe Factors

Cringe Factor #1 – You have a few paying customers and they aren’t increasing in number over time.

Why this makes us cringe:  Status quo, apathy, and disuse are the reasons that products die.

How to do it right:  Your investors want to be reassured that you are a realist. A realist knows that a new product, no matter how sexy, inexpensive, functional, or perfect, will not become instantly adopted by the world. There are plenty of products out there that consumers are happy to use for free, but will abandon when a financial transaction is required. If you are in revenue, you must show your potential investors a trend of increasing paying customers over time. If you cannot show this positive trend then you must have a good reason for a lack of increasing adoption. Alternatively,  you can devise a way that you can monetize your product without the user having to pay.


Cringe Factor #2 – You aren’t clear about WHY people will pay for your product.

Why this makes us cringe: Investors are afraid that no one will be willing to pay for your product.

How to do it right: Make the Payer ROI very clear in your pitch. If your product is faster to install and cheaper to run than the current solution, then you have a great argument. Visually show your audience that a payer can currently expect to pay $2000 a pop for the current solution and would only have to pay $800 for yours. Further, you can install yours in minutes instead of days.  We want specifics with the Payer ROI description. Beat us over the head with your Payer ROI.  Don’t leave it to the imagination.


Cringe Factor #3 – You aren’t clear about WHO pays for your product.

Why this makes us cringe: Many products are free to users these days. (Thanks, Google!) So, who are you planning to get your revenue from. It’s not always obvious.

How to do it right:  Even if you are selling a product directly to users, be explicit about who pays for your product. You can go one step farther and discuss your price point. It’s a lot easier for investors to picture a successful transaction when they understand whether the cost of the product is reasonable.


Example Customer ROI Slide


One of the simplest ways to show customer ROI is to create a graph of potential savings that a customer might experience if they were to switch to your product.

If your user is not going to pay for your product, you will need to describe a non-financial ROI. It’s not enough to have a better product. People need a very compelling reason to change their habits.




Article by Nicole Gravagna, PhD, Director of Operations for the Rockies Venture Club as part of a series on the elements of an investor pitch deck. The next in the series is ….