Student Entrepreneurs at ACS Semi-Finals

The Angel Capital Summit 2013 Semi-finals were closed to the public. Instead, we invited some energetic student entrepreneurs to view the pitches. We know it’s hard for students to break out of their rigid schedules and ivory towers so the few who actually showed up that day are total stars. Eric Nydegger from the School of Mines attended to our semi-finals with Dr. Joy Godesiabois who understands the importance of connecting industry and academia.

Impressed with some of the questions that Eric had for the pitching companies, I caught up with him between pitches and asked him a question of my own.

“Eric, will you write about your experience here today for our online readership?”

Below is his take on the busy day:

[pullquote align=”left|center|right” textalign=”left|center|right” width=”30%”] Investors will consider investing in a founder who is excited about the business[/pullquote]

As with any college experience it is necessary to get outside of the structured institution and peruse different venues for the application of education in the business environment. Recently the undergraduate and graduate students at the Colorado School of Mines in the economics and business department were provided this opportunity through an invitation to attend the Angel Capital Summit 2013 Semi-Finals to gain insight into the process of the entrepreneur pitch to angel investors.

By personally experiencing the Semi-Finals and watching the angel investor coaches and judges in action, I was able to see first-hand the mannerisms, presenting strategy, and the basics of the pitch required to gain the interest of investors effectively and succinctly.

After each pitch, judges inquired about details. From the business’ Twitter handle to the summary slide, I was quickly able to see what investors would be looking for within the first crucial seconds of the five-minute pitch and throughout the entire presentation. As efficient methods of communication of the business were addressed, the varying entrepreneurs and coaches were conducted through a quick presentation and then a Q&A session to address questions, but to also allow for the knowledgeable judges to provide guidance and recommendations for the entrepreneurs on their presentations.

Some of the presentation tips included using timeline slides when effective, addressing the exit strategy, clarifying the product and the industry in the first crucial moments of the presentation, addressing current partnerships and networks that are currently developed and advantageous to the business, and most importantly highlighting the competitive advantages.

Other guidelines for the presentation strategy included using pictures to keep interest without distracting, create “the hook” within the first 30 seconds, and present with power and enthusiasm for the business. Investors will consider investing in a founder who is excited about the business with a poor product before investing with an individual that has a great product but a poor, unenthusiastic attitude.

The atmosphere of the practice pitch session gave me an understanding of the pressure of the presentations and the composure required by the entrepreneurs in order to effectively communicate their business and product.  As a practice session and a final elimination session before presenting to the multitude of investors the following week, the setting brought on a challenge to the entrepreneurs presenting, recognizing the significance of the experience. By simply observing the professional poise of some and the shaking and bending of notecards by others, the preparation and the experience of the speakers quickly became apparent to all those observing.

Throughout the enlightening experience and in preparation for our own class presentations of our business plans it was most certainly an informative and educational experience to supplement the classroom experience. The familiarity to the situation will certainly prepare those that attended not only the pitch session but the conference as well with a new awareness and vision for the young entrepreneurs into the innovative business environment.

Part of the Rockies Venture Club mission is to help build the pipeline of great entrepreneurs in Colorado. We are excited to report that 6% of our Angel Capital Summit Attendees were students. The audience contained student representatives from the School of Mines, Regis, and CU Boulder.

 

See Vokl pitch at Angel Capital Summit 2013

By Tim Harvey,  guest writer for the Rockies Venture Club

Your smartphone is as dumb as a banana when it comes to interaction with local merchants,” says Tom Higley from his co-working space in Denver, Colorado. As CEO of Vokl, he’s ready to change that.

Smartphones are more prevalent than ever, with over 1 billion users worldwide, expected to double in the next few years. Including tablets, the worldwide market for mobile purchases is around $25 billion, and eMarketer says this will jump to $87 billion by 2016. Despite this, many local merchants rely on technology as advanced as the tried-and-true sidewalk sandwich board to attract customers in the area. It’s hard to blame them – these signs are fast, cheap, get attention, and many small business owners don’t know of a better way. They often have a hard time creating professional content online, and when they aren’t able to provide value to their customers this way, they’re missing out. The incredible market opportunity presented by mobile technology poses risks as well – especially to small and medium size companies and local merchants. The businesses that are either not aware of, or not able to capitalize on these global trends are likely to be left in the dust – while the ones that see it coming and can use it to build meaningful content and connections with their customers stand to win big.

Tom Higley has a vision for how these smaller businesses can participate. As a successful serial entrepreneur and 6-year mentor for TechStars, this isn’t the first time he’s planned to change the tech landscape. Vokl is the 6th company where he’s either been a founder or CEO, and throughout his career has raised about $35 million to return over $1 billion to investors. Working closely throughout his career with entrepreneurs like Brad Feld and Raj Bhargava, he has a unique perspective on what growing businesses need and where opportunities are within the marketplace.

Tom’s answer to this problem is an easy-to-use app for businesses to create mobile content their customers appreciate. “The consumer is the center of the value-creation universe,” he says. He believes that giving local businesses the ability to produce and deliver value to their customers will drive consumer engagement, and envisions a world where both the consumer and business could expect mobile interaction with each other. Right now, neither side expects this – and that’s what Tom plans to change.

The first stage of Tom’s plan was to create the Vokl Business app, which has been available on iOS since October 2012. This allows local merchants to easily create and share content through Vokl as well as social media, similar to how Instagram works. It has pre-built templates, and also makes it easy to do things like add text to images, for a caption or a call to action. The next step is for Vokl to release the consumer version of the app, which they expect to do within the next month or so. This will drive communication beyond content creation and consumption – users will be able to see posts businesses they follow in their feed, and they can also interact with the merchant. The last and potentially most valuable phase for Vokl will be leveraging location based content. Geo-tag technology will continue to grow, and although companies like Foursquare have been popular, they really aren’t really geared toward merchants, especially in the minds of users. It’s especially hard for businesses to create content or direct who gets it. “Eventually every place will tell a story, and what is important to me may be different than what is important to you,” Tom says. That’s why it’s so important for a business to be able to tailor their messages quickly and easily. Although the location based technology will be the most challenging piece to develop, he has experience in this area from serving as CEO of Denver-based Local Matters.

Vokl plans to fill a niche in the market that they don’t see anyone else providing. Many business owners haven’t seen much value from directory services, even when they are online. Most small businesses are on Facebook, but they are becoming increasingly annoyed with it. Often, they created a page because it was free and relatively easy to get ‘likes’, but with the implementation of EdgeRank they aren’t able to reach all of their user base they build organically without paying for sponsored posts. Whether or not they see this as a bait & switch from Facebook, many find it frustrating and hard to control.

While Tom was obviously excited about developing the technology, he also has great respect for the rest of his team. He is known for for spotting talent – he hired Niel Robertson (Founder/CEO of Trada) in his early 20‘s at Service Metrics, and they went on to sell the company to Exodus Communications for $280 million in 1999. For Vokl, Tom brought on software and engineering wiz Vasily Vasinov as CTO, after finding him at the top of the CU-Boulder computer science program. Tom also had good things to say about the rest of his team – another developer and what he calls “the best UI designers in Colorado.” He talks of how his team’s experience complements each other, similar to how Steve Jobs likened his recruiting model to what made The Beatles great.

Tom is pitching at the Rockies Venture Club Rockies Venture Club Angel Capital Summit, March 19-20, 2013. The two-day conference is Colorado’s largest angel capital event, and begins with a live interview with TechStars founder David Cohen. In addition to other startup pitches, RVC will feature seminars from local experts, and a keynote speech from Jon Nordmark, co-founder/former CEO of eBags and current CEO of usingmiles.com. After last year’s Angel Capital Summit, RVC investors led $15 million of investment in 24 companies that pitched throughout the year, so this year is sure to have a positive effect on the Colorado entrepreneurial community. The event will be held at DU’s Sturm Hall and more information can be found here.

Tim Harvey is a guest writer for the Rockies Venture Club. His mixed experience with Finance and Neuroscience allows him to fit right in. If you run into him, ask him about his ‘Semester at sea’.

 

The Next Silicon Valley

Silicon Valley has sat confidently on the throne of the entrepreneurial kingdom for a long time now. We all know the reasons this region has thrived: large numbers of smart people with entrepreneurial spirit, an excellent university (Stanford) consistently producing more of them, and a great environment where these people want to stay and live.

Today, Silicon Valley continues to lead the start-up community in numbers and successes, but as in any kingdom, there are others chomping at the bit. The pool of potentials is overcrowded and extreme competition has taken its toll on its famous entrepreneurial spirit. “There is a feeling in Silicon Valley that if you win, someone else loses,” said Kimbal Musk, Co-Founder of The Kitchen Community in Boulder. “It has driven success, but it has also driven people to leave.” (New York Times)

So where do you go if you want a better place to start your business? There are many locations vying for attention. Some of the top contenders, as ranked by National Venture Capital Association, include Boston, New York City, Los Angeles, and Washington D.C. These cities not only have the money to spend, but they have brainy populations with established industries in need of new businesses’ services and skills as well. But hold your horses, don’t forget that most entrepreneurs can’t afford to set up shop and live in such expensive places. The high cost of existing in these cities has caused many start-ups to look elsewhere.

Smaller runner-ups for entrepreneurial hotspots are places like Portland, Oregon, Austin, Texas, Salt Lake City, Utah, and our own backyard. The Denver-Boulder area has made it’s own mark among the challengers. In fact, many believe Colorado is poised to become the next Silicon Valley.  You might ask why our state would be better than others considering that most of these locations have some of the same benefits as Silicon Valley too (remember the smart people numbers, smart people factory, and great environment?). Well, Colorado is succeeding for these reasons, but it has emerged as an excellent combatant against the reason people are leaving Silicon Valley – it is fostering a supportive community where entrepreneurs learn, work, and thrive together, not in isolation. Sure, there’s competition, but it’s less of a winner-loser situation with more support systems in place to boost the entire entrepreneurial community.

Colorado supports its start-up community with many educational opportunities designed to help entrepreneurs learn the process of starting, funding, and running a business well. Universities in the state continue to augment their business programs and focus on community support. Many degree and non-degree opportunities exist for entrepreneurs to pursue. The focus of these programs even extends to women specifically as an entrepreneur target group. University of Colorado at Boulder’s Deming Center houses the Women’s Council is an example of forward-thinking environment the state offers. This group aims to provide role models, leadership lessons, mentoring, and coaching for female business leaders specifically, but it also involves the entire community.

Besides institutional education, many organizations continue to arise in Colorado and provide essential preparation for start-ups as well. There are organizations like Rockies Venture Club (RVC) based in Denver and serving the whole state. Besides providing a well-rounded support system for entrepreneurs and investors alike, RVC recently created a series of courses in which thought leaders provide specific expertise and foster discussion and collaboration. A Good Investment Deal, Marketing and Branding, and Due Diligence are among the offerings.

Now of course business education isn’t the only factor in Colorado’s run for entrepreneurial leadership. Many cities have the same benefits, but not all of them have the same community gatherings arranged for business success. Boulder Denver New Tech and Boulder and Denver Open Coffee Clubs are examples of regular gatherings of Coloradoans where anyone can appear to discuss tech and business. Besides helping to establish relationships with fellow business leaders, attendees can discuss issues, share updates, and talk innovation as well.

Rockies Venture Club throws its hat into this ring of community business also. Part of its well-rounded nature is that it addresses all possible needs of investors and entrepreneurs. Beyond providing educational opportunities, RVC hosts monthly meetings in which local start-ups have the opportunity to pitch their business, mingle with other entrepreneurs and investors, and get feedback and possible funding. Pitch coaching proceeds these gatherings and investor forums follow, creating a cycle of support and leadership.

Now let’s be honest. The aforementioned reasons for Colorado popularity as a start-up destination are valid, but not totally unique. The picture would not be complete without the mountains. Nobody can deny the absolute beauty of the Rocky Mountain state. Lifestyle is a huge factor is deciding where to establish a business. If your employees can enjoy an affordable life and have the great outdoors and fantastic weather to boot, they are more likely to stay and thrive. As David Cohen, CEO of TechStars, put it, “If you visit, you might love it and decide to never leave. That’s what happened to me.” David Cohen will be a keynote speaker at the Angel Capital Summit on March 19th.

And of course, Colorado rise to the top of contenders for the tech hub title is not without it’s issues. Nobody can deny that Silicon Valley remains the center of the tech universe and money flows there more than anywhere else. Incumbent tech companies dominate there also, and they still lure tech brainiacs away from small and/or new start-ups elsewhere. Furthermore, Doug Dwyre, the CEO of Mocapay, a mobile payments company, thinks while being in Colorado has its pluses, “it’s harder being a start-up here,” he says. “You have to prove your business model 10 times over. Your ZIP code makes a difference for a start-up.”

However, start-ups are called that for a reason. You have to start somewhere. If you can’t afford Silicon Valley or other big cities, what do you do? Herein lies the potential for Colorado’s rise to the top. If you’re a tech brainiac who wants to pave your own path, you are likely to want to do it where you have affordable opportunity, a strong and supportive community, and an excellent lifestyle. Colorado offers the entrepreneur this environment, one where she can learn, grow, and thrive. It is the shining star on the horizon, one that promises to take its place among the leaders, if not overthrow the king of tech industry. Now of course there is the Animal Farm effect. To misquote George Orwell, All towns are created equal, but some are more equal than others. 

 

Stacy Gregg is an educator, runner, reader, and mom to two energetic pre-schoolers. She joined the Rockies Venture Club at the end of 2012 to support the communications side of the organization.

 

Investor Pitch Deck Series #3 – The Team Slide

Dear reader,

This is the third 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

 


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


Team Slide

At the Rockies Venture Club we have reviewed easily 300+ company profiles in the last 12 months. We’ve noticed that the team is often very well put together, but very poorly communicated in the pitch.

It’s hard to discuss the team. In a startup, the team is made of people who work together, often intensely. For the person pitching, it’s hard to separate the investor-important nuggets from all the other stuff that makes their teammates awesome. The CFO might be a Harvard graduate with two big exits on his Curriculum Vitae, but when you know him well, all you can think about is his silly irrational fear of crickets.

Much of the material on the interwebs says that you should put the team slide early in the pitch. They do. They do. They do.  We disagree in most cases. If you are famous, or semi-famous, feel free to talk about yourself or the team early in the deck. If you are not yet famous, then leave the team slide until near the end. We have had two pitches in the last year that fit the famous model. Super angels were pitching their new companies and it made sense for them to say, “Hi, I’m Locally Famous Angel and I have a habit of growing companies and making money for investors. Here’s my newest venture.”

For the 99.9% of us who are not famous, it’s important that investors understand the context of the company before they can fully care about your team’s experience. It’s hard to care that the person pitching spent 10 years exploring submerged oil veins in Alaska until you understand that it’s exactly that person who should be leading this company’s R&D effort.

Investors are often leadership types who have done a lot of hiring. During your pitch, make them want to hire a person just like you to lead this company. Think about how relieved they will feel when you disclose that you are already on the team!

Cringe Factors

Cringe Factor #1 – Your team consists of two guys and a dog.

Why this makes us cringe: A group of devoted supporters is the first proof that a company has a good idea. If you have a group of strong supporters, why is no one helping you with this company?

How to do it right: You don’t need to pay salaries to have people on the team. Team members in an early stage company include founders, employees, mentors, advisors, and board members. Back up and think about the experience that your company needs to grow. Will you be franchising? Then you better have a franchise guru. Will you be selling your product to hospitals? Then you better have a teammate with a medical sales or medical liaison background. Find the right people and determine their desired level of involvement. Maybe a phone call every month is all they can afford to give you. If they are willing to publicly call themselves your mentor, then you are welcome to add them to the team.

Cringe Factor #2 – Your team is too complicated

Why this makes up cringe: Actually this isn’t fair. An in depth, life-story discussion about each team member doesn’t make us cringe. It puts us to sleep. Save the life stories for your memoirs.

How to do it right: Just the fact ma’am. Boil your teammate down (not literally!) into one line that describes how his or her experience will make your company succeed. Remember, the whole pitch is really about money, so try to keep a message in there about how they can make the company money.

Cringe Factor #3 – Your team slide presentation is awkward

Why this makes us cringe: Since teams are made of people and people have relationships (good or bad) there is a weird thing that happens sometimes during the presentation of the team slide. The presenter changes body position, and either says something inappropriately loving, or leaks an accidental inside joke, or makes odd gestures. It’s awkward.

How to do it right: Practice this part just as much as the other parts. Feel free to be glowing about your teammates accomplishments in his last job when he saved Oracle $2 billion dollars because he caught a mistake. Give your pitch on camera and watch it. Or do it in the mirror. You’ll notice immediately if you become a giggling schoolgirl when you talk about your developer.

How to build the side

Visually, this team has the right idea. They simply show which founder has which role. They use logos from Dow Jones, RIM, and Oglivy to give them the appropriate amount of street cred. The assumption is they worked in those places before starting this company. Name dropping is ostentatious at a cocktail party, but necessary in the team slide.

Verbally, the pitch presenter will give one line statements about how these team members are well suited to making this a successful company.

Note they have their golf handicaps on the slide. It’s a golf company, so that little tidbit is there to keep the slide branding related to the industry. No piece of this slide is random.

 

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  #4 – The Summary Slide

 

RVC News Blitz – Spring 2013

 


In this edition:

 


 

Angel Capital Summit News

The Angel Capital Summit is scheduled for March 19 and 20th at the DU Campus in Sturm Hall. This is the same location as last year. Don’t take that to mean that we are repeating the same old conference! We’ve revisioned the ACS to include suggestions from last year’s suggestion box. All the seminars will occur on one stage. No more choosing between two awesome talks. Just relax and take it all in!  Similarly, pitching companies will not compete for attention; they too will pitch on one stage.

Local Legends, David Cohen, founder of TechStars, and Jon Nordmark, CEO of eBags will both be giving Keynote addresses at the ACS. We have confirmation that many angel and venture capital investors will be in the audience. We have a growing list of VCs who will be attending so they can browse our local seed stage companies.

Pitch applications are in Executive Review through February and companies will be invited to pitch in early March. We have seen some hot new companies come through both the Gust and Business Catapult application databases. Companies will be matched with trained Pitch Coaches and the Finalists will be chosen during the week of March 11 after we’ve seen the pitches in person.

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No Pitch Event in April

Since the Angel Capital Summit is late in March (corresponding with DU’s Spring Break), we will have a bye in April. Although we won’t have new pitches in April, the investor Forum will still meet in April. This allows the Investor Forum to fully digest the large number of companies that pitched at the Angel Capital Summit. A Bye in April is good for entrepreneurs and good for RVC staff. Whew!  We will resume our normal pitch event schedule in May.

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New RVC Staff Roster

We’ve been growing!  RVC is an amazingly complex organization at the cutting edge of angel investing and private equity community development. We are so thankful to have found some amazing new staff members so we can accomplish our goals this year. As a new non-profit, we are thankful to have the deep experience of executive-level interim staff. We really are lucky to have such a great team! Here’s what our roster looks like right now…

Peter Adams, MBA – Executive Director

Known as the brave soul who took over the Rockies Venture Club in Dec of 2011, Peter is the visionary force shaping RVC today.

Kevin Andresen – Interim Staff

Most recently VP at Urban Lending Solutions, Kevin is experienced with the crazy world we call Private Equity and Venture Capital.

Patty Laushman, MA – Interim Staff

Past CEO of the Uptime group, she now calls herself a “cashed out entrepreneur”, Patty is intimate with the inner workings of start-up operations and knows the path from zero to exit.

Nicole Gravagna, MS, PhD – Director of Operations

Just like the human brain strengthens useful neural connections and removes extraneous ones, Nicole is constantly developing new Standard Operating Procedures to keep RVC running smoothly as it grows.

Stacy Gregg, MA – Communications Manager

With two advanced degrees in education, Stacy is well-suited to managing the constant stream of three-way communications at RVC.

Rebecca Wiedemer, MBA – Events Manager

Senior Financial Analyst at Standard and Poor’s by day and master of Event Management by night. Rebecca is responsible for the high quality of our monthly Pitch Event these days.

Mimi Zheng – Analyst Intern

Soon-to-be-graduate of Metro State University, Mimi is involved with Analysis at RVC this year. She’s taking a deeper look at operations, revenue, and communications to make RVC a sustainable non-profit for Colorado.

 

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Writing Venture Capital for Dummies

We have a confession. We’ve been moonlighting. Peter and Nicole are writing Venture Capital for Dummies with John Wiley & Sons, Inc. publishing company. We were excited to take on the project when Wiley approached us in the fall since we already wanted to build extensive educational curriculum around fundraising. This book will walk founders through the process of fundraising in an easy-to-grasp “for dummies” format. VC’s for Dummies will be on shelves by September 1st of this year.

 

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RVC Classes are a big hit!

Speaking of educational curriculum (see above), we have been thrilled with the quality of education and the amount of energy that arrises from each RVC Academy class. We’ve had a couple of stellar classes so far, A Good Investment Deal, Marketing and Branding, and Due Diligence. Our thought leaders bring specific expertise to the table, and the small setting allows for amazing discussion around the issues facing everyone in the room. We will try to do 2 or three of these classes every month.

We’ve had a request for a class on Anti-dilution Clauses in term sheets. These are the sticky clauses that can help early investors feel safe in their investment, but can ruin the deal for future investors if done poorly. Does anyone else want to learn about this topic? Send Nicole an email or mention your interest in the comments section at the bottom of the page.

 

 

Pay to pitch?

[Clarification Note: See bottom of post for FAQ about which RVC services require a fee.]

Pitching companies contact me all confused about having to pay for Pitch Academy before they pitch to investors. Another thing I get a lot of guff for is the fact that we require pitching companies to pay for their conference tickets at the Angel Capital Summit. I was told that for a pitching company to pay for the conference is like the band having to pay to attend their own show.

We have a provision where we’ll waive your fees if you pay us back with your time. For ten hours of volunteer work, you can get through our system entirely cash free. This is a community organization, we have plenty of work for volunteers. One word of warning, if you want to volunteer, you have to actually try to be helpful. Playing with your phone for hours while I handle the deluge of event attendees at the door, like one CEO that will remain nameless, is not really helpful. Understandably, founders often find that they are busy with their company and would rather just pay for the class.

Why are we gouging entrepreneurs with these horrible fees for a simple 5 minutes of air time?

[pullquote align=”right” textalign=”right” width=”30%”]At RVC we spend two days talking with investors about each company after the pitch.[/pullquote]

Wow, that really does sound bad, doesn’t it? The pitch is only the tip of the iceberg. The pitch is the public part, and from the outside it looks like all we do is pitch companies every month and take their hard earned cash.

Actually, we do a quite a bit more than that.

 

 

 

Reviews

By the time a company pitches with RVC, we’ve already had reviewers vetting their company and determining if they are ready for investment. It would be a huge disservice for us to pitch companies randomly, or just have them get in line and pitch when they wanted to. Readiness is a big deal and if we pitch a company too early, investors get the message that it’s not a good company (right or wrong). Our reviewers are experienced volunteers, but it takes hours of administrative staff time to sort, manage, and account for all the applications that come in to make sure that everyone gets fairly reviewed.

Pitch Academy

I’m really proud of this class that Peter has put together. Pitch Academy is a 4 hour class that is a drink-from-the-firehose lecture that encompasses everything we’ve learned about angels, pitching to angels, and most importantly pitching to our angels. We know who is investing right now and we know the messages that they want to hear. After the lecture, companies pitch in class and get constructive comments.

This class is always full even when we run an extra class in the month. People take Pitch Academy before they even apply to pitch just so they know what they are getting themselves into with angel investing.

Attending Pitch Academy used to be optional. We quickly learned that it was very important. Audience members were having no trouble at all picking out the company who had not come to pitch academy and we determined that it was a disservice to pitch a company without giving them some extensive feedback first. Even good pitches seem bad when they haven’t been standardized with the current trends.

After taking the Pitch Academy class, every pitch your company does will be better, sharper, and more focused on the investment deal. We teach investor-speak.

Investor Forum

Founders may not realize that at RVC we spend two days talking with investors about each company after the pitch. Both Peter and I manage 6 hours of investor meetings each month acting as each pitching company’s agent. We go over the pitch deck, discuss the points that investors want to learn more about, and get to the nitty gritty about what they need to move forward with due diligence. It’s important that this is done without the founder present. That anonymity gives investors a chance to talk candidly and determine what it would take for them to get involved with the deal.

RVC Investor Forum exists because of thousands of hours of investor community building done by RVC staff. We spend a lot of time working with angels to teach the skills of investing so they are educated when they approach you for negotiation. An educated angel is much easier to work with when you are closing a round.

Some have argued that instead of the entrepreneur paying fees, the angels should pay for these services. They do! We divide the costs between the entrepreneur and the angels.

Entrepreneurs think that angels are the haves and the founders are the have nots. Therefore angels should foot the bill for everything in this process. It’s important to understand that although a founder might need an angel to grow his business, an angel never needs a founder. Angels don’t have a mandate to invest like VCs do. Angel investing is a hobby, not a job, or a requirement. If we add all the fees to the angel side of the seasaw, they’ll just take their ball and go home. Nobody wants that.

Referrals

If your company needs a lot of money, it makes sense for you to share your deal with High Altitude Investors in Colorado Springs or Colorado Angel Investors in Fort Collins. We often make phone calls to those groups to help get our companies on the radar in other angel communities. We are starting to form relationships with groups like First Funder and local foundations that will provide companies with non-dilutive grants that don’t require selling equity.

Metrics

We try to tally up all the investments that are done in our companies. This is extremely hard to do. Last year our companies raised around $15 Million. We don’t have a fund so RVC doesn’t directly do any of that investment. Entrepreneurs love to remind me of that. Our metrics are important to show investors that RVC knows how to pick great companies that get investment. This metric also helps put Colorado on the map. Angel deals are often so quiet that you’d never know they were happening. We try to pull out the bull horn so everyone knows great things are happening with entrepreneurship in Colorado.

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Frequently asked questions about RVC Fees

(more extensive FAQ)

Do I have to pay to apply to pitch? No

Do I apply through the “Coaching Cloud” which has a fee? No. “RVC Pitch Your Business” is our group in the Business Catapult. There is no fee. You can also apply through GUST.

Do I have to take the Pitch Academy to apply to pitch? No, but I have to admit it helps us to see that you are ready to pitch if you pitch in the class. If you take the class, then get accepted, you don’t have to pay for the class again. We do suggest you come back and pitch in class again (for free) to get more feedback.

How much is the Pitch Academy Class? $149 for non-members, $125 for basic members, free for keystone members.

Do I have to pay for Pitch Academy AND the ticket to the pitch event? No. When you pitch at a conference, you pay for the ticket and get coached through a volunteer pitch coach for free. When you pitch in a monthly pitch meeting, you pay for the class with Peter and Nicole and then get into the pitch meeting for free.

Do I have to take Pitch Academy to Pitch? Yes. This is non-negotiable. How you pay for it is negotiable.

Do you forsee making the Pitch Academy or the pitch process free for entrepreneurs in the future? No. We think it’s fair for founders to contribute with either their time or money. This is a community-based non-profit. We think everyone should give a little to keep RVC going for another 27 years.

RVC staff members are all angels and don’t need to take home a salary, right? Ha ha ha ha ha! Whew, that’s a good one.

Do you take a cut of the deal when investment happens? No. We can’t. It’s not legal to do that unless you are a broker-dealer. We think it’s more important to be a trusted intermediary than to become a broker-dealer or even to work with one.

Do you take a finder’s fee? Again, not legal. See above.

 

 

 

Kickstarter Project Experience and Education

Tim Harvey, Software & Biotechnology Consultant

Joni Gale Kripal’s idea for a Kickstarter project began with just her and a friend, looking for something they wanted and couldn’t find on the market – an iPad attachment with practical organization and the elegant design they were looking for. Joni says simply, “I made it for myself because I wanted it,” and they saw the potential in the market as well as talent within themselves to build a business. Although her project wasn’t fully funded, she considers it a positive experience and has some thoughts for anyone considering crowdfunding.

Kickstarter (funded by Index Ventures and Union Square Ventures, among others) is a way for anyone in the world to fund creative projects and is open to creators from the US and UK. Kickstarter specifically requires that all projects be creative in nature, although other platforms focus on different areas. These types of crowdfunding platforms rely on “backers” not investors, people who find these campaigns online, believe in the idea, and agree to put in cash for the project at certain levels. Based on their level of support, backers get rewards, such as the products they’re funding, or a one-of-a-kind experience. There is technically no “investment,” so the creator(s) keep 100% of their equity. This also means an entrepreneur is not likely to find mentorship or guidance going through crowdfunding.

So far, Joni and her partner had just invested sweat equity and personal money, and as they were looking to scale the business they realized they needed more cash to do so. They chose Kickstarter over other services primarily because of the “all or nothing” premise. Other platforms, like Indiegogo or RocketHub have a “keep-it-all” scenario, where an entrepreneur keeps all of the money raised, even if the campaign hasn’t met its fundraising goals. With an all-or-nothing premise, if the goal isn’t reached by the deadline (as in Joni’s situation), no money is collected from the backers. In this case, they won’t expect anything else from you, which limits your risk and sets their expectations upfront. In addition, backers may recruit others before the deadline just because they want to see the idea succeed. For these reasons, ideas tend to be either popular and hit their goal, or don’t get very far – there is little middle ground on Kickstarter. Joni’s biggest take away from her experience was market research insight and real world feedback, and she also had some more specific recommendations as well.

If you’re considering crowdfunding, the first thing to do is to back a few projects that you find interesting to get a feel for how it works. It’s a good idea to have a solid website and a multi-channel social media campaign running prior to launching your project. Keep in mind that having established users liking, tweeting, and blogging about you prior to the project can create credibility for new people finding your idea. Twitter can certainly be useful, and Pinterest could be even more important, especially if your idea is visual in nature and/or is more targeted toward females, as they are 80% of Pinterest’s user base (TechCrunch on Pinterest). Be thoughtful with the rewards that you give backers, and structure the package levels simply. Rewards that are close to the heart of your idea are likely to do well, because backers resonated with them in the first place. Decisions made on social media tend to be fast, making first impressions ever more important, so if you use video (which is a good idea) don’t be afraid to spend some money on video production. It can also be helpful to overestimate your funding needs, as fees and unexpected challenges always come up.

There are things to be careful with as well. As always, read the fine print and keep up on any changes in your business environment. A platform’s rules may change during your experience with them, as Joni’s did, so pay attention to the ones that affect your project. When the JOBS act is implemented (Forbes infographic here), it will change some things in the industry, so be aware of that as well. Fees will cut into your margins, 10-15% in Joni’s case, since Kickstarter takes 5%, Amazon Payments 3-5%, and shipping for backer’s rewards are usually included. “You have to discount to get on Kickstarter,” she says. Competitors can see your ideas out in the open, so if necessary look into filing patents or other IP protection. As always, be careful in hiring any outside professionals, as there are shady “consultants” who cold-email to offer marketing, design, or other little services than are little more than a scam. Do your diligence if you hire someone, and if the offer sounds too good to be true, it usually is.

Joni sees her Kickstarter project experience and education as a good thing and something she would do again. She doesn’t consider it a failure, but a learning experience that is part of her entrepreneurial process. It gave her a new level of market insight as well as a chance for market exposure and feedback from potential customers. In the end, Joni’s positive attitude and learning from her project means that her experience is a valuable stepping stone in building her business.

About the author:

Tim is pursuing a Master’s from CU-Boulder in Engineering Management, after a few years working with entrepreneurs following an undergrad in Cognitive Neuroscience at U. of Denver. He started his first business at age 19 and currently consults for startup companies, primarily in software and biotechnology.

 

 

Crowdfunding Myth Busting Series – Quick Fixes

Peter Adams, Executive Director at Rockies Venture Club

Let’s tackle crowdfunding myth busting to better prepare for raising capital. What are the most commonly believed myths in crowdfunding? Here we look at crowdfunding as a quick fix.

Myth #6:

Once the SEC releases its guidelines, funding will become easy and freely available.

Reality:

Even if Crowdfunding portals do become popular, it will likely take years before people begin investing with them regularly. There are several factors that may slow the adoption:

Many “accredited investors” today do not even think of themselves as Angel Investors.  It is unlikely that the existence of a portal will change this perception. Accredited investors are individuals with a net worth of $1 million or more, not including their primary residence, nor an income of $200,000 or more a year with a reasonable expectation that it would continue. These investors are typically working with wealth advisers who are not motivated to move money to angel investments where there can be significant work in doing due diligence and risks with unknown investments. So, even though these people are qualified to make angel investments, few actually will engage in angel investing. It’s reasonable to assume that the same resistance to angel investing may exist among the non-accredited investors as well. While one upside of the JOBS act is that those who want to have the opportunity to experience the significant returns that angel investing can provide, it may take time for these individuals to get used to the idea of investing through a funding portal.

Platforms like E-Bay took years before people became used to the idea to bidding for things in an auction format.  People were simply not used to bidding for things and had concerns about whether they would actually receive the items they had won in an auction. It took E-Bay years to develop their buyer’s insurance program and for word to spread of the deals that could be had on their platform.

Even if Crowdfunding becomes as popular as E-Bay, it will take some time before it catches on in the mainstream. They will likely need to develop their own version of buyers’ insurance in order to gain investors trust.

 

 

Crowdfunding Myth Busting Series – Public Offerings to Non-Accredited Investors

Peter Adams, Executive Director at Rockies Venture Club

Let’s tackle crowdfunding myth busting to better prepare for raising capital. What are the most commonly believed myths in crowdfunding? Let’s look at many of them to find what’s truth and what to debunk. Here we look at how existing offering exemptions already allow for public offering to non-accredited investors. We’ll examine one more myth, so look for our final blog post in a few days.

Myth #5:

In Colorado, many of the crowdfunding opportunities created by the JOBS act are already available to entrepreneurs.

Reality:

The Colorado Division of Securities already offers SCOR and RL limited registrations for public offerings to non-accredited investors for in-state deals. These registrations are rarely used, even though in some cases they represent less work for the entrepreneur than filing with a crowdfunding portal.  Entrepreneurs can pay $50 and fill out a few forms and in a few weeks of regulatory review they may be legally entitled to publicly market their securities to accredited and non-accredited investors alike.

Many people confuse the two things that must occur for successful securities sales.  The first is that it must be legal. There has been much excitement about the SEC releasing the details the JOBS act, but since many of these opportunities for lightweight registration have already existed for years, there must be something else missing.

That second thing missing is the marketing effort that must be expended to raise capital.  Most companies seeking capital are not prepared for the process. They are promoting their companies without having put together a working team of people, without having done the detailed financial projections and analysis needed, and without having done the market research to gauge market demand and competition for their product.  Even those who have gone through these steps to prepare for raising capital are often not ready for the extraordinarily difficult process of marketing their securities.

Funding portals will help companies to some extent in that there will be a place where investors can look at a good amount of deal flow in one place.  Entrepreneurs will likely find that it takes more than a portal listing to sell securities and they will need to develop significant social networks and spend significant dollars and time in putting together presentations, traveling to meet investors, advertising and more.

 

Stay tuned for the next crowdfunding myth busting blog post on quick fixes

Crowdfunding Myth Busting Series – Due Diligence

Peter Adams, Executive Director at Rockies Venture Club

Let’s tackle crowdfunding myth busting to better prepare for raising capital. What are the most commonly believed myths in crowdfunding? Let’s look at many of them to find what’s truth and what to debunk. Here we examine the importance of due diligence. We’ll examine a few more myths over the next week, so look for subsequent blog posts in the coming days.

Myth #4:

Due diligence is a critical part of the early stage investment process. Most professionally prepared due diligence packages are no more than a collection of hundreds of documents, which is too much for someone to go through for a $500 investment.

Reality:

Unless crowdfunding sites find a way to crowdsource the due diligence process, it will not make sense for any one person to do all the research on a company, and many companies may be funded without receiving the scrutiny that they should. Even for Angel groups, Due Diligence is a time consuming and expensive process that sometimes threatens to eclipse the value of the investment in terms of the time it takes to do the research.  Groups have the opportunity to work together and split up the work so that no one person bears all of the burden. Crowdfunded Due Diligence will always be suspect when we don’t know who the other investors are and do not have a means to get to know them individually and develop trust relationships that face-to-face angel investors have.

 

Stay tuned for the next crowdfunding myth busting blog post on public offerings to non-accredited investors