BUYING A SMALL BUSINESS

Finance: Elevator Pitch

PODO helps shoppers find sneakers and shampoo. Can it find $8 million?
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The Pitch: "We make interactive kiosks that help shoppers make buying decisions. Let's say you walk into a beauty salon. Our touchscreen asks you questions about your age, sex, what kind of hair you have and whether it's permed. Then it recommends some shampoos and conditioners. The data you entered then go to the salon, which uses the information to tailor its selection to customer preferences. We make most of our money on subscriptions, which cost $200 to $300 per device per month, and we charge an initial fee. Now we're looking to sign on more European retailers."

Company: PODO

Founder and CEO: David Pattillo, 48

Location: Atlanta

Employees: 22

Founded: 2002

2007 Revenue: $3 million

2008 Projected Revenue: $4.8 million

2009 Projected Revenue: $14.2 million

Raised So Far: $8.5 million from individual investors

Needed Now: $8 million to $10 million for expansion

Customers: Retail chains including Dick's Sporting Goods, Stadium AB, and the Athlete's Foot Australia

The Experts Weigh in

Pick one segment

We're believers in this space -- we're invested in a company called Evincii, which puts interactive kiosks in drugstores. But PODO needs to focus on one retail segment and demonstrate its effectiveness over a couple of years. Potential clients will want to know that shoppers use the machine and find it friendly, and they will want to know about the transaction lift -- how much more shoppers buy when they use this system. I'd also suggest that Pattillo focus geographically: Pick the U.S. or Europe. I think $3 million to $5 million would be effective for now.

Joshua Goldman
Venture partner
Norwest Venture Partners
Palo Alto, California

Try Selling Ads

PODO could be a winner if its revenue model is sound. Has Pattillo considered getting advertisers to sponsor the kiosks or charging slotting fees for the recommended products? If he did that, he would no longer be simply a service provider who gets a monthly maintenance fee -- he would own the ad network. My other word of advice is about content: Pattillo needs to make sure the content updates are as automated as possible, to minimize friction with the retailer. Workers at retail stores are often resistant if the kiosks force them to do extra work.

Tim Mcadam
General partner
Trinity Ventures
Menlo Park, California

Where's the growth?

My first concern is that PODO is six years old and hasn't yet hit an inflection point on the revenue curve. For a company to be valuable to an investor, revenue needs to go from $2 million to $6 million to $14 million, and PODO's is growing too slowly. The company's markets are developing overseas, and the cost to pursue those markets can be very high. I'm worried Pattillo will have burned through $40 million before my investment starts paying off. Also, I'm not sure what my exit strategy would be. It's not clear to me that there's a natural buyer for a business like this.

Brian Connors
General partner
Formative Ventures
Menlo Park, California

Last updated: Aug 1, 2008




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