Support Groups for Start-ups
Kelly Fallis's pitch for her start-up, RemoteStylist.com, starts out well. The concept—an online interior-design service—is straightforward and appealing enough on the surface to elicit a couple of nods from the panel of investors. Soon, though, Fallis is in the weeds. She gestures to a projection screen behind her, pointing to key numbers on a PowerPoint slide filled with type so small that it is barely readable. Explaining how her service works, Fallis clicks through several more slides, each dense with more illegible text. And then she is rushing, visibly flustered, barely looking up from her notes. Before she has had a chance to talk about her revenue model, her team, or how she intends to use the $350,000 she hopes to raise, someone yells, "Time's up!"
Fortunately for Fallis, this is just practice. It is part of an event organized by The Hatchery, a New York City-based company that connects tech start-ups with investors. About once a month, five or six founders are selected to pitch their start-ups to a panel of four seasoned entrepreneurs and investors—plus an audience of about 100 note-scribbling peers. The location varies—tonight we are in a conference room at Baruch College, where attendees have each paid $10 for pizza, soda, and a chance to learn. In addition to Fallis's company, the other start-ups being pitched tonight include an online barter service and a rating and referral site for home contractors. After each pitch, the founder is given a score as well as a critique of the business plan and performance.
As these things go, Fallis gets off pretty easy. The comments from the four panelists are blunt but constructive: "You're talking so fast it's making me anxious. Slow down." "I need a walk-through to visualize this—you need pictures." "Your slides with the numbers are way too small—remember the 10-20-30 rule: 10 slides, 20 seconds per slide, and 30-point font."
Although VC firms are still making fewer investments than they were two years ago, events like this one, which allow entrepreneurs to hone their pitches and meet investors, have become increasingly popular not only in tech hubs such as San Francisco; Boston; New York City; Austin; and Boulder, Colorado; but also in places such as Miami; Pittsburgh; and Grand Rapids, Michigan. Most events, which can typically be found through Meetup.com or StartupDigest, an online newsletter for start-ups, are either free or charge a nominal registration fee.
For a growing number of entrepreneurs, these pitch practice sessions have become an invaluable step in the fundraising process. "It's a tough world to break into if you don't know people," says Alex Carey, founder of VenueDex.com, an online marketplace for event space. Carey jokes that he had nothing but a "network of low-income individuals" before he pitched his company at one of The Hatchery's events. Carey says it was a good icebreaker and led to meetings with investors and potential partners. "When the intent of an event is to pitch and get feedback, instead of just having drinks," says Carey, "it's less awkward to ask, 'Do you like my business plan?'"
An entrepreneur occasionally walks away from the event with a term sheet in hand, but most of the time, the practice is the payoff. Even companies that don't want venture funding can benefit from these groups, says Alex Schultz, co-founder of George Guest, a Boston-based start-up that designs and sells high-end luggage and travel gear. Although Schultz had received funding from friends and family, he says he refined his business plan after presenting at Pokin' Holes, a free monthly gathering in Boston at which founders pitch their business ideas and receive critiques. "It helped us to think about the company from different angles—product, marketing, sales, financials," says Schultz. "And it was comforting to see people like us going through the same challenges."
Sometimes it can be hard to take in all the feedback, which is why entrepreneurs often recruit allies to take notes for them. When David Bloom, founder of Ordr.in Networks, a Brooklyn, New York-based start-up that makes online software for ordering food delivery, pitched his company at one of The Hatchery's events, he had one of his board members record the presentation and feedback. Later, he says, they hashed over each of the criticisms. "I've made lots of tweaks since that night," says Bloom.
Some entrepreneurs might be hesitant to discuss a start-up concept in an open forum—if you throw your idea out there, what is to stop some wily would-be competitor from stealing it? But investors and entrepreneurs who participate in these events say it pays to be open. "When people are concerned, I advise them to talk at a higher level about the technology—describing it without telling exactly how it works," says James Jorasch, an inventor, angel investor, and founder of the Science House in New York City, which hosts monthly pitch sessions for scientists who want to start companies. "But 99.9 percent of the time, the way to success is to talk to the most people possible. If you hold back, you give up the benefits of a network."
Networking is an important part of these events, says Bloom—more than he realized. "I attended to sharpen my pitch, not to meet anyone," says Bloom. After his presentation, he was surprised to find himself exchanging business cards with so many people. "One guy introduced himself after the panel, and when he described his business, I almost laughed," says Bloom. "It was a perfect fit, and he looks like a huge new client. We've already started sketching a deal."
Those interactions had yet another benefit, says Bloom. "Being an entrepreneur can be lonely," he says. "A little networking is good for business, but it really helps make me feel part of a community."