Startups Should Never Pay to Pitch

Several times a week my startup is solicited to participate in pay-to-pitch events at which we are promised access to a smorgasbord of wealthy, capable investors who are just chomping at the bit to invest in companies like mine. Sounds too good to be true, right? Well, it is.

This has been covered by many other posts, such as from this startup lawyer and from this angel investor but here is my $0.02 to add as well.

These pay-to-pitch scams start off innocently enough. There is often no mention of a fee up front. Then, if you "apply" (a classic sales/manipulation trick: making YOU apply to THEM so that you want them to take your money in order for you not to feel rejected), you make it to the "next round," and then they casually drop the bomb that, oh by the way, there will be a fee of several thousand dollars to present.

If you object, it is often glossed over as, "We have to charge the fee to filter out the startups that aren't serious." I see, because the "application process" I've been going through doesn't help you filter any startups out? What exactly is the application process for then? Oh, right, see the above note about the sales technique!

Imagine that: the hoards of rich investors want the cash-poor startups to pay substantial fees just for the right to talk to them - makes sense, right?? Seriously, no investor worth his/her salt needs a forum of curated startup presentations to get access to dealflow. Likewise, no entrepreneur worth his salt needs to pay to have access to a group of such C-list [non-]investors. Or put another way: if investors don't even see enough value in the event to fund it completely, how likely do you think they will be to invest in the presenting companies? The result is an event consisting of lackluster startups, lackluster investors, and very, very little actual investment activity.

Think about it: how many successful startups do you know whose story starts with, "Well we had this game changing idea and a great team but we were so unresourceful that we had to pay just to get access to some potential investors?" Google? Facebook? Paypal? Nest? Exactly.

The practice of charging entrepreneurs to present is, at best, naive on the parts of the angel groups and, at worst, straight up predatory. I have to admit that, when I first started Smart OES and was raising capital for the first time in my life, I fell prey to one of these events. Fortunately it was a relatively small fee and the damage was minimal.

Of the nearly $1M of angel capital my startup has raised, not a dime of it has come from events like that. It has come from hustling and networking, which are key entrepreneurial skillsets. My advice to entrepreneurs: forget the pay-to-pitch scams. If you're having a hard time raising money, get out and start networking or, though it may be challenging, take a look in the mirror and evaluate why the people you are pitching aren't buying in.

Business Schools and Buffett

The last two weeks have been full of "B"s--business schools and Jimmy Buffett!

September 16th was the 8th annual Rice Alliance for Technology and Entrepreneurship Energy and Clean Technology Forum. We won an award at the elevator pitch competition last year and we were excited to be asked back to compete again this year. I love these forums as there is so much energy, so many good ideas, and so many great people throughout them. Anyone who knows me knows how competitive I am, though, so I don't consider such events successful unless I come away with an award. Some people go into such events casually and speaking extemporaneously. I do not. I come to win and prepare obsessively for it.

I spent the plane ride back from Italy refining our message down to just the bare minimum and rehearsing it to ensure that it could be delivered in less than 90 seconds. In my IMD marketing course, we learned that branding is about sacrifice; people can only absorb a few messages. Nothing could be truer about elevator pitches; they are like branding statements for your company or idea. There were many things I would have liked to have included in the pitch but there just wasn't enough time. In many ways, this is similar to the "How do I spend my time?" challenge with which the entrepreneur is faced every day: distilling the top 3 most important things from the top 30 really incredibly important things from the top 300 really very important things. For this reason alone, I think periodic pitch preparation is a helpful exercise in prioritization.

If you would care to see the fruits of my labor, a video of it is available at The BusinessMakers Radio Show's review of their favorite pitches from the event. Looking back at it, I clearly rushed delivery a bit and didn't pause to "plant" my points as much as I would have liked. I welcome additional feedback as well!

Long story short: we won an award again--2010 Rising Venture! I am once again supremely humbled, honored, and thrilled to have won. There were some great pitches and it was exciting just to have been counted among them. As was the case last year, the whole event was a very good one and we made several new very interesting contacts.

The following Sunday I had to shift out of Rice business school mode and into IMD business school mode as we hosted the very first event of IMD's new Houston Alumni Club. It turns out that there are 500+ IMD alumni in Houston so I and a few other "enthusiasts" thought it was criminal not to have some kind of organization to bring us together.

Our first event was a simple networking and brief talk event. IMD professors Don Marchand and Michael Wade were in town for a Shell program so they came and talked with us about their research. The rest of the evening we sipped wine, networked, and discussed the future direction of our nascent organization--it was a great first step!

Then last weekend Katie, I, and my favorite wingman made a very quick (~48 hours) trip to Paris for the Jimmy Buffett concert. It was marvelous and exactly what I had hoped it would be. We spent most of our time walking around Paris, eating, dropping into museums, and drinking great wine. Friday night we tailgated with 96-point Bordeaux (Chateau Pontet-Canet 2005, way too young but still delicious) then made our way to the concert. The total attendance was maybe 1,000 people and, because everyone there was a big fan, it was basically one long, glorious sing-along. It was so much fun, as was the after-party at O'Sullivan's!

Now we're back in Houston with no travels abroad planned until our wedding in May. We came back just in time too; the weather is gorgeous! As Jimmy Buffett would say, the weather is here; wish you were beautiful!

Settling In in Lutry

Slowly but surely I am settling into life in Lutry. It is very different than living in Lausanne--or even Ouchy--where I lived for one year each. Although Lausanne is only a city of 150,000 people, it is a bustling metropolis relative to the sleepy town of Lutry. I definitely feel less "connected" here--which is not a bad thing! It does reinforce my preference for living in the heart of a major city while choosing more "out there" settings to get away.

I've always found Switzerland to be a very magical place and the further out you go the more fairy tale-like it becomes. Villages like Lutry are interspersed with old forests full of tall trees--very much how I would imagine the "dark forest" although not nearly as sinister. There are also spiders everywhere! Each morning when I wake up there are new cobwebs along the paths outside. Although I have no great love for spiders, I do appreciate the work they do on keeping the "mosquito" (not real mosquitoes because they don't bite!) population small. The most surreal aspect of the Swiss environs, though, is the false twilight. Because we are surrounded by mountains, the sun "sets" out of sight at 8 or 9. However, it still provides plenty of ambient light until it actually slips below the horizon around 10. This leaves 1-2 hours with the sky a soft, mystical blue. The street lights are already on, but it isn't quite dark yet. It's fantastic.

Despite this I have been doing more than frolicking in fairy tale land. Every day (after taking Acacia on a morning walk through the nearby vineyards) I have had meetings in town with IMD faculty, staff, friends, and other connections. It feels great to be back in touch with this crowd!

Sunday, Monday, and Tuesday nights have all featured meet-ups with classmates. Tuesday's was to cheer on the Dutch (on behalf of the Dutch wife of a French classmate) at the huge outdoor viewing party in Ouchy. While I'm still not in love with soccer--World Cup or no--it is fun to be around lots of people who are!

Wednesday evening I had to pass on social activities in order to give my first investor pitch on this side of the Atlantic. There is a budding Angel network here that has just started a small sustainable investment subgroup. The gathering was tiny and informal but it was very nice to be around others in the cleantech space. Because I was a last-minute addition to the program I just gave a five-minute "quick pitch" but it stimulated a great deal of Q&A. This group may not be a great fit for us right now but I'm very excited to have made the contacts.

The rest of the week and weekend is still up in the air but I will report in soon!