BlackLocus Wins “Best in Show” at Under the Radar

We’ve had a great two days at the Under the Radar Conference in Mountain View, CA.  It’s a commerce-focused event, featuring roughly 30 emerging companies in 5 categories that pitch in competition format to an audience and a panel of judges.  Today I had the opportunity to pitch BlackLocus under the “Measurement” theme to a panel of 3 judges including Liz Gannes, Senior Editor with All Things Digital, Will Lowry, VP AT&T Platform Partners and Mark Silva, SVP Emerging Platforms Anthem Worldwide.  The session was moderated by Rafe Needleman, Editor at Large for CNET News.  To see the 15 minute pitch and Q&A session, click here and go to 3:45 in the video if you want to skip the panel intros.

The good news?  We won the Audience Choice Best in Show award among the 30 companies and the Judges Award for our category!  We also met some leaders in companies that would be extremely valuable partners and most important, we connected with some large, Fortune 200 retailers that are prospective customers.  All in all, a great use of our time and money to participate.

The other good news (disguised as bad news)?  Along with positive exposure and press comes an onslaught of demands that stress the team to deliver on.  It’s a constant battle at this stage, how to prioritize activity and only that activity which has the highest return when there are dozens of things we know need to be done.  And priorities are not always obvious, these decisions require some stakes in the ground but more important, they require measurement, learning and adjustment to turn on a dime as information becomes available from customers and partners.

I’m returning to Austin today and looking forward to debriefing with the team and getting everyone energized about the path ahead of us.  Strap in, its going to get nutty!

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Crafting Your Startup Pitch

I participated in a session today during Boulder Startup Week hosted by Jason Mendelson, a Partner in Foundry Group.  The audience was a group of entrepreneurs in various stages of fund raising activity.  Jason had some great advice for the group as a long-time Venture Capitalist who sees over 1,000 pitches per year.  Of the 1,000 he sees, 500 of them are immediately discarded to to bad grammar.  Really?  Of the remaining 500, 300 have an ineffective or even no “Elevator Pitch” – which Jason claims is the most important thing an entrepreneur has to get right to get initial investor attention.

So there you have it, you can be in the top 20% of deals he sees just by 1) mastering the English language and 2) having a concise, well-articulated Elevator Pitch.

What comprises an effective Elevator Pitch?

  1. Proof of a massive problem. What problem are you solving and how big is it?  This should be easy to nail quickly.
  2. How your business solves the massive problem.  What unique solution has been developed or conceived?
  3. Why YOU rock! (as an individual and how you are different than everyone else).  VC’s invest in people, first and foremost, so don’t be shy about why you are the best at what you do and what gives you a special advantage to outlast everyone else.

And all of this communicated before the elevator gets to the 4th floor!

So now that you are in the top 20%, here’s the next set of deliverables to win your prospective VC’s heart and cash.

  1. 5-7 page Executive Summary in written form.  The days of 70-page business plans went out with 8-Track tapes and Betamax.
  2. Product demo or prototype.  Showing your product is ALWAYS the most effective way to get attention.  It shows passion, commitment and enables an investor to share your vision for solving big problems.  It does not, however, eliminate the need for the Executive Summary.
  3. Personal connection.  I thought this was a really interesting and refreshing insight.  In order for Jason to invest, he must build a relationship with the entrepreneur and he expects incredible energy from that relationship, energy that first emanates from the entrepreneur and that increases with each visit as trust is built.  Why?  Because when times get tough, the personal relationship is what gets you through it.  The trust is the fallback for difficult conversations and wrenching decisions.  Personally, I want my VC to act this way, I was super-impressed by this investment philosophy.

Where do most entrepreneurs fall short in their pitches?

  1. Inadequately evaluating or addressing the competitive threat.  Even if there is no one on the planet that is doing exactly the same thing you are doing to solve a particular problem, for you to obtain customers there has to be a compelling reason for them to allocate time to you v. whatever else they could be doing.  Literally, the Internet is your competition in this case.  Don’t ever tell a VC you have no competitors, its the Kiss of Death.
  2. Inadequate attention to Business Model – Both Revenue and Expenses.  The one fundamental truth about Revenue projections?  They are always wrong.  100% of the time they never come true, the business will learn, iterate, pivot and generate revenue in ways that weren’t originally contemplated.  But its OK.  They key is to understand the drivers of revenue – # customers, page views, $/customer – those things that if you can scale, even a few of them, it drives revenue.  Expenses, by contrast, better always be right.  They are controllable and need to be well-thought out.

Finally, how does the entrepreneur find investors and get their attention, particularly VC investors?

Jason’s advice, as someone who is regularly spammed by entrepreneurs who blast out wildly to VC “lists” having done little to no research on the VC’s investment criteria –  do your research in a targeted way and wrestle ONE VC to the ground first.  Get personal, find common ground, ensure they invest in your sector, follow the directions above and generate interest and dialogue.  Once you have one that is responsive, cross-reference what other firms your one firm has co-invested with in the past, which are in the same sector or stage of development from an investment standpoint and create some competition for your stock.  Just don’t delay a deal by trying to create an auction!

And my favorite quote of the day.  Asked how long an entrepreneur should expect funding to take, from “first date to wedding”.  Jason’s answer?  “It depends how hot you are”.  Quick on his feet, very quick.

Why Most Startups Need a “Business Guy”

I read an intriguing blog post titled “What the Hell Does a “Business Guy” Do? by serial entrepreneur Rob Walling.  The basic premise of his post is that the only compelling reason a “technical founder” should bring on a “business founder” (BF) as a partner is if that BF has “successful marketing experience”.  While I agree that marketing, specifically customer acquisition, is probably the most important and difficult problem to solve in a startup’s early days, I believe there are other important aspects of both building a team and a foundation for scaling the business that technical founders (in my experience) don’t always possess.

Of course I’m biased, because I represent the BF that Rob discusses.  Having been on the ground floor of 3 startups as the lead business and operations person, there are a few consistent areas of value that I’ve seen critical to early stage success, in addition to the marketing/customer acquisition skills Rob mentioned.

I would define these areas of value in the context of what I believe a BF profile must look like.  In my opinion, a credible BF needs to have demonstrated operational success in a startup environment, from early product development through financing, rapid growth and scale, including:

  • has been through multiple early product fails and iterations
  • has a high tolerance for ambiguity, chaos and daily priority changes
  • can contribute immediately in at least one critical business functional role at the outset – Marketing or Biz Dev ideally
  • has navigated a financing from external investors
  • has built a cohesive, uber-talented team that are the best at what they do AND that share similar culture sensibilities and work ethic (this is hard to do)
  • has successfully acquired and scaled customers, partners and revenue
  • has established metrics for tracking business success and a way to reliably measure and adjust
  • has battle scars, fail stories and an ability to articulate why the same fails won’t happen again.

So, this BF is not just a strategist or marketer, but a true partner to the entrepreneur who has a unique ability to take the entrepreneur’s vision and build a real business out of it.  The importance of this experience should not be underestimated.  True visionary entrepreneurs typically have an “anything’s possible” belief system and won’t be deterred.  Balancing that perspective with someone who can implement and tolerate that kind of ambiguity and chaos is paramount.

If the technical co-founder has experience in all these areas, then yes, I agree with Rob that partnering with a non-technical founder may just represent unnecessary equity dilution, but I’d venture there are lot’s of new businesses being created right now by super-developers without these important experiences under their belts.

Some might argue that all of these skills don’t have to be wrapped up in one person and that they don’t have to all be present at the earliest stages of a company’s development.  It ultimately comes down to the skills and experiences of the original founder, but having a BF partner who has been through the “business building” process successfully can ensure the correct sequencing of process, people and technology and let the entrepreneur focus on high value creation – strategy, product and funding.

What do you think?

Foundational Events in a Company’s Life

In the life of an organization, it’s easy to reflect back at certain foundational events that either resulted in a new level of organizational development and success, or just the opposite in the case of failure.  But they are “foundational” because their occurrence contributed so significantly in either a positive or negative direction.  While there are numerous important wins or losses that are memorable and significant along the way, especially in a startup, these foundational events are set apart based on their epic significance.

At TrueCar, there have been at least 2 such events over the past 3 years.  The closing of our first Venture round of financing in 2008 and merging with our sister company Zag in 2010 to create TrueCar, Inc.  Well, we just had another one announced Monday that I believe could lead to a tipping point for TrueCar – A partnership with and equity investment from Guthy-Renker, the leading international infomercial producer.  The most notable of their product partnerships is Proactiv, the acne treatment system that has grossed over $800M.  This partnership with GR involves a large equity investment from them that will help fund a massive brand development and advertising campaign for TrueCar.  It speaks to the potential for success that the experts in this process are confident enough to invest capital and put their own skin in the game.

Why is this so significant for us and why now?

First, why now?  The past several years we (Zag & TrueCar) have been quietly and gradually building our product and brand and have been gaining share of automotive retail with little to no marketing spend.  We’ve instead grown through large partnerships with companies like USAA, AAA, Consumer Reports, American Express and others as well as a robust PR machine that has helped build a foundation for the TrueCar brand, both in the automotive industry and with consumers.  But PR and distribution partners will carry you so far, to really scale the brand you must have widespread, household awareness which can be incredibly expensive.  However, in order to spend marketing dollars to acquire customers, there has to be a positive ROI on that investment, meaning for every dollar spent on marketing, more than one dollar must be generated in profit.  That’s a tough equation to make work unless the product engine is converting customers at high rates.  This is an oversimplification, but suffice to say that we now have the engine in place that enables a positive ROI on paid customer acquisition.  So, the time is right.

Second, why is this significant?  A partnership, including investment, with a leading brand-proliferation company like Guthy-Renker enables a mass introduction of TrueCar to consumers that would be almost impossible to achieve otherwise.  It has the potential to make TrueCar a household name among consumers.  It enables us, now that the “product engine” is built, to immediately and rapidly build the TrueCar brand nationally as the new and only way to purchase your next vehicle.  If our conversions (website visitor who purchases through our program) stand up, this will not only be a large cash outflow to pay for the marketing, but also a hugely profitable partnership due to the revenue generated from paying customers who see and respond to the advertising programs.  It’s also significant because this widespread, infomercial approach has never been done before in automotive retail, and we believe auto is ready for this type of innovation.  That could lead to an important first-mover advantage.

Only time will tell whether this will be an epic foundational WIN or LOSS.  But it will certainly be foundational.

What were your “foundational” company events that defined success or failure?

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