NYCENT

Check out the latest update from our friends at Trial X:

We totally underestimated the depth of NYCENT, especially given the fact that it was the inaugural event. To be honest, all of my partners and I were traveling that week to different parts of the country and we only decided to participate on the deadline date, when my schedule changed and allowed me to stay in the city. At the end of a gruelling week, we were adjudged the winner. They say, "Life always works itself out, it always does" And I, am of them.

I must congratulate Solidea and the Connectors Group for organizing a great event, one that is conspicuously missing for entrepreneurs in New York City. No wonder they had over 2500 attendees in the first year. It is an amazing event and I encourage all entrepreneurs, aspiring entrepenreurs, angels investors etc. to be a part of it.

I was pleasantly surprised by the number of incredible startups that I met during NYCENT. Since then, we have kept in touch and have been very useful resources for each other’s companies. That, in my view is the real value proposition that NYCENT brings to New York. The Connectors Group and Solidea did a wonderful job in meticulously selecting judges who asked very tough questions and offered critical feedback, which helped TrialX define the business model better. Needless to say, NYCENT was a tremendous opportunity to network with seasoned entrepreneurs, investors, government officials and others. It also focused on numerous aspects of creating and building a company, many of which we tend to overlook in our day‐to‐day lives, but are crucial to the growth and development of a startup. I particularly enjoyed the PR session with BITE and PRWire.com and the Legal panel with Fulbright and Jaworski.

My partners and I are very grateful to Solidea and the Connectors Group for getting together a wonderful event that we hope will facilitate New York becoming a hub for entrepreneurship. On a personal level, it was a gratifying experience meeting and competing with so many bright entrepreneurs. It’s been a privilege.

Pogby at NYC ENT Week

The week was incredible! Not only were we ecstatic to be a semi-finalist, but a finalist was a huge reward!

The intense sessions on Tuesday of that week with Solidea, Connectors, and the other participants were truly a boot camp needed by Pogby. The guidance on our business model and pitch deck was of extreme value and caused our team to rapidly re-think a few things to further ensure we were going down the right path.

The event fostered a blog post by Eric Schonfeld regarding our company...with a comparison to OpenTable. This worked wonders and was a great start in building credibility and spreading the word! In addition, Meeting and Conventions magazine (mcmag.com) contacted us regarding an article in an upcoming issue of their magazine, and killerstartups wrote a fantastic review of our services. Finally, the CEO of BizBash was present at the event and was impressed with the feedback, attention, and the opportunity we presented. More conversations to come on this!

Being able to meet with a group of other entrepreneurs was extremely beneficial. All of us were in the same spot, with similar stories, and shared challenges around a tough economy, developing funding interest, working with little to no pay 100+ hours per week, finding resources to help build product for some equity or a six-pack of their favorite beverage, and dreading another update to the business plan (I am personally on version 45).

Our primary focus now is on sales and continuing the development of credibility for our company. It has been a fun ride and I expect it to continue...

All in all, an excellent week. The sponsors of the event were incredible and I've already contacted and met with most of the judges since...to pick their brain and to get further feedback.

Looking forward to the event in 2010!

- Josh

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Who knew?

Having the opportunity to compete as a finalist in this year's NYC ENT business plan competition was invaluable. As a start-up, one of the things you cannot get enough of is honest, critical feedback. In some cases, potential investors cannot share specifics because in doing so, they ultimately reveal their methodology and thought process--basically, their IP. To be even more frank, these people often lack the time, interest, and/or compassion to take the time and sit down with an organization they have no interest in doing business with.

As we discussed in a recent interview on ChubbyBrain, in our experience, a social enterprise may have additional difficulty getting this honest, critical feedback. As a social enterprise, with a mission that is inherently focused on the greater good:

"As I focus on the social sector, I think the fact that social entrepreneurs are doing something positive and focused on making a difference may make it difficult to get critical feedback. For example, I have not spoken to a single individual who said “I don’t get it”, or “Why would you try that?” I actually would have hoped for more criticism, but I think social entrepreneurs face a unique struggle in this sense. The idea is inherently positive. We are trying to do something that has a direct positive social impact. And so you are rarely going to hear negative feedback because of the ultimate goal."

As members of NYC ENT, we received detailed feedback on our business and how we represented our business from a high quality audience. But it is equally important for the recipient of this feedback to ensure it does not fall on deaf ears.

We received volumes of actionable feedback, but perhaps the most important was on how we were approaching the market. As a publisher of children's books, we were focused on developing a series of high quality products and expecting the concept and the product to drive interest and funding. We left NYC ENT with a different perspective, however, and with one word echoing around in our heads: "traction".

Throughout our week at NYC ENT and during all of our follow-up conversations and emails, the folks at Solidea and Connectors Group consistently emphasized the importance of demonstrating traction. The most appealing information for potential investors is a demonstrated audience. The implications of this advice cascaded through everything from our business plan to our short and long-term strategy.

Needless to say, we shifted our seed funding request, reduced it by 75%, and placed the emphasis on marketing and sales. Our goal? Demonstrating traction and using our successes (and failures) to formalize our valuation and finalize our "ask" for Series A. The approach has given us credibility with early stage investors, but also brought a new level of focus (and sense of urgency) to our own team.

Who knew losing would be so rewarding? (Regardless, we plan not to make a habit of it.)

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At IndieGoGo, we were very excited to be selected as a finalist company to be part of the Inaugural NYC Entrepreneur Week (NYCENT). Having submitted our executive summary, we had no idea what to expect, but the immediate feedback and relationships built for the future turned it into a very valuable experience. From pitches to parties, work-shops to panels, it was an immersive week of content for any entrepreneur trying to become part of the NYC venture community.

We launched IndieGoGo at Sundance 2008 with a mission to create fundraising, promotion, and discovery tools for the film and media industry. To date, thousands of customers have used our tools in over 80 countries for activities from raising tens of thousands of dollars for film funding to supporting their film festival promotion campaigns. As we look to scale the business we wanted to get more involved with the NYC venture community and figured NYCENT could be that opportunity.

The five days were like a non-stop entrepreneur’s bootcamp. From meeting the leaders in the NYC venture community to sharing with fellow entrepreneurs, we always had to be ready with our “pitch”. Being an entrepreneur, we get stuck in our day-to-day operations, and it was amazing to get the opportunity to share and get unbiased feedback. One venture professional even took a liking to IndieGoGo and we have been able to grow an advisory relationship beyond NYCENT.

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MicroGen's BOLT120® power generator product is a global, scalable, green renewable energy power source. MicroGen products will eliminate or extend the life of lithium batteries 6-fold in WSN (WirelessSensor Networks) applications and significantly reduce the cost to deploy and maintain WSNs . Initial application fields are bridges and roads and building energy and security monitoring.

MicroGen received several contacts with interested investors as a result of the NYC ENT event. In addition, using the feeedback provided by the NYC ENT event,

MicroGen Systems recently placed first among pre-revenue companies in the Rochester Regional Business Plan contest. This includes a $5000 cash prize, and services totaling $5000.

MicroGen, with additional partners, including Leveraging Technologies, have received commitments from the Monroe County (NY) DOT and the State Of Michigan DOT to conduct tests on bridges in both locales using wireless sensor networks, software provided by Leveraging though IBM Smarter Planet, and MicroGen technologies.

In addition, MicroGen is raising $1M in convertible debt and has begun to attract investors. The round is expected to close in October. This will enable MicroGen to complete final systems testing and begin engineering sample sales and integration work with wireless sensor network companies.

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(I have written about presentations elsewhere, but thought thought the advice would be relevant here as well:)

As someone who is continually pitched new company ideas, I sit through mountains of powerpoint presentations.

The worst presentations. by far, are those that are crammed with text, coupled with presenter who is adding his own message to the pitch. I can usually only focus on one thing, either reading the slide or listening to the speaker, if the two don't mesh, then I am automatically frustrated.

A couple of suggestions for those out there who are looking to empassion their listeners.

a) Keep you presentation short -15 to 30 slides MAX.

b) Spend about no more than a minute and a half per slide

c) Whenever possible use pictures instead of words. Keep text to a minimum.

c2) Use exciting imagery

d) Make one point per slide

e) Make sure your entire presentation tells a compelling story, that is, it starts with a one line sentence of what you are going to be talking about, presents a problem, offers a solution and then informs the audience why you are qualified and how you are going to enact that solution.

f)Keep the mood light. Add a few pre-rehersed and relevant jokes.

g) PRACTICE!

Below is an excellent presentation on creating compelling presentations.

Fred Wilson from Union Square Ventures makes several great points in his posts on the Venture Capital math problem. (As you may remember, we were fortunate enough to have 2 members of USV speak during entrepreneur week: Albert Wenger and Andrew Parker)

But instead of rehashing how the venture capital model needs fixing, I thought it would be interesting to use the data to shed light into how an venture funds are set up and the financial metrics that drive equity  investments.

First lets talk about how a venture fund works:

Venture funds make investments into illiquid and risky investments with expectation of high returns over the long term.  Most funds are organized as limited partnerships in which the venture capital firm acts as the general partner (GP) and investment advisor and the investors serve as limited partners or (LPs).

The General Partner

The general partner is the person or entity that has control over management  (running day to day operations) and investment decision. Usually the GP is organized as an entity such as an LLC, in order to shield the individuals who are making investment decision from personal liability associated with acting as GPs.

General partners can compensated by the fund in several ways. The most common is though a management fee which can be a percentage of the value of the fund at the end of a relevant period or straight percentage on the paid in capital--usually 2%. Moreover, the GP is entitled to a percentage of the overall profits from a fund at some point in the future, such as when a liquidity event occurs or when the fund closes.  This is called carried interest and is usually 20%.  "2 and 20" is how this is commonly referred, where 2% represents the management fee and 20% represents the carried interest.

Often the 20% carried interest has a limitation: It is only allocated if the funds value exceeds a certain amount. This prevents the GP from receiving payment if the fund suffered a loss. VCs who are members of the LLC which serves as the GP are therefore doubly careful about the investment decision they make. Not only do they want to wisely invest the money of their investors, but want to make investments that maximize profits of their fund, so they can participate in the upside at the funds close.

The Limited partners

Limited partners are usually institutional investors or HNW individuals. Fund investors can be employee benefit plans, insurance companies, banks, pension plans, university endowments, family offices, trusts among others.  Limited partners cannot participate in the management of the fund without exposing themselves to personal liability and generally are prohibited from transferring their interests in the fund without consent of the general partner.

Lifespan and Capital calls

Venture funds usually are organized so that they have a life span between seven and ten years. Generally investors are not required to invest 100 percent of their capital in the initial closing of the fundraising round. Instead capital will be dispersed to the fund by investors on a pre-determined basis or when investments are made by the fund. The latter is known as a 'capital call' Many partnership agreements have penalties if LPs fail to meet their calls on a timely basis which can range from loss of rights to participate or exclusion from the funds profits going forward.

Economics

Because LPs typically make investments into high risk illiquid securities, they are looking for significant returns on their investments to compensate them for the increased risk. Fred Wilson does the math in his blog:

At a bare minimum

an investment needs to generate 2.5x net of fees and carry to the investors to deliver a decent return. Fees and carry bump that number to 3x gross returns.

So a 5 million dollar investment needs to generate 15MM in returns.

Looking at how much of a company a single VC owns at exit is next.

The number bandied about by most VCs is 20%. That means that each VC investor owns, on average 20% of each portfolio company. We'll use that number but to be honest I think it's lower, like 15% which makes the math even tougher.

Using the 20% number, a 5MM investment must generate 75MM (or 25X) at a minimum in order to make it worthwhile for the venture capital firm to satisfy the risk appetite of its limited partners.

As you can see VCs have to take into account the size of the potential market, and the probability of generating significant returns on their investment, not because they are greedy, but because of the metrics of success they need to meet in order run their own VIABLE businesses.

Do you agree or disagree? We'd love to hear your thoughts in the comments below.

--Jeevan Padiyar

 

For everyone who has been asking if we will post videos presentation slides from the various talks. The answer is YES! They will be coming soon. We will let you know as soon as they are posted.

-Jeevan Padiyar