Last night I went to the Tech Coast Angles Fast Pitch competition at UCLA. Overall I thought it was good event that gave me a bit more insight into what the organization is looking for and how they function. You get a fair amount of access to practical investors that are candid about what they think a good venture is.
That said I still walked away a bit disappointed in the pitches themselves. The companies, supposedly handpicked from over 80 applicants, did not impress. Few of the presenters were able to concisely and explicitly convey their value proposition or why they were differentiated from the competition. In all but one case I did not see any company that I thought would provide the 30x returns that most investors are looking for.
This isn’t to say that some of the companies are not going to do well. I think several will be profitable businesses with modest returns for their investors. As an Angel or VC, modest is not what you are looking for. Modest returns rarely warrant the risk. Typically an investor will invest in 20 companies and 5 of them will pay for the failures of rest. To do this those 5 have to have exceptional returns.
Where do we get exceptional returns? We get them from people who can adapt and turn the current paradigms upside down to find value for the customer. Investors look for people who think outside the box for opportunities and apply good business practice to achieve results in that space. It is not enough to differentiate what you do, you have show how that will shake up the industry and be a clear advantage.
Alex Quilici (CEO YouMail) gave a good presentation that illustrated what a company has to do to succeed and provide these types of returns. That you really do need to watch your market, respond by tailoring your business to the markets needs, and provide simple measurable goals that everyone can work towards. Alex did a great job of communicating exactly what and why these concepts are important.
What company peaked my interest? I won’t name names, but they had perhaps the least glamorous market, hair extensions. They clearly articulated that it was a $500 million market, and that their product was going to take a 5 hour application process down to 30 minutes. Their proprietary product will reduce the time and cost of extensions by an order of magnitude. In essence they can and should turn that industry upside down when they release. They didn’t win.