Category Archives: Investment

Yelp! needs Help?

Yelp has been growing at a good clip and in the last couple days touted how well they were doing. This growth was probably a big factor in Yelp’s rumored $200 million valuation on its fourth round in February. A lot of this growth has been fueled by the excellent SEO that they receive as a result of a partnering arrangement with Google.

I noticed recently that Yelp isn’t as prevalent in my searches. Where Yelp used to show up almost every time I Googled a restaurant, instead it looks like Yelp competitor Citysearch is Google’s new review partner.

We haven’t seen a press release yet, but if Yelp has lost its relationship with Google this could lead to a downturn. While they may have the best reviews, that will mean little if people can’t find them. Could Yelp’s recent crowing be a scramble to paint a pretty picture before the decline?

BrightQube: Blowing the Bell Curve

BrightQubeOne of the realities that some may have to face when trying to get a company funded is that although your company rocks, another company may just be rock stars. BrightQube is one of the companies I would feel hard pressed to compete with if I were in their space. If getting funded is a bell curve, these guys skew it way to the right.

How do they do this? With a complete and utter understanding of their space, a rock star management team, enthusiastic seed investors and deep relationships. In his presentation at the Pasadena Angels Presentation Screening event BrightQube’s CEO Lee Corkran handled every question head on and nailed it to the floor with a smile.

So they rock, are you doomed? No, it just means you probably won’t be getting any money from the same well. If you have a competent team and a great product that will give people the returns they are looking for then you need to persevere and you will likely get funding. The lesson here is not to give up, that sometimes your lack of success is just because someone else is being very successful.

Those who know me know that I do not hand out faint praise. I will say nothing rather than complement a company I don’t think has what it takes. I am hard to impress, and these guys pulled it off in spades. What more it’s my impression that they are offering a way cheep valuation for having what is essentially a polished and innovative product. The funding is probably a done deal, but if you can get in on this series B, I would hop on.

Talking to Angels

Angel InvestorI have attended a few events for Angel Investors this week to get a feel for the community and how the system works here in LA. While I got a great perspective at the Tech Coast Angels Fast Pitch Competition, today’s time at the Pasadena Angels Screening Event cemented some of my perceptions.

The format of the screening event was geared for fast presentations (less than 20 minutes) rather than 1 minute elevator pitches. This allows the presenter to paint a much more elaborate picture of what they are doing and why you might be interested in investing. As it turns out it can help, but it also masks some basic communication problems.

By luck one of the presenters at the Screening event, HauteSpot Networks, was one of the winners at the Fast Pitch event. HauteSpot is a solution for streaming CCTV and HiDef video over wireless. At the fast pitch it was unclear what the target market was and how the product was used. The questions from the judges aimed at a consumer play and that didn’t seem to jell or make sense with what I knew of the competition in that space.

The presentation at the screening presented a much different picture of what the company was about and I had an opportunity to talk to HauteSpot’s CEO Bob Ehlers after the event. It turns out that the technology developed by HauteSpot is geared towards government, large public installations and the media. In those markets they had done a lot of work to get government approvals, partnering relationships and start the ball rolling on lucrative contracts.

The interesting thing here is that Bob was using the same type of language in both presentations. In the screening with his PowerPoint there was enough context to see exactly what the business was, but in the fast pitch there wasn’t. Instead the judges assumed that it was yet another consumer play based on their experience and context. If it looks like a hammer we know where to find a lot of nails.

As I talked with Bob afterwards we recounted some of this and that the miscommunication was simply the lack of understanding of the context of the investors. In Bob’s case he assumed that he used some of his terminology that everyone would instantly know his market. That in a way the market speaks for itself. His context was the presentations he had been so successful with in government meeting rooms.

In business as anywhere we need to start by understanding our audience, what they are looking for, what they need to understand. We assume that many things are obvious that just aren’t. Lessons learned, drop the domain specific thinking and adopt the language of the audience. Focus on what the audience understands and build a bridge to your vantage point.

HauteSpot is great technology put out by a company that knows its market and to my view is making the right moves to capture it. They have enough on the ball that most investors can see potential past the delivery, but Bob is also taking his experience to heart and will be tuning his presentations to address defining his market, its potential and their exit strategy in the language of the investor. I look forward to seeing his company grow and have no doubt they will be a great success.

Tech Coast’s Best Fast Pitch?

Tech CoastLast 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.