[B] FARRELL ON VENTURE CAPITAL: Start-ups feel the need for speed
By Elizabeth Farrell, BridgeNews Commentary
New York, April 20 (BridgeNews) - Silicon Alley venture capitalists and
entrepreneurs are keeping up with the slowing economy by picking up the pace of
the funding pitches.

* * *
On May 30, a mix of VCs and angel investors are expected to attend Silicon
Alley: Survivor, a conference held at Baruch College in New York that will
allow them to hear ten five minute "speed pitches" from 30 companies seeking
between $1 million and $5 million in venture capital.
Participating start-ups come from a wide spectrum of industries, including
wireless, biotechnology and software, and are handpicked from a host of
applicants to make their presentations.
Prior to the conference, a panel of five investment professionals,
including Rick Friedman, the founder and coordinator of the conference and the
president of New York firm Mindshare Ventures, will screen all applicants to
determine which 30 merit the attention of VCs.
The conference is the second of its kind coordinated by Mindshare Ventures,
which held the first speed pitching conference, Istartup Fever, in January.
According to Friedman, the previous conference resulted in 216 follow-up
meetings with VCs for the participating companies.
"It came down to an average of about five meetings per company that
presented," said Friedman. "For one day of presentations, those odds are a lot
better than they would get through traditional methods."

HOLD THE ELEVATOR
Making a quick pitch isn't a new concept to start-ups. They are accustomed
to delivering the elevator pitch, which takes its name from the belief that
companies should be able to swiftly and clearly convey their idea in the few
minutes it takes to ride an elevator.
But the opportunity to meet individually with a number of potential private
investors in one day was previously unavailable to entrepreneurs. Though they
might have perfected their pitch, getting in the door of a VC firm typically
takes weeks and sometimes months.
"The process is very time-consuming," said Eric Cohen, president of
start-up Funderstanding, a market research company based in Livingston, N.J.
"It takes awhile to get calls returned, and once you do get them on the phone,
they'll say they'll get back to you, but 95% of the time they don't."
Without established connections in the VC field, months will pass before
meetings are secured, and precious time and opportunity can slip through the
hands of even the most tenacious entrepreneur.
VCs have less time than before to pursue new business opportunities due to
the litany of faltering businesses currently weighing down their portfolios.
"Venture capitalists are spending about 80% of their time on existing
portfolio companies," said Friedman. "They're more likely to be receptive to a
forum that allows them to see a bunch of new companies in one day and condenses
the amount of time they have to spend on it."

THE DATING GAME
VC firms that participated in the previous speed-round funding conference
echo Friedman's sentiments and cite the time-efficient structure of the
conference as one of the main reasons they'll be attending the next conference.
"Everybody's time is valuable, and we all have alternative uses for our
time, especially in a tough funding environment," said Ike Kier, a partner at
New York VC firm Coqui Capital.
In addition to Coqui Capital, established firms like Patricof & Co., Pequot
Capital and Summit Partners are signed up for the next conference.
Though the present funding environment provides a particularly fertile
environment for accelerated funding pitches, the inspiration for speed funding
came to Friedman from outside the business world.
"There's a practice of speed dating in the Jewish community," said
Friedman. "Yeshiva University sponsors a forum where single men and women all
meet in one place and rotate tables, talking to each person for five minutes.
They get to meet more people in one night instead of spending all their time on
one date, and they decide which ones they want to pursue further."
It occurred to Friedman that this concept could be applied in the business
world, another realm where first impressions carry a lot of weight.
While some romantic singles may prefer to take more time to size up
potential suitors, VCs find that five minutes is more than enough to decide
whether or not they want to ask the entrepreneur for another date, so to speak.
"A good company should be able to convey why it is an attractive investment
for potential investors in five minutes or less," said Coqui Capital's Kier. "I
would say that 90% of the time, a VC can know whether or not they want to
consider investing in the company through such a short meeting."

THE POST-DATE WRAP UP
On the other end of the spectrum, entrepreneurs are thick-skinned enough to
handle the instant rejection that might come from such meetings because of the
knowledgeable feedback the VCs are prone to providing after the pitch.
"The best part about it is that you get immediate feedback," said
Funderstanding's Cohen. "Based on the critiques given by the first two VCs I
met with, I was able to tighten up my presentation and more effectively
communicate the value of my company by the time I got around to giving it to
the third VC."
But just as many dating services ultimately yield few marriages, some might
find the process of speed-pitching unhelpful if they try to quantify the end
results thus far.
Out of the 216 follow-up meetings that resulted from the first event, only
one company has received funding from a participating VC firm.
"There are a couple of term sheets that resulted from it," said Friedman.
"One company merged and another received funding, but it's really too early to
tell how many will actually receive investment capital."
Anthony Faulise, the co-founder and president of Reactive Search, an
e-commerce merchandising firm based in Durham, N.C., is one of the previous
participants that has not received any funding to date, but he isn't concerned.
"I haven't nailed any funding yet, but I'm moving in that direction with
three of the contacts I made at the conference," said Faulise. "Funding
decisions aren't made overnight, but speed-pitching certainly jump-started the
process for me."
Faulise also pointed out that even if no funding results from the process,
he still found it helpful because it allowed him to develop contacts in New
York, where he plans to move his business.
"I had been commuting down to our headquarters in Durham every week," said
Faulise. "But after the speed-pitching event, I had enough contacts that I had
to stay in New York for the next month."
Venture capitalists who refrained from pursuing investments in any of the
companies that presented at the last event also found the trip worthwhile.
"Last time there weren't any companies that fit the focus of our firm,"
said Kier. "Regardless, it was a valuable experience because it gave me the
opportunity to learn what stages of development companies were in, and whether
or not they might be worth investing in at a later stage."
Entrepreneurs interested in submitting their business proposals for
consideration have until May 11th to do so, and anyone interested in attending
the conference can find more information at Mindshare Ventures' Web site
www.mindshareventures.com. End

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Elizabeth Farrell, BridgeNews, Tel: (212) 372-6030
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