Presenting at the Council for Entrepreneurial Development’s annual venture capital conference can be compared in many ways to a beauty contest.
Rather than answering questions about current events or donning bathing suits, the entrepreneurs selected each year by a CED screening committee are there to tout their company and products.
But the days of easy judging and quick deals are long since over.
Style is out; bottom line is in. Beauty? Try revenue potential. Poise? The “p” that counts is product. The measurements that matter are market size, patents held or applied for, management team lineup, and cash flow. Rather than hearing about personal dreams, VCs want to scrutinize business strategies produced in PowerPoint and Word — not on napkins.
After all, venture deals are down, valuations are down, term sheets and due dilligence are tougher than ever. Entrepreneurs could write their own scripts for “Survivor”. There might be some bad blood in the backrooms as the investors and the company builders debate the merits of each company’s management team, market strategy, and intellectual property/products.
Who are the “contestants” for Venture 2002? Local Tech Wire is offering a daily sneak preview of CED’s 19th such event.
(Bandwidth.com is profile No. 1: www.localtechwire.com/article.cfm?u=468 )
On April 30 and May 1, the CED will gather representatives from 29 North Carolina companies to make their best sales pitch. The vast majority is from the Research Triangle Park area. With biotech-related and networking companies leading the way. The companies are grouped into two categories: early stage (10) and later stage (19).
Each of the presenting companies was asked to participate in our preview series through a detailed questionnaire prepared by LTW. We posed several questions a VC is likely to offer up, and we asked them to spell out in a paragraph why an investor should put money in their company.
LTW’s questions center around topics VCs are saying companies must address if they hope to get money. For example, Steve Nelson of Wakefield Partners says:
“I look for three things in any business that we might invest in:
A big market where there’s a big need;
Technology that has a compelling advantage that’s sustainable and is disruptive;
And people who have a commitment to change the world.”
What do they think of VCs?
While they didn’t have to sign non-disclosures with LTW, the entrepreneurs were asked to be candid. And we added a couple of unexpected questions, too — like what do these entrepreneurs really think of venture capitalists? (“We love them,” one exec said; others declined to answer — for obvious reasons, given the strained relationships between entrepreneurs and VCs in tight-money markets these days.) And what would they consider “fair” in a term sheet?
Beginning today, LTW will feature daily one of the presenting companies. (Leading off is Bandwidth.com, which is based in Durham.) And in the replies as prepared by their management teams, LTW readers will gain in-depth insight into these firms — from leaders to products and philosophy.
The surveys are all part of the “show” these entrepreneurs will be taking part in. These men and women — perhaps hoping to be the next Jim Goodnight if not Bill Gates — do go on stage before a big crowd to make their best pitch. They also adjourn to private meetings where they hope some VC or investment banker or rich angel will be impressed enough to trade business cards, schedule a follow-up meeting and perhaps even hint at a term sheet offer.
Who will win a “deal”?
No winners will be declared. No VC Choice Award. The judging as to which companies are deemed worthy of investment is secret — and tightly held. The VCs and investors from around the country who turn up for North Carolina’s biggest such event will hold their cards close outside of talking with potential collaborators in a round or deal.
The winners will come in the months ahead when announcements are made of investments or “bridges”, as in loans, or maybe an acquisition as plotted by VCs and investors who see more upside in a merger than a go-it-alone strategy.
After all, the “dot com” graveyard is filled with companies who thought they had the next best thing. And listed in the obituaries of their demise are the VCs who went along for the death ride. More VCs have survived than “dot coms” and other high-tech plays, but their own returns have suffered, too. And term sheets are tougher’ valuations are down. They, too, have to make money for their investors and must have some idea of what an “exit strategy” to profitability for all concerned is.
This is serious stuff, too. The CED schedules a variety of other speakers around the two-day event and offers counseling on alternatives to a straight-up equity stake sale.
And “stage fright” is no excuse for a bumbled presentation. The CED even invites these executives — some young, some seasoned — to a “rehearsal” where their presentations can be critiqued.
Should be an interesting two days —
The early stage presenters are:
Advanced Integrated Manufacturing Solutions, Durham
Batanga Inc., Greensboro
Compendia Solutions, Inc., Raleigh
Gentris Corporation, Morrisville
Numerical Design, Ltd., Chapel Hill
Piedmont Pharmaceuticals, LLC, High Point
Respirics, Inc., Raleigh
TEAMM Pharmaceuticals, Inc., Morrisville
The later stage presenters are:
AlphaVax, Inc., Research Triangle Park
Athenix Corp., RTP
Chemcodes, Inc., Durham
CipherOptics, Inc., Raleigh
Convey Systems, Inc., Charlotte
Cropsolution, Inc., Morrisville
Incellico, Inc., Durham
LiveWire Logic, Inc., Morrisville
LVL7 Systems, Inc., Cary
Merix Bioscience Inc., Durham
Nobex Corp., RTP
Overture Networks, RTP
Peopleclick, Inc., Raleigh
Pinpoint Networks, Inc., Cary
Targacept, Inc., Winston-Salem
Trinity Convergence, Raleigh