Chicago Booth - After the Pitch: Entrepreneurial Financing Insights.

The event was held at the Woolgate Exchange, Chicago Booth's London campus. It looks even better on the inside.

Chicago Booth held an event earlier this week, After the Pitch: Entrepreneurial Financing Insights.

The event featured an entrepreneur making a pitch to a panel of investors for money. Following the 10 minute presentation from the entrepreneur, the entrepreneur was quizzed by the panel. The parts that followed were interesting. We were 'let in on' the kind of discussion such an investment panel would have after the entrepreneur had left. Chicago Professor Waverly Deutsch, who chaired the panel discussions, closed the  the evening with her summary.

Below are the highlighted insights that I noted...

The Entrepreneur: Riaz Agha, Founder,
GreatSwitch is a new price comparison site. The key differentiator between GreatSwitch and its competitors is that the site stores the details of the person using the site and then proactively later offers them opportunities to switch their mortgage / other financial product as better offers arise. This is in contrast to current sites, where you have to search for better deals periodically.

Investor Panel:

Ashish Patel, Managing Director for Europe, Israel, and the Middle East, Intel Capital
  • We always start assessing the venture by looking at the route to market. How will the venture get there? How will it achieve critical mass? What is the unique proposition?
  • Very few people make money using patents to prevent copycats.

Giuseppe Zocco, Co-founder and Partner, Index Ventures
  • Riaz needs more awareness of what he does not know. This is important for building the rest of the management team. There seems to be CTO experience missing. Should seek a former CTO from a competitor.
  • The venture needs to address how it will continue to innovate after the initial launch.
  • There needs to be an understanding of the financial needs of the firm for the next 7+ years.
  • A lot of ventures have approached the firm with the 15th iteration of their business plan, so keep iterating and refining to address concerns of the VC firm. Sometimes the venture does decide some of VC's concerns are not valid.

Sherry Coutu, Angel Investor
  • Everyone liked Riaz's energy in presenting his idea.
  • The business plan needs more work. e.g. I would expect to see more detailed cash flows.
  • Angels will typically come in and hone the financials, as well as put in a team to deliver the final product/service, and enter discussions with other angels to understand what other similar ventures are launching.
  • Angels will also look to identify who the venture can be passed on to for larger levels of funding in later rounds.
  • Usually there would be further sessions with the entrepenuer for the angel to determine how the entrepenuer thinks. The angel would also want to get view from other angels with other expertise.
  • A lot of investing is networking.

Keith Breslauer, Chicago MBA '88, Partner, Patron Capital
  • There needs to be more thought on the revenue model - how will this make money?
  • For internet models, think about this: is it a vitamin or a pain-killer? For the online world, the venture needs to be very disruptive.
  • Would expect the person making the pitch to
    • Find market data on all the competitors
    • Find out all their negatives
    • Give a presenation on how you would address these market issues.
Panel Chair: Waverly Deutsch, Clinical Professor of Entrepreneurship, Chicago GSB
  • Most entrepreneurs need to be more realistic with their expenses.
  • Entrepreneurs always underestimate the difficulty of creating behavioral change to make their product/service successful.
  • The most important thing is to get the investor excited, because you won't be able to answer all their questions.
  • Emphasise what is different about your business. What will get out the sizzle?
  • As an entrepreneur, you need to have knowledge available of the industry you are entering. This could be through advisors or others. This is particuarly important if you do not have knowledge of the industry.
  • People invest in people.
  • The investors talked about why they would invest - they want to invest more than money to ensure the business is successful; they want to bring in the expertise of their colleagues.
  • When you are pitching for money, you must have the correct investor profile. e.g. angels invest from £0 to £1M; VCs from £1M+.
  • For multiple rounds of dilution, the venture must have strong multiple returns.
  • Investors these days are thinking about the longer duration.
  • The angel investor is thinking about where the money will come from next (for further rounds); who can they bring in? Investing is a team sport - angels need to ensure their investments have enough money.
  • The newest money coming into a venture has the power. They will want to change the terms. This is why angels think about who can come in to fund the venture in later rounds.
  • In the current financial situation, VCs are withdrawing from earlier stage funding and angels are being looked at to fill the gap. It is therefore important that your venture can make money.

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