Videos and Angel Pitches

As an active angel investor, I am faced with an embarrassment of riches when it comes to potential companies with which I can get involved. I receive new business plans every day from people who know what I do; I see all of the deal flow that comes through the professional angel groups to which I belong (such as New York Angels); and recently, with the advent of Open Deals, I find myself inexorably drawn to seeing the latest investment opportunities from around the country. But because of the sheer number of companies involved, I, like most other active angels, tend to make very quick, first-pass decisions as to whether we should even bother to look at a plan, let alone invest. (For example, I personally have no interest in real estate investment deals, movie opportunities, or biotech; the first I’ve got enough of, the second is too risky even for me, and the third I’m not smart enough to understand. I also don’t generally look at deals that are too far away from me geographically…although this is beginning to change with the high quality of deals I’ve been seeing in Open Deals.) This first pass will typically cut by about half the number of companies in my mental in-box. For most of the rest, however, I have only a limited amount of time to decide which deals warrant further attention. Now, I’d like to say that I carefully read every word of every business plan. But I don’t. I could say that instead, I not-so-carefully read most words of most executive summaries. But, umm, I really don’t do that either. These days, what happens in practice is that I pop over to Open Deals and skim the latest submissions. My eye is immediately drawn to deals that have videos (because the poster frame of the video is prominently displayed to left of the entry, like this:) And then, because I’m essentially lazy, I click the video, sit back, and let the entrepreneur tell me why I should look further. It requires no additional action, and fewer brain cells, on my part. Not only that, watching videos is actually fun, whereas reading another business plan…not so. Most importantly, however, a video is an entrepreneur’s one chance to ‘look me in the eye’ and take a shot at conveying his or her essential self. Why is this important? Because as virtually every investor will tell you, in early stage deals our overwhelming preference is to bet the jockey, not the horse. That is, we’d much prefer to bet on someone we think has real entrepreneurial talent, even if the plan requires a bit of tweaking, than take a chance on even a superb plan in the hands of a mediocre entrepreneur. And letting us see you on video, looking right into the camera, is the first step in selling yourself…until we can see you in person. “But…” I hear you object, “making a video and doing it right takes time and effort”. To which my response is, “Doh!” How much are you trying to raise from angels or VCs? $200,000? $500,000? A million bucks? And how many years of your life are you prepared to commit to this venture? Three years? Five? Ten? Whatever time it takes to do the video right, doesn’t it make sense to do so, if it will help your fundraising to even the teeniest, tiniest degree? OK, now let’s get to some practical suggestions. In an ideal world, you’d find someone (either a friend, or a professional) who knows how to do videos, and you’d carefully gather B-roll footage, product shots, customer testimonials, and more, and then you’d go into a studio and record yourself talking passionately into the camera in front of a ‘green screen’, and then you or an experienced video editor would cut the whole thing into a gem-like, five minute elevator pitch (but not too, TOO slick, because then we’ll get a little suspicious). The world, however, is rarely ideal, and if you’re like me (and every other entrepreneur I’ve ever known) you want to get started right away, be finished in half an hour, and do it at your desk. Well, let’s see what we can do to help. First of all, built right into the Open Deals application, thanks to our friends at Viddler, is a nifty little widget that allows you to click one button, look into your computer’s webcam, and record a live video, which Open Deals will then upload and host for you at no charge: No muss, no fuss, no cost…and absolutely no reason whatsoever that every single entrepreneur shouldn’t have a video included with his or her Open Deals submission. But if you want to do a better, more professional job, there are quite a few tools available at very reasonable cost to give you a quick and painless way to create a polished pitch video. Putting aside all of the myriad high-end, production and editing packages, two companies in particular have really cool products that are just perfect for this purpose. On the Mac side of the house, Vara Software has two great programs that you can try out for free, and download instantly. ScreenFlow lets you run your PowerPoint or Keynote presentation on your computer, while simultaneously recording an inset video of YOU, giving us the best of both worlds. Videocue 2 makes it really, really easy to write up your pitch, film it with your webcam while you read from a teleprompter, and seamlessly add in titles, overlays and images. Very cool…and they work. Almost identical programs are available for Windows systems from Adobe, which last year acquired a really neat company named Serious Magic that had pioneered the whole ‘pro-sumer video upload’ field. Adobe Visual Communicator 3 does even more things than ScreenFlow, including letting you record and deliver your PowerPoint presentation, and Vlog It! is a virtual clone of Videocue. (To be fair, the Serious Magic/Adobe folks claim that it’s the other way around, and that they were first. I’m not choosing sides, just point out two sets of cool programs.) (By the way, the third Adobe/Serious Magic product in the list is Ovation, which is a VERY powerful program that takes your PowerPoint presentation, adds in a full teleprompter, timer, and other goodies. Definitely cool for doing pitch presentations.) So there you have it. Now that you know the secrets, please be nice and pander to your friendly local angel investors by recording a video along with your Open Deals submission. It makes it easier and more fun for us, and gives you a much better chance of rising above all those entrepreneurs who weren’t smart enough to read this blog entry!

It's Only Business

When I began raising outside capital for Ex Machina, my first venture-financed deal, I was convinced that the concept of wireless connectivity software was a sure-fire winner that would be obvious to anyone who looked at it. It came as a bit of a surprise, therefore, that although VCs were almost always polite and encouraging, there was a very big gap between supportive talk and actually getting their money in the door. Like most entrepreneurs, I took my business very personally—a virtual extension of myself—and perceived rejection by potential funding sources to mean that they didn’t like me (because, of course, the idea and the company were perfect!)

This personalization of the capital raising process accelerated post-funding, when we needed to go back for follow-on rounds. By now, the investors knew the company well, and they knew me even better. So when it became clear to me that we were thisclose to a home run success if only we could bring home just one more round of financing, that fact that an existing investor was prepared to see the company fold, rather than re-invest, could only mean one thing: they had a personal vendetta against me. Was it because they didn’t like my hair color? My religion? My New York speech patterns? Did they have a problem with my politics? My family? The schools I had gone to? Whatever it was, it was clearly THEIR issue, because I knew it wasn’t the company’s situation, and it certainly couldn’t be me, could it??

After fifteen years of pure, full-throttle entrepreneurship during which I raised many tens of millions of dollars from more than half a dozen venture capital firms, I branched out and began investing in other promising entrepreneurs as an active angel investor. Now that I’m on the other side of the table, I see a much different picture: YES, it is all about you, but NO, it is not in any way personal.

Having heard hundreds of pitches over the past five years, and invested in dozens of companies alongside of dozens of other angel and venture investors, I can’t think of a single case where I (or another investor) did [or didn’t] invest in an entrepreneur simply because we did [or didn’t] like him or her! Indeed, I have a number of investments in which I personally think the CEO is a jerk, and I have passed on many, many opportunities where the entrepreneur was someone I would have been delighted to invite to dinner.

What, then, makes the difference? When I look at a potential investment I try as best I can to figure out if this particular entrepreneur has what it takes, in this particular case, to create an enormous home run. Whether or not I find him or her personally attractive, I look for things like integrity, passion, vision, domain expertise, startup experience, leadership qualities, functional skills, ‘coachability’ and other factors that directly affect the enterprise in which I’m being asked to invest. I then look at this entrepreneur in light of the business plan, the market, the team, the product, the traction that has been achieved to date, the potential upside, and all of the other factors that go into the magic stew of a successful startup. And it is only in those rare cases, fewer than one in a hundred, where everything comes together, that I commit my own time, energy, money and passion to helping launch what I hope will be the next potential Google.

The bottom line? It’s not personal…”it’s only business”.