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Saturday, April 10, 2010

TLP Investor Showcase: An panel and mentoring event with 7 of Boston’s most knowledgeable early-stage investor-mentors

Credits: Photos by Praveen Yajman

Shawn Broderick, Managing Director, Techstars Boston (Moderator)
Todd Hixon, Managing Director, New Atlantic Ventures
Jonathan Lim, Principal, Polaris Ventures & In-charge, Dogpatch Boston
Elon Boms, Director, Launch Capital
Eric Paley, Managing Director, Founders Collective
Chris Sheehan, Managing Director, CommonAngels
Josh Tolkoff, Ironwood Equity

April 7, 2010 was one of our most engaging and vibrant events in recent memory, primarily because it was our first ever organized showcase of TLP’s product: its Fellows. We brought seven of Boston best known seed and early-stage investors to meet 20 outstanding Founders and CEOs. It wasn’t pitch day. It was a chance for founders and CEOs to give brief overviews of their companies, and then to ask questions about solving specific business problems. It was a standing room only session.

Shawn did a great job moderating a panel and extracting questions out of the panelists. Here is a sample of the points raised at this event, in no logical order.

The team question came up. Eric reminded everyone that when you look for feedback for being turned down, the real reason may actually be the team itself. But its never something one will hear from investors. They don’t want to hurt any feelings. When you ask us for feedback, there is a difference between asking for genuine feedback and really asking the question about “what does it take to write us a check”. Those are two different questions, and the latter is a far more difficult answer that investors are not likely to give.

Jon is wary of overconfident management teams. He doesn’t like to invest when he thinks “They don’t know what they don’t know”. Elon reiterated that many times his decisions are based on going with his gut feel. There are times when there is no clear reason why he’s uncomfortable. Eric had similar anecdotes. One of his investments had everything going. Everyone liked the market, the product, everything seemed right. His team spent half a dozen meetings, but in the end walked away because they just could not get comfortable with the entrepreneur.

About Changing Your Business Plans
Eric reminded Founders to carefully think about whether the insight and vision they started out with still stood even if the markets were changing. He was looking to see how quickly can these entrepreneurs make these changes needed. Eric was less enthusiastic about this approach, using the term pivoting. He warned about CEOs “pivoting” too much around their original business plans, reminding him that pivoting was dangerous. It wasn’t always a strategy. While there was a desire for tech CEOs to iterate quickly, it is never the preferred alternative to “we have a good plan going in”. Todd reminded the Fellows that every pivot is a swing, and there are just so many swings that one gets, and ended by saying “One definitely doesn’t build a great business by infinitely iterating on bad business cases” which drew some nervous laughs from the audience.

Make Investors lives easy
Jon reminded the Fellows that they should try to make lives easy for the investors. Make a one pager (excel or word) so they can go to the partners meeting. Josh advised entrepreneurs to guide the diligence process. “We’re lazy.” We’ll take the path of least diligence that shows our world. You understand that we’re busy. Get us in front of people who can corroborate your story.”

How long does it take to get funded ?
Josh offered a very important tip based on statistics that reminded us that getting funded is even harder. He said that statistics show that it takes 18 months & 36 meetings to get funded early stage.

Business plans versus Pitch Decks
There was a clear split between people willing to read pitch decks and business plans. Everyone agreed that less is more; no one has the time to read long plans.

Josh advised Fellows to entertain by telling a story that would make it interesting. What’s happening now. What will the future look like. “Tell me a story that gets me interested.”. As a lifesciences investor, he also reminded the crowd never to forget that biology is really hard.

Todd was quick to point out that there was a difference between a pitch deck and a business plan. A pitch deck is a communication tool. Jon and Eric clearly had no interest in anything but pitch decks. Elon pointed out that while its great to write the plan to get everyone on the same page, which drew support from the other investors. However, Jon argued that business plans are static documents, and are not updated, so they quickly become irrelevant. Regarding a question about putting together a list of frequently raised objections, the panel agreed that this was a good idea, but cautioned against giving it out to the investors unless the questions were asked. But the preparation was a good thing.

Elevator Pitches
Todd offered a great tip on elevator pitches. Convey three things:
1. What it is
2. Why is it exciting
3. Why are you credible

Some other feedback
During the event, Todd remarked that the entrepreneurs did a great job giving feedback to each other; at one point he felt that Shawn and he were moderators of the session. Everyone thought that the quality of presentations was very good. Josh sees a lot of plans, but he is astounded to see how few plans are any good, so he was actually quite happy to see the quality from the Fellows. There were several suggestions – to give more flexibility to investors to move around, to give more information before this event next year, to give more time to each investor, and finally, to always send the decks and two pagers in advance.

A remarkable event with a ton of learnings. Thanks to Rich Kimball and his team at Edward Angel Palmer and Dodge for hosting us, to Ariel, Brian, Chase, and Parul for all their hard work organizing this, to Praveen Yajman for taking the pics, for the Panelists and Moderator for their insights, and the Fellows showcasing and listening, for making this a success.

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