On March 1st, we officially launched the 2017 App Idea Awards at General Assembly. As part of the launch festivities, we held a panel discussion on the state of early stage of investing hosted by our own Co-Founder and President, Amy Kadomatsu. Our panel included:
- Jason E. Klein: Founder & CEO, On Grid Ventures
- Adam Quinton: Founder & CEO, Lucas Point Ventures
- Alicia Syrett: Founder & CEO, Pantegrion Capital
- Zosia Ulatowski: Principal, Cornerstone Ventures
- Jason Eiswerth: Managing Director, Nima Capital
In front of a room filled (literally!) with entrepreneurs, investors and tech enthusiasts, our panel discussed a wide range of topics —from investor pet peeves to what makes a perfect pitch. In case you missed out, here is an excerpt of the discussion that took place.
Amy: What are your go to questions when an entrepreneur comes to you?
Adam Quinton: A professor at UT Austin, Robert Metcalfe, who discovered Ethernet, always asked the people who were pitching their businesses, “can you tell me why you’re doing this?” It’s a very powerful statement about your passion and energy which is very interesting from an investor’s point of view. It tells you very quickly where the people are coming from in terms of their background, how much they believe in the product, how committed they are, and it allows you to quickly screen out people who aren’t fully committed and who don’t fully know what they’re talking about.
Alicia: First, sales and marketing questions. A lot of start-ups don’t really think through the marketing of their product. They need to be thoughtful of how they’re gaining customers. It’s more than just hiring sales people and doing social media outreach, but partnerships and distribution and understanding the traction of the business. I really dig into the sales and marketing plan, why somebody else can’t replicate what you’re doing, and ask what are the real tractions in the business.
Jason K: It’s not really one question, but I’m really interested in your understanding as an entrepreneur of the competitive set. It’s a question that probably 80% of entrepreneurs just flop because they don’t really understand it at all. Are there any other venture backed companies out there that are doing the same thing that you’re doing? Are you really the first to market? Building a company isn’t just about a product. It’s also about the company and the market. So that’s one thing that I really look for: a good understanding of the competitive set and a realistic view of where you stack up.
Amy: What are some thoughtful questions that entrepreneurs have asked you?
Jason E: A question that I was asked recently was, “if you were in my situation, with these resources going in this direction, what are the things that you would do to take maximum advantage of that opportunity?” If you’re younger or newer to starting a business and you’re sitting across the table from someone who’s done it before, don’t miss the opportunity to get information for free while you’re there. You may not get the investment, but that information you get may help you evolve your thinking and refine your pitch so that you are better prepared in the future.
Zosia: I ask the question, “do you have any questions for us?” It’s so surprising how many entrepreneurs don’t ask questions, don’t ask for feedback, or don’t try to take in more about the personality of the fund or of the investor or who they’re going to be working with. You’re getting into a very long term thing, so getting to know the people on the other side of the table is very important.
Amy: What are some of your biggest pet peeves when people step through your door to meet with you?
Adam: One thing that I see a lot at pitch competitions and when entrepreneurs are pitching to investors, is that they’ll only talk about their product. When you’re pitching to an investor, you’re not pitching your company, your product, or your service; what you’re pitching is the opportunity for me to invest in your company and share in the future value of your company. So the pet peeve more specifically is: you come in and you spend 10 minutes telling me what your product is and how wonderful it is and you don’t do all of the other stuff around market size, opportunity, competitive set, etc.
Alicia: One of the pet peeves that angels always say is when entrepreneurs tell us that there is no competition. There’s always competition. Another big one is when someone just does a back-of-the-envelope estimate of market size. You want to estimate the market size from the bottom up. Another thing is when people are too sales-y, like when someone comes in pitching to the NY Angels and will say something like, “the ground is almost full if you don’t get in now” or “we promise five times return” because that’s usually a huge red flag.
Jason E: Think about what you’re actually doing. You’re an entrepreneur. You’re self-consumed with whatever it is that you’re trying to pitch. That’s usually the only lens through which you’re looking at the world. If you take a step back, do a little homework, and research a bit about who you’re pitching to, learn to understand the person, the company, what their drivers are, what other companies they’ve invested in, why they invested in them, which ones worked, which ones didn’t. People are too focused on their own idea that they forget to put in context of everything else.
Amy: Are there specific metrics that you’re looking for particularly at the early stage? What are some of those tangible metrics?
Alicia: We really look for traction. That’s probably a priority for us. There doesn’t have to be paying customers but we want to see that you’re talking to customers, you’re getting feedback on your product, your customers are touching and feeling your product and giving you suggestions on how to make it better. We also look at the founding team. We want to see balance across the founders.
Jason E: A really good sales plan. There are so many great ideas out there but a lot of them fall down when sales is not well thought through. Be ahead on sales. Who are you selling to? What’s different? What problem that you’re solving? Really articulate that in a very granular way. Make sure to have spoken to people who know more about sales than you do so that you can get their ideas.
Amy: So I’m going to move on to the state of the app market since it is the App Idea Awards. So the big question is, are apps dead? Is the app market dead? What’s your take?
Alicia: I know it sounds a little dramatic to say that they’re dead, but there’s definitely been a mass amount of consolidation in the market and most of the studies that I read say that at the end of the day, people focus on only four or five different apps. And so the question is, is what you’re building crucial to the user? Is it something that they’ll rely on, that they’ll use everyday?
Jason K: I think the notion that you have to basically come up with a great app, a consumer app, and put it in the app store and get people to download it and be successful almost doesn’t really happen. No matter how good it is, you’ve got to have some way to get that app into people’s hands which means you have to think outside of the app store. You have to think about marketing partners, you have to think about ways to force downloads, you have to think about it as an integrated business and not just as an app. And so, frankly, I won’t even look at business plans for an app without an equally strong plan about how to get people to download it, use it the first time, and repeat using it — which are enormous challenges.
Amy: Last year, there was a lot of talk about the arrival of chatbots, To many, this signaled the end of apps. Are you on team chatbot or team app?
Zosia: I think we’re in the middle. I don’t think apps are bad. I think chatbots are a great way to make the user experience more easy and natural and can be the bridge between the user and the app. So it doesn’t have to be in silo. It can be a part of the business model. That been said, we have been looking for a chatbox investment. We haven’t found one.
Amy: What’s the one that got away? What’s the investment that you could’ve invested in, but you didn’t?
Jason K: So I was at Best Buy last weekend and there was a big display for Canary in the home security section, which is a self contained little box that’s a home security system. And my recollection is that I think we saw that at NY Angels right after I had joined and I was just really getting into all of this. And it was just too early and too different and too risky.
Adam: I was thinking really hard about this because there are so many. For active investors, you’ll see hundreds of companies for every one that you invest in. So there’s actually a lot that got away. Personally I don’t spend too much time thinking about it. I just keep looking for the new ones that come through the door.
After the panel discussion ended, a crowd of curious entrepreneurs formed around the front of the room. All five of our panelists were kind enough to stay around for an hour or so (some even longer) and speak face to face with our attendees, answering any pressing questions that they had. As this occurred other attendees enjoyed drinks and appetizers and spoke to us (the competition organizers), and each other, about their ideas and the competition as a whole. Thank you to everyone who helped us put the event together, and to everyone who joined us. We look forward to seeing you at the next event - the finals on June 7th!
The competition has officially launched! Make sure to get your applications in.