The Elevator Pitch and the Fast Pitch Are Hold Over Relics From the Dotcom Bubble.

Fast pitches are only necessary when one intends to make his/her profit from an economic bubble, when the goal is to get in and get your profits out quickly before the bubble bursts. Without a bubble to make money from, the fast pitch does not serve one's best interest.

I've had a negative view of fast pitches for years. But in the past I was just another person who failed to get funded, so my views would be looked at as whining. Therefore I am naturally biased to like this interview of Jim Armstrong from Clearstone Venture Partners.

In another post I have submitted to the Frank Peters Show, I contended that: "History shows us that it takes more than 10 slides written at 30 font, or a 30 second elevator pitch, or a 5 minute fast pitch, to be made aware of all the variables that indicate if something has the potential to be a next big thing. Understanding the invention is only half the issue, if even that. One has to also understand the affect it will have on economies, how economies will evolve to include it, and how new industries will be created because of it."

I feel that Jim Armstrong has said the same thing in this interview when he said:
"The trait that has emerged as the defining trait outside of good market, and early market, and good people, is entrepreneurs that are really willing to ready aim aim aim aim aim, aim again, aim again, fire! And now I've done my share of ready fire aims, and I've done enough ready aim fires. But people who have really taken that golden time, when you have identified a market, and now can you double verify it, and triple verify it? I have low burn, I have three employees, I'm working on a concept, I don't have to worry about my sales force, I'm not selling anything yet. I really want to validate it and in the process get to know the right players that will take me to market."

So I too am very optimistic about the coming year. It seems the number of VCs that agree that it takes a considerable amount of time to judge an opportunity properly is growing.

Probably most Angels and VCs that have been to my website have said to themselves something like "oh boy, more hockey sticks". They see my claims that I am the only one in the world with this invention and that there is no competition, which are considered red flags, and think of me as another nut that doesn't get it.

My website(s) have changed many times over the years. There is so much advice from VCs and Angels saying to say it like this, or say it like that.

What my critics are not taking the time to understand is that in the multi-billion dollar opportunity I offer, competition actually hurts both the manufacturers and the Users in this particular area. It causes both of them to lose money. Both parties actually demand that a standard be used.

So the idea is that because all parties are frowning on competition; that makes it easier to establish a new standard that allows both the Users and Manufacturers to make more money than they are now. Then sit back and collect the license fees when the hard work of establishing the new standard is over. There is over 100 years of history in this particular field supporting my assertion.

It is these particular market realities that make what I have to offer a multi-billion dollar opportunity. My inventions and the fact that no one else is addressing these needs are just necessary prerequisites to get into the market, but the rules of the market are the exciting part.

It's been done before on a global scale and the product lasted the entire life of the patent. I expect it to happen again. I want me and my inventions to be part of the team that does it.

I do not have a sponsor; someone to mentor me through the fundraising process. Perhaps after someone from TCA follows Jim Armstrong's advice, and learns more about the opportunity I offer, and if they find it appealing, they might consider taking me under their wing.

Offer To Test Jim Armstrong's Advice.

Happy New Year Frank,

I would like to offer myself as a guinea pig to test how TCA would go about following Jim Armstrong's advice of taking time to carefully identify a market and double and triple verify it.

You could interview me for your show and we could talk about this multi-billion dollar market I have identified and how this market insists that there be only one winner and no competitors, and how that makes this a great opportunity.

I think the fact that I have these inventions that no one else has is less important than the fact that this market doesn't concern itself with also rans. There is no number two. It is number one or zero. That's the rule of this market.

Having these inventions that no one else has allows one to be first. But it is the rules that this market plays by that allows one the possibility of being the only one.

It doesn't have to be one on one. Feel free to have other people try to poke holes at my assertions. Of course you would be under no obligation to podcast the interview. Just have some fun testing your powers of discernment.

If the interview is not one on one, you might even get a debate going among the other participants. After all, I'm just the technical founder, and TCA members are more business savvy than me and will have insights of their own to add to the discussion.

In the end, you could discuss what is the required important information when verifying a market and how best to present it and or study it.

Maybe that would have been a good question for Jim Armstrong. Having stated the importance of double and triple checking the market for the purpose of correcting your aim; how does one go about selecting early investments to incubate?

Sending out your work emails at 8 o'clock on New Year's Eve -- poor Barbara!

Happy New Year to my most thought provoking, successful, and interesting career changing friend and mentor. All the best for 2009...

I started listening to your podcasts a few months ago and just would like to express my appreciation for the great programs you put together. As an entrepreneur I am always looking for time-efficient ways to stay in touch and learn more about the financing side of the business and your programs are great for that.

One idea for future shows would be to look at specific verticals and have one or more participants talk about their experience and opinions in that specific vertical. I am personally looking for contacts in the consumer e-commerce area in Orange County to meet and exchange ideas with.

I look forward to listen to your programs in 2009 and wish you a great new year ahead.

Red Flags That Angels And VCs Do Not Understand. Here Is How To Get It Right.

1. How to identify a legitimate hockey stick.
2. How to maximize your IP.
3. Judging People Correctly.

My experience has shown me that misunderstanding how to identify red flags correctly is an example of what Jim Armstrong said in this interview about the importance of identifying a market correctly. Getting the red flags wrong, leads one to getting the market wrong, which leads to a loss.

Maybe anyone can talk about the importance of identifying the market correctly. But how about some discussion on how to do that? Here is my effort to promote that discussion.

As a person who has been trying to get funding for years, I've followed every piece of advice. I've gotten to the point where I understand the psyche of Angels and VCs pretty well and I can always get a phone call and then an offer for a meeting.

But I haven't wanted a meeting in a long time and now I usually turn them down when they are offered. In past meetings I've been turned down for funding for some pretty ridiculous reasons. I have invitations to return for funding after I conduct the business in a manner that would decrease the potential return on investment by over 90%.

So I can't tell you how thrilled I am to come across something like The Frank Peters Show, where individual investors, the actual sources of the money, discuss their concerns. The viewpoints can be a little one sided, like the choir preaching to each other, but it is much better than any other VC or Angel Group website that I have come across.

What I see posted on most other sites seems to be nothing more than a VC or a Director of an Angel Group promoting their conflict of interest. They've got to put their spin on things to attract more money to their fund and or struggling past investments.

Confucius said that seeing how someone makes their money tells you everything you need to know about that person. You will know their worldview, what they think of their fellow man and so on.

I mention this spouting of conflict of interest because as Angels more and more decide to work in groups, I see an unhealthy group mentality forming. Angels take their cues from VCs who make their money very differently than how Angels make their money.

Let me give you a tip. If you see a VC that makes his money selling his book, or from fees for speaking or judging contests, you don't need that particular VCs advice. He also gets paid a percentage management fee from the fund he manages, even if the fund goes broke. He needs to hype his reputation to increase his fund or create the next one. Of course he wants his next fund to be larger than his last one. If his fund is doing well enough, he doesn't need to work on his image so much and he has better things to do anyway.

I haven't read the book Black Swan, but I hear it discussed frequently on The Frank Peters Show. It strikes me that when VCs and Angels are in trouble, it is just like what Black Swan says about the current problems in the banking industry. The banks were trading with and investing in each other. So of course if one fails they all had to fail.

VCs claim to be reducing their risk by investing in each others deals. But if a VC with a ten percent success rate invests in the deals of another VC with a ten percent or lower success rate. There is no reduction in risk and possibly an increase in risk.

Angels don't make their money from management fees. So they need to be even more careful than VCs. Angels need to do a better job at differentiating between spin and advice.

Angels have some misunderstandings about some red flags that they look for in opportunities. This causes them to reject big opportunities and focus only on smaller ones.

One misunderstanding is right in line with what Jim Armstrong said in this interview about taking the time to identify a market properly. Angel's look out for hockey sticks and if they see one it is automatically assumed that the people presenting the opportunity have their heads in the clouds and nothing more needs to be looked at. A hockey stick refers to the shape on the graph of the sells forecast. It illustrates a tremendous jump in profits.

What this fails to realize is that there are key segments in almost every industry that as a rule operate exactly like hockey sticks. They do not exist in any other form. So if you are looking at an opportunity in one of those segments you are supposed to see a hockey stick.

Standards is an easy example of this. Every industry has required standards. Standards reduce manufacturing costs, development costs, and they increase the size of the market. You are seeing a battle for the standard right not between blue ray and HD. For the one that finally wins... hockey stick!

The one that is going to win remains profitable during the battle as its sells are paying for the battle.

That was just an easily visible example but you can find other examples where the shape of the hockey stick is more extreme. Microsoft was around for about ten years before they became a household name. When most people see the billions of dollars that Microsoft is worth they immediately think software is a great investment. They don't think about the industry standards that Microsoft has established.

There was a time when people could not transfer files and data from an Apple computer to a computer running Microsoft. Apple finally got with the program and accepted the standards set by Microsoft. Doing so increased Apple's sells.

If the hockey stick you are looking at has to deal with establishing an industry standard, it is supposed to be there. It represents the highest achievable goal of the opportunity. The opportunity should not shoot for anything less.

Hockey sticks for establishing a standard are a reality in almost every industry. You don't need to fear every hockey stick. Look for a hockey stick that requires minimal costs and time to become the standard in its industry, and one in which the sells can pay for the battle. In other words the demand for it will be high.

Another red flag that both VCs and Angels get wrong is the lack of Intellectual Property (patents). It seems they have no concept of how much it costs to present them with a global opportunity.

When a patent is applied for, there is a one year deadline to submit that application to any other country. Any countries not applied to within that year can never be gained later. Just needing a few patents puts the costs out of reach of most Startups.

Startups are often told to comeback after they have their USA patents. The problem with this approach is that it often takes more than a year to get all the necessary funding. In this situation filing that first patent application actually increases the risk for the opportunity of being fragmented to only one country.

By demanding that patent for only one country, Angels and VCs are demanding to be presented with smaller opportunities. A willingness to help get more patents increases the potential return several times over.

I think most early investors get people wrong also. Some seasoned VCs insist that it is not possible to attract good people at the early stage of a Startup, and the risk has to be removed in order to do so. They say to start with the technical founder and then find the founding CEO later.

If this is so, then who are you really looking at when looking at an early stage CEO? What would Confucius say? Someone with nothing better to do? Someone trying to take a career shortcut? What are this person's options in life and why have they discarded them to take this risk? What kind of person discards those options? Is a person who discards such options capable of exercising the necessary judgment required by the opportunity? Will unnecessary risks be taken by such a person? Is such a person capable of identifying impending risks and handling them properly?

A technical founder usually does not have the same options available to him as a qualified CEO. So the technical founder does not take as big a risk. This is why it is easier to find a good technical founder early on, rather than a good CEO.

Judge an opportunity by its ability to attract a winning CEO after the risk is removed. If you don't think it can do that, it doesn't matter how much you like the current CEO.

To increase your potential returns, I would say look for standards that will be in high demand that can be established with minimal costs, and be willing to work on getting patents.

The bubble has been gone for many years now. Do not waste your time analyzing where the market is headed. That just means you are looking for a bubble. Look for the opportunity instead.

Why There Is A Lack Of IPOs, How To Increase IPOs, Proof Of When A VC Or Angel Does Not Know What He Is Doing.

When I hear someone ask or answer the question, what are the areas that are hot for venture funding, where they should be putting their money, it tells me that both the asker and answerer do not know what they are doing.

If you were an early investor in a search engine, there use to be well over a dozen of them, now there are only two main players, and some argue that there is only one main player, would you be telling people that search engines are hot and they should go create one and compete with you? Inside the dotcom bubble were a lot of little bubbles of competing businesses.

Looking to identify a broad area that you can participate in, means that you are looking for a bubble. It means that you are depending on the creation of dreamers in order for you to sell your IPO to. One might think they are playing it smart and safe by going with the crowd, but what they are really doing is deciding to have competition.

He didn't say it but you could clearly hear this opinion from Josh Wolfe of Lux Capital, in the way he answered Frank. He did not want to answer the question.

VCs want each other to invest in each other's deals but at the same time they don't want to incite competition from the VC community. This is the non-bubble reality. You don't get to say we are all making money.

It is not likely that anyone will create a bubble in the current economic climate. Don't waste your time looking for one to rely on.

Identifying specific opportunities instead of hot areas is what will increase IPOs. If you want to strike gold, you are going to have to separate yourself from the crowd, enter the wilderness, and start digging. Don't worry, there is this really cool invention called soap.

In today's economic climate if you ask someone what you should put your money into, without any intention of putting your money together with theirs, if they know what they are doing they are not going to tell you; you are competitors. I won't be surprised when VCs stop putting their early stage portfolios on their websites.

Who Should Get Out Of Venture Investing.

If you are looking for a hot area, that means you are looking for a bubble. If you need a bubble then you should get out of the venture capital game as there are no bubbles to be had right now.

As someone who is looking for funding for something that will never be a hot area, I have a personal interest in wanting such a shakeout. Most venture investors desire to stay in and follow groups. Most of them are also looking for bubbles/hot areas. In order to participate in the group one has to go along with what ever is in vogue, and right now it is the search for the next bubble/hot area.

If the bubble/hot area wanting people were no longer the majority, efforts would shift to identifying specific opportunities rather than bubbles/hot areas.

If your VC says that he is good at identifying hot areas, that's advice you don't need. A focus on separate specific opportunities will bring back the IPO market, not another bubble. To seek the bubble/hot area is to seek lower returns if any.

Avoid Guy Kawasaki Like The Plague, His Own Advice Is Not Working Well For Him

In a previous post I mentioned the type of VC Angel's should avoid taking advice from. I stated "If you see a VC that makes his money selling his book, or from fees for speaking or judging contests, you don't need that particular VCs advice. He also gets paid a percentage management fee from the fund he manages, even if the fund goes broke. He needs to hype his reputation to increase his fund or create the next one. Of course he wants his next fund to be larger than his last one. If his fund is doing well enough, he doesn't need to work on his image so much and he has better things to do anyway."

In other posts I illustrated how the fast pitch is the reason there are no IPOs and that if you want IPOs you are going to have to get away from the fast pitch. Fast pitches only work in bubble economies. Without a bubble the fast pitch will not lead to an IPO.

In Guy Kawasaki we have a highly visible example of both of these points. He is the type of VC I say to avoid and he is a very strong proponent of the fast pitch to the point of being an offensive personality.

Look at his videos on youtube. He is constantly calling people bozos if they do not do it his way. He is relying on fear and intimidation to get people to agree with him. It is bullying.

Look at where Guy Kawasaki's advice has gotten him. He is a VC that has demoted himself to being a founding CEO. I doubt most Angels are looking for an investment opportunity in which they will have to be the one running it.

Of course if it is an increase in pay for him it is not a demotion. If it is an increase in pay what does that say about the venture fund he manages?

VCs are supposed to find the best of the best to be CEO for their investments. Traditionally when a VC takes over running an investment it means the investment is in trouble. So what is the trouble with Alltop.com that it cannot attract a high quality CEO? What does that say about Guy Kawasaki that he has invested in something that is not attracting higher caliber employees? What does it say about him that he as resorted to creating startups instead of sticking to funding them?

The reason there are no IPOs is because VCs and Angels have regulated themselves to the fast pitch. People who need fast pitches are people who need a bubble and are people who are not taking the time to identify what can be successful without a bubble for it.

Guy Kawasaki becoming a CEO is a sign of what you are headed to if you continue to rely on the fast pitch without having a bubble to go along with it.

An open fast pitch competition is a ridiculous idea if you haven't identified a bubble to be the theme of the competition. Having no bubble theme means you do not know what you are doing.

Great Example Of How Fast Pitches Lead To Bad Things

The TCA fast pitch competition is coming up and on its website the pitches of previous winners are displayed as examples of what to do, along with comments and advice.

In 2006 the award of "Best Investment Opportunity" went to Dr. David Saad (pronounced sod), here is his pitch along with the TCA advice. Followed by my analysis of what is wrong with both.

Best Investment Opportunity 131 words, 60 seconds

By David Saad, CEO of Clupedia

Word of mouth - the wholly grail of marketing but very difficult to achieve. And here comes Buzz - the ultimate referral system on the web. Think of Buzz as "tell-a-friend" with extensive analytics so that marketers no longer have to "leave it to Beaver" but instead can launch viral marketing campaigns using Social Network Analysis. Now that's unique and defensible.

Buzz was nominated for the innovative product of the year award by the American Electronic Association. We got our first customer with an order of $85,000. And finally, the exit could be spectacular for one reason - the network effect.

I'm David Saad. I have invested $2 million, 25 years of experience, PhD in computer science, twice on the Olympic team, and came to you tonight through - referrals - a trusted source. Thank you

Comments
In David's opening sentence, he sets up anticipation of a big solution by referring to the Holy Grail of marketing. he then ties into social networking - a hot investment space. He then conveys external validation by referring to an AERA award and an initial customer order. Finally, he sells himself which is critical to any investor. Investors want CEOs with skin in the game, and this one's invested $2M of his own cash -- that's commitment. The Olympic reference is memorable, and conveys dedication and perseverance -- also important to investors. And he wrapped his pitch up withsome humor about being referred to TCA -- re-emphasizing the importance of trusted referrals. got everyone's attention by opening with a load roar and then his "gorilla" one-liner. Anyone nodding off in the audience was quickly woken up and ready to hear what he said next. They were prepped. Noe of the most effective openings we've heard.

So how did this investment do? Another website reported "Imagine investing five years and $2.3 million of your own money to develop a product and then finding out the entire market has changed."

That's just putting a polite palatable spin on the disaster. The truth is the market never existed.

Dr. Saad made a false statement to TCA when he said that buzz is the holy grail of marketing. That is patently false for two reasons.

First because buzz has never been the goal. The conversion of buzz to capital has always been the goal. Second because not all products can be sold through buzz, so buzz cannot claim to be a holy grail. Many don't need it.

Dr. Saad said he had "an" order, not a repeat order. Nor did he claim to have served his customer better than their alternative. Did the customer get their money's worth? We don't know from the fast pitch.

For making this false statement, TCA awarded Dr. Saad the title of "Best Investment Opportunity". It turned out that the business model never had a product the market wanted. The market needs someone who can convert buzz into capital at the right price and not just create buzz for the sake of buzz.

Perhaps if Dr. Saad wasn't caught up with fast pitch fever he wouldn't have fooled himself into thinking this was a good idea. He believed his own hype and personally lost millions.

The time spent preparing a fast pitch is a waste of time. It is much better to spend the time to get your analysis right.

Keeping The Faith

Frank, this is meant to be constructive criticism on how you can improve your show in a manner that will also improve your angel investing and the angel investing of those who listen to your show.

You wrote "Keep the faith!" The prerequisite to keeping the faith is to first pick which god you choose to pray to very carefully, or define very carefully what it is that you are supposed to have faith in.

It is not any different than the career advice many people get. Choose your leader very carefully because you will never rise any higher than the example you follow.

I always say, and it is a personal quote of mine that I made up, "If you are going to pray, pray to a BIG GOD!" As we listen to your shows we notice that the guests on some shows have opposing opinions from guests on other shows.

You should not change the educational aspect of your show, but your show does nothing to identify best practices. Opposing views should be discussed on the same show, along with supporting facts. When there are opposing view points, they can't all be correct.

I would say your shows are a little bit too much kumbaya. Waiting for the next one is like wondering who is Frank going to hold hands and sing kumbaya with this time. My wife says it is like listening to Frank hang out with his buddies, everyone says the same thing and they all agree with each other. In the Navy we called that....

As an example of identifying best practices, it is not possible to use the fast pitch to follow the advice of Jim Armstrong, Randy Lunn, Josh Wolfe, and Shahin Farschi.

Their advice also directly contradicts the advice of Tom O'Malia. But there is no discussion on who's advice you would be better off following. I say O'Malia's advice that the idea is not important has no place in venture funding.

The fast pitch has its place. In a bubble economy there is no business analysis required in order to make money. The only thing the investor has to look for is if the opportunity is capable of producing and sustaining the type of hype that the bubble is responding favorably to. The fast pitch is nothing more than a demonstration of the opportunity's ability to create the desired hype. It does not demonstrate the ability to create value. We don't have a bubble so there is no need for this demonstration of hype.

There also exists opposing views about the importance of the team. Some say to start with a great team and some say that's the worse thing you can do and that it is not possible anyway. They say that great business people are not attracted to the early risk because they don't need to take the risk. So if people are important to you, you must remove the risk first.

I say if the opportunity is dependent on the team, it is a sign that it is a weak investment. A strong investment will always be able to attract a strong leader and high quality employees. It should have an easy time replacing its people. If it can't do that, don't invest.

I think a strong leader who has high quality employees that he can make use of is more important than a bunch of guys that all get along together. Somebody has to tell the marketing guy that it doesn't matter if full page ads are more effective. He is not allowed to spend more than what the sells bring in, and if he does he is going to have an even lower budget next time.

There is no attempt on the show to identify best practices or reconcile opposing views. Everyone who gets on is assumed to be correct. It is like the old saying, "he who chases two hares catches neither".