Frank,

I understand your point about "having a good sales pitch and intriguing us". And it may be as you say "the path to take" to get funded. But you can't claim that it is the path to an IPO when there is no bubble. You also do not reconcile your view with the opposing views of Randy Lunn and Jim Armstrong.

I would say that according to Randy's teaching and examples throughout history, it is not possible to make a good sales pitch for something that truly has IPO potential because nobody will know what the presenter is talking about. According to Randy, if they do know what the presenter is talking about it does not have IPO potential. Jim Armstrong specifically stated that those that were their biggest successes took a lot of time to understand their market.

I also understand your point about "entrepreneurs have a concept that if their audience knew everything about their opportunity like they know it, then that's what makes us buy, so they just overwhelm us with information". I assure you that's not me.

I only need someone to understand my market the way I do. If they disagree than the meeting is over. That's just one thing, not "everything". If they agree with my definition of the market then the next step is to discover if we agree with the solution that I propose. If they don't, then it is over. Just two things and maybe only one, not "everything" as you say.

I only advocate getting to know one thing, the market. The size, the competitors, how much do you have to pay to play, what affects the market, and so on. One is not concerned with the solution at this point. Only if the market checks out does one proceed to analyze the solution.

The reason for the initial focus on the market is because it is the market that tells you if you have a great team or not or if you can get one. It is also the market that tells you if you have a great idea or not. If the market is large enough it can lower the risk. Focusing on the market also agrees with the advice from Jim Armstrong.

I think where you and I differ Frank, is that you keep advising on getting funded whereas my comments refer to how to identify an IPO potential. I do use the advice given by successful VCs you have had on your show to support my comments.

In this interview John Filla says to do fewer new deals and reserve your cash for follow on rounds because in 2009, VCs and other folks will be pulling out or pulling back when you least expect it. That's another reason to be IPO focused instead of sales pitch focused. If one is putting more money into fewer deals, wouldn't they require larger returns?

Angels claim to know how to get us entrepreneurs funding from VCs. The Forbe's article you recommended "Venture Capital's Coming Colapse", says to expect there to be fewer VCs in the near future. For the reasons given in the article, isn't it appropriate to say that the same old advice is not going to work right now? VCs need IPOs which is something the sales pitch cannot deliver when there is no bubble.

Emphasizing the sales pitch is putting the cart before the horse. The opportunity called "Buzz" mentioned on the TCA website and the opportunity called Budding Brilliance mentioned on this website are proof of that. Both opportunities failed to know their own markets. Their markets were never what they claimed them to be.

VCs and Angels say they believe in the sales pitch, so entrepreneurs adopt this belief, and without a bubble it gets both of them into financial trouble. VCs don't get an IPO market, and entrepreneurs might go broke and or damage their careers believing they are following proper business practices.

It doesn't help when Angels and VCs say they don't care about the market or the idea, and if they like you they will invest. It causes entrepreneurs to work on being likable instead of adding enough value to cause an IPO.

The way I see it, based on the advice of Randy Lunn, Jim Armstrong, Tom Perkins, and the fact that there is no IPO market; the "sales pitch" and the IPO are two different goals when there is no bubble. When there is no bubble one has to choose which one do they want and they don't get to claim that sales pitches lead to IPOs if there is no bubble. History doesn't support that claim.

All this talk about whether to form an LLC or not is simply talk about how to squeeze every last drop out of the lemon one is trying to make lemonade out of. If someone is at the point where this is a big issue there is definitely something wrong with the opportunity selection process.

Perhaps it is culling based on not having a slick enough sales pitch that is the problem. Randy would say that one does not know what is supposed to intrigue him and Jim would say it takes time to figure it out. Randy would say that if one knows what to be intrigued by, then it is too late to invest.

Because I subscribe to the teachings of Perkins, Lunn, and Armstrong, when I hear you say that you are sticking to the sales pitch as your guiding light. I am hearing that you are sticking to non IPO opportunities unless they have a bubble to support the IPO.

You did say that the reason you like Life Sciences is because "there are well defined acquisition partners always on the scene". The sales pitch can work for acquisitions because the people doing the acquiring tell you what to look for in a sales pitch.

Acquisitions are traditionally less profitable than an IPO. Because they are less profitable the point made by Randy Lunn is still valid. "By the time you know the right questions to ask, it is too late to invest".

What about those investors who are not interested in Life Sciences, or who don't have well defined acquisition partners, or who are seeking the big return of the IPO? It is not right to think that one size of advice fits all. If they don't have acquisition partners telling them what to look for in a sales pitch, it doesn't make sense for them to rely on sales pitches.

I slightly alter my stance here to concede that sales pitches also work for acquisitions and not just bubbles. I am not conceding that they work well. I still hold to Randy's advice on that one; I still hold that they do not lead to an IPO if there is no bubble.

I am inclined to think that an acquisition that is a result of following Randy's advice gets higher returns and is less risky than an acquisition than one that resulted from sales pitches. If acquisitions are that exciting it would not have taken the dotcom bubble to make the mainstream media interested in the venture capital industry.

If an Angel is telling me he can get me to VC funding and we know that VCs want IPOs, then he also needs to show me he knows how and is willing to take the time to, identify an opportunity with IPO potential. Otherwise there is no reason for us to meet.

I'm looking for people who want the big return and are willing to invest just a little bit of time to discern it. Just the time it takes one to understand my market, that's all I ask. Not the solution, not the company, or anything else. If you don't like the market we stop there.

It was great that you asked Mr. Filla what his track record is but he wasn't inclined to tell us. He talked about percentages of companies that did not fail rather than percentages of returns.

You mentioned that you count on "social glue" when it comes to member retention in an Angel Group or Angel Network.

Isn't that another way of saying that the group and or network are not living up to their own hype?

Here on the entrepreneur side of the fence, we see Angels and VCs hold themselves up as an (or the) authority on how entrepreneurs are supposed to conduct business. We also see the trouble that following their own advice gets them into.

For those of us with well thought out opportunities, it is easy to see that the problems Angels and VCs often complain about should have been expected given the type of advice they give and or follow.

I do feel sorry for both Angels and Entrepreneurs who are damaged from following the advice of hype, believing that they were actually following best business practices. I think about their families and what else they could have done with the money they lost.

When an Angel Group or Angel Network relies on "social glue" to retain its members rather than its ability to live up to its hype; doesn't that show a lack of respect toward the individual members? Isn't it possible that an individual member has something better to do with his money for himself and his family?

"Social glue" sounds like a lot is being asked for very little return. I'm just saying how it sounds; I know I could be wrong since I don't know the numbers.

On your shows you have often mentioned those Angel Groups that create a fund in advance of selecting investments. "Social glue" would probably be a lot less affective in such a group. The need to replace members who do not want to invest in the next fund is also the need to create more of the hype that the early investment community is plagued with.

Because you rely on "social glue" TCA will always continue in its present form and never create a fund. Once you have a poor performing fund "social glue" becomes less effective as a retention tool for joining the next fund.

If one wants to keep a non or low performing network big it will not use the model of creating a fund unless it is willing and capable of meeting required performance goals.

I am curious as to whether or not it occurred to you that creating a fund puts the network at risk?

A resistance to creating a fund because it can reduce the social glue that holds the network together is a sign of weakness in the opportunity selection process. If this is the case within a group it is further proof that the sales pitch does not lead to IPOs in a non bubble economy.

I think if the sales pitch is a reliable tool for finding an opportunity with IPO potential in a non bubble economy, TCA would have formed a fund a long time ago.

To put the sales pitch in concise terms, it is only useful when the early investor has a credible source informing him of what to look for in a sales pitch.

If the investor is counting on the investment being acquired, the people doing the acquiring inform the investor as to what they are willing to acquire and at what price they are willing to acquire it at. This tells the investor what to look for in a sales pitch.

He then looks for opportunities that can deliver the desired product below the stated acquisition price. This also means that the investor knows in advance the limit on the price he will be able to sell the investment for. It means that he knows in advance he cannot count on an IPO.

During an economic bubble, the source of the credible information of what to look for in a sales pitch comes from the IPO market. Investors learn the type of hype the IPO market responds to and then evaluate sales pitches to see if they contain the same hype. Because the source of the information is the IPO market these investments can lead to IPOs.

The source of the early investor's information of what to look for in a sales pitch sets the limit on the possible return from investing in a sales pitch. If one wants an IPO, the source of information cannot be the acquisition market.

I wish early stage investors would be more honest both with themselves and entrepreneurs. It would be nice if they would admit when they say that they are only interested in executive summaries and sales pitches, they are also saying they are not focused on identifying opportunities with IPO potential right now. They are saying they only want IPO opportunities when there is a bubble because that allows them to stick to the executive summaries and sales pitches they love so much.

"Love" is not too hard a word considering Frank has an article titled "Why I Love Executive Summaries". I haven't looked at the article in a while, but I don't think he claimed that they lead to IPOs as a reason he loves them.

How about a show that identifies what to look for in a fast pitch that tells the investor he is looking at a seed stage opportunity with IPO potential? That would also tell entrepreneurs what type of deals to bring you.

Of course there are those who have been on your show that say if you can explain it then it is too late to invest.

Relying on the sales pitch hasn't worked out for one of the biggest proponents of doing so. Guy Kawasaki now spends more time as a founding CEO of a poorly performing website and less time as a VC.

Guy has a need to sell his books that emphasize the pitch rather than how to find out what to look for in a pitch. What credible sources of information does one turn to discover what to look for in a sales pitch?

Being overly focused on the quality of the presentation skills has caused him to be blinded to the quality of the information. The need to sell his books blinded him to the need to change the way opportunities with IPO potential are identified.

Although blinded to the need, none of us are blinded to the negative results. Which is why Guy became a founding CEO.

The stated goal of venture capital is to beat the stock market. Guy describes Alltop as an online magazine rack. I haven't found a credible source to say that is the way to beat the stock market.

Alexa.com currently ranks Alltop on a downward trend at almost 90,000; meaning that it is near the bottom of the top 100,000 websites. Which means there are literally tens of thousands of other sites for people to consider owning before they would want to own Alltop.

The graph of the traffic trend is wildly sporadic with spikes and drops. At one time spiking as high as 30,000 but quickly dropping back down to below 100,000. Most of the graph seems to be below 100,000. The spikes are probably due to moments when they are able to create buzz that attracts new visitors.

The fact that the number of visitors is not stable indicates a lack of usefulness to the site. Which means Guy Kawasaki has not identified a need. Hooray for the sales pitch and executive summary?

Guy is constantly emphasizing that people should do what they love and money will follow. That only works when you happen to love what your customers want from you.

The Budding Brilliance interview on The Frank Peters Show is an example of people who followed this advice, chasing an opportunity that never had the ability of bringing them significant amounts of money. In Alltop, Guy seems to have finally become a victim of his own advice.

Like Google, Alltop does not create its own content. Yahoo! and Micro Soft are already having a hard enough time competing in this space. What metrics does Guy Kawasaki have that indicate a startup this late in the game can carve out a significant share of the market?

Wouldn't you like to see the sales pitch that got Alltop funded?

In all the advice given to entrepreneurs, I see way too much focus on getting funded and almost none on what it takes to cash out. Most of the business advice given is standard for any business regardless of seeking to cash out or not. So it is not specific to the situation.

I listened to the Podcast yesterday with John Filla. You mentioned working on the "Zen" presentation.

It was a real good show and I found it very insightful and interesting.

In this interview the issues of retention and social glue were brought up. Frank also mentioned he has an investment he made about eight years ago that still hasn't paid off. In one of his posts on this website, Frank expressed hope about another of his investments writing, "surely it will pay off in my lifetime". In other shows Frank has mentioned that an Angel must make 25 investments to get ahead in this game.

If one includes graduate school, eight years is almost one third the time it takes to get a kid out of the house. Naturally most Angels would want to receive the fruits of their efforts while they are still young enough to enjoy them. Therefore it is reasonable to measure the effectiveness of an organization by its ability to attract enough high quality opportunities for its members so that they can achieve the required 25 investments as soon as possible.

I see a lot of effort is put into improving the sales pitch which does absolutely nothing to improve or attract quality. As far as I can tell, Tritech SBDC also does nothing to attract or even verify quality.

It makes sense for an investment organization to be putting more of its resources toward attracting higher quality opportunities than the amount of resources it puts toward teaching salesmanship. We wouldn't be talking about relying on social glue for retention if the members were satisfied with the quality of the opportunities they are being presented with.

Angels immediately start off on the wrong foot in their relationships with entrepreneurs even before they have met the entrepreneur. It is not hard to find complaints from Angels about the types of pitches they receive, but Angels set the tone and example that causes them to attract such pitches.

Below are two examples directly from the TCA website. By promoting these examples to entrepreneurs, TCA is advertising that it is an organization to bring your pitches that contain fantasy large market figures that cannot be supported, and fantasy definitions of markets that do not exist.

Inexperienced people take these as an example of how to properly conduct business; after all the instructions come direct from the Angel investors. Experienced entrepreneurs take these examples as a sign that approaching TCA means that they are not being separated from the clutter. Fantasies will always look better than reality so people who present their opportunities authentically know they have a tough row to hoe in TCA.

On the TCA website, the opportunities called Buzz and MaMoCa are held up as examples of how to approach TCA and what to approach TCA with. MaMoCa makes wild claims it cannot support about its potential while Buzz describes a fantasy non-existent market.

Buzz has gone out of business losing millions but continues to be held up as a great example on the TCA website. MaMoCa greatly tones down its claims on other websites such as Vator.tv.

On the TCA website MaMoCa states that the $160bn movie, videogame, and television show markets, are proof of its potential to make a lot of money by getting co-production deals. The problem of course is that the vast majority of that money is made by the big players who have no intention of sharing their pie with MaMoCa.

On the vator.tv website, MaMoCa admits that it is only seeking co-production deals with small independent companies. A far cry from the $160bn figure it touts on the TCA website. It should be obvious to see that TCA members do not need to invest in a middleman in order to invest in small independent entertainment productions.

TCA is not doing enough to protect its reputation and protect its ability to attract and find quality opportunities for its members. The TCA website should only be used to highlight successful exits and not the spin of companies that have failed or have yet to be successful.

Using successful companies to set the tone of what TCA expects from entrepreneurs would decrease the number of frivolous pitches that must be culled, and make TCA more attractive to entrepreneurs who are being authentic in their approach.

Currently, TCA is advertising that it responds favorably to unsupported claims. So it is going to keep attracting them.