Forbes | Randall Lane
The global capital of entrepreneurship last week was….Buffalo, N.Y. As part of a billion-dollar initiative to kickstart the western New York economy, Buffalo hosted the biggest pitch contest ever: $5 million, doled out to 11 startups last Thursday, including a cool $1 million to the winner. Just a single catch: the investments were contingent on the winners growing their startups in the area.
Shark Tank, in other words, with an extra zero or two and some Lake Effect snow. More than 6,900 applications from 96 countries and all 50 states poured the contest, which was hatched by Softbank Capital partner Jordan Levy, a proud Buffalonian and the steering committee chairman for 43North, the group which oversees the contest and will nuture and incubate the 11 winners for a year, gratis, in the hopes of turning the region into an entrepreneurial hotbed. More than 200 volunteer judges winnowed the pool to 113, who underwent more careful due diligence.
From there, 11 finalists were summoned to Buffalo, all winners already—four of them would get $250,000 and six $500,000, in addition to the $1 million grand prize honoree. (Rather than haggle over valuation, Mark Cuban-style, each company ceded a flat 5% of their equity, the proceeds of which will be reinvested in the Buffalo startup scene.) I was one of six final judges allocating the cash, along with an all-star roster of capitalists: EDventure’s Esther Dyson, Lerer Venture’s Ken Lerer, Spark Capital’s Bijan Sabet, Bills and Sabres owner Kim Pegula and Roswell Park Cancer Institute honcho David Hohn (the unsung hero, since many of the finalists were biotech).
It proved an instructive experience in two ways. First, I’ve never seen such a pure, positive celebration of entrepreneurship. With the Bills on a bye week, the entire city was talking nothing but startups: there was nary a cabbie, hotel clerk or bartender who, after asking what brought me to town, couldn’t tick off the contest’s minutia. It fronted the newspaper, led the television news, and when the 11 finalists pitched, almost 1,000 people filled the stage at the grand Shea’s Theater to watch, More than twice that number piled in later in the evening to learn the winner, which was announced with the pomp of the Golden Globes. The entrepreneur finalists toured the city all week like rock stars.
Second, in reviewing so many earnest entrepreneurs in rapid-fire, universal truths in the art of the pitch emerge. While I’ll keep the specifics of the judging room private (other than to tip my hat to a very conscientious process), each of the 11 public presentations offer lessons aplenty. In no particular order, here’s $5 million worth of wisdom:
1) Forecast Realistically — Angel Davis and Lauren Washington have everything going for them. They’re smart and charming and they have an idea –rolling-up all your myriad social media feeds into one master feed – with resonance. But in their presentation for New York City-based KeepUp, they also projected they’d have more than $200 million in revenue by year 5, which has no chance of happening (few social media startups have historically had even a penny in revenue in that time frame). It’s tempting to show a jackpot for investors – but not at the expense of credibility.
2) Cover Your Assets – Florida-based Asana Medical claims to have a device-based treatment for ulcerative colitis – a $9 billion market. As with most healthcare startups, it’s hit-or-miss. Which makes tidying up underlying intellectual property critical. Key patents filed? Landscape review conducted. Fast-track approval ascertained? Check, check, check. No matter your business — think trademarks or code — the same principles apply.
3) Youth Can Be An Advantage — It’s a point I drive home hard in the introduction to the just-published You Only Have to Be Right Once: for the first time in human history, being young – and, specifically, a digital native – makes you more likely to succeed in many fields than years of experience. Peeyush Shrivastava of Ohio-based Genetesis, which measures patient response to heart medication, presented for 10 minutes, and then fielded questions for 10 more. It was only as he left the stage, with the prompting of emcee Jordy Levy, that he revealed that he was just 18 years old. The crowd was impressed: he won an extra $10,000 as the People’s Choice winner.
4) ….Especially If Coupled With Gray Hair Expertise – Deena Malkina, a Harvard MBA, did a fine job presenting for Hemogenyx, which help improve the way bone marrow transplants are done. But Dr. Vladislav Sandler, a distinguished Cornell professor who’s a leading expert in this niche, provided the room with confidence. For the rest of the day, a common theme among the judges was to push the operators to explain “who their Dr. Sandler is.”
5) Think Big – Venture investments are risky. Thus, companies with the potential, if they hit, to offset 100 losers will always prove attractive. Medical Conservation Devices has developed a machine designed to provide anesthetics via an inhaler, fits that ball. A longshot? Of course? But the management has a good track record, and if this product works as hoped…it would be very big. A worthy $500,000 roll of the dice.
6) Don’t Lean on Powerpoint – For too many pitches, the product or idea is conveyed by Powerpoint. Raland Therepeutics, which is developing a biosensor designed to provide real-time input for people undergoing chemotherapy, brought one, too. But it was only once they passed around their non-intrusive, pebble-sized prototype that heads began to nod. They wound up with $500,000.
7) Bet on Yourself – Two Taiwanese students at Rice University developed Ecobreeze, a new style of microfan they claim can cost-efficiently extend the life of LEDs and other bulbs. My big beef was that, according to their application, one of the two principals, Hayden Ren, had already accepted a job as a wealth adviser. Who wants to bet on someone who doesn’t bet on himself? When I asked him about it, though, he had a good answer: since becoming a finalist, he’d turned down the job. They nailed $500,000.
8) Own the Room – The classic investment dilemma is whether you invest in an idea, or in a founder. The perfect answer is both, but most investors are forced to lean in one direction or their other. Entrepreneurs can help sway the equation in their favor. Folks liked the idea of Energy Intelligence, which uses the kinetic energy generated by braking cars to cost-efficiently power, say, the parking garage where the braking occurs. But they loved Daniel, the firm’s confident cofounder (with his father), who wound up with $500,000
9) Walk the Walk – I’ve hired a bunch of media design firms over the years – the ones with the beautiful presentations tend to win. They aren’t telling you how talented they are—they’re showing it. A restaurant investors dinner should have delicious food. A movie funding pitch should blow folks away with their trailer. And TriMirror, from Ontario, which creates digital, accurately sized avatars to “try on” clothes online for fit, should have a James Cameron-worthy demo. They did, down to morphing real faces onto virtual dummies. Little was left to the imagination. And $500,000 will soon hit their bank account.
10) Validation Nation – Ross Tsakas checks a lot of the aforementioned boxes. The Scotsman is an impressive presenter with a huge, game-changing idea – a one-vial delivery system for vaccines that has applications worldwide, especially in the developing world. The Gates Foundation has spent billions creating efficient ways to deliver vaccines to poor nations. As Tsakas presented, one could only wonder what the Gates team would say about his technology. Then he showed his cards: The Gates Foundation had already given him a grant to support his research. Tsakas wound up with a $500,000 investment, and the runner-up designation.
11) Don’t Rush – ASi, a metal-forming firm whose cutting-edge technology offers stronger, lighter, more flexible material for small industrial pieces, with applications from fracking to dentistry to ammunition, was formed in 2006. Why was a company that’s been already been around for 8 years only ready to go to market now? CEO Glenn Thomas could only shrug: his firm has spent $1.5 million and nearly a decade testing, improving and re-testing. This isn’t a chat app, and they weren’t rushing their product to market. It needed to be done right. He now has a $1 million war chest to roll it out. The American Dream is alive and well, in Buffalo.