The Sharkification of Investor Pitching Spreads Outside Silicon Valley
WHY YOU SHOULD CARE
Because thinking outside the box could give you a leg up.
By Nick Fouriezos
It was an early morning in March 2015 and frighteningly cold, with whiplash winds treacherous even by the standards of central Vermont’s Mad River Valley. From their perch at Sugarbush Resort, Christine Dodson and Sascha Mayer plotted their plan of attack.
The two co-founders were looking to raise money for Mamava, an early-stage startup that sells lactation “suites” for nursing mothers in public spaces like airports and sports stadiums. They had a competitive advantage: Dodson, a “killer” Alpine skier, pitched investors on the chairlift — “like speed dating,” she says now — then rocketed down the slopes to get back in line, increasing the chances of landing the next Daddy Warbucks. Meanwhile, Mayer, who wasn’t as keen a skier but had mastered the team’s elevator pitch, worked the lodge for investors deterred by Mother Nature.
Unconventional settings for business pitches can be an advantage for savvy investors looking for the next Facebook where competitors are not.
What brought them to the wilds of Vermont is part of a growing trend — pitch events that are held in decidedly nonbusiness settings. The point is to get people out of suit-and-tie meetings where startup souls go to die, and start getting entrepreneurs used to selling themselves in more natural — albeit often adrenaline-infused — environments. In the past, investors might work university tech fairs for fresh talent or go to large-scale conferences, but nowadays, “what they’re doing is participating in events,” says Cairn Cross, managing director of FreshTracks Capital, which runs Peak Pitch, where Dodson and Mayer did their tag team, and Road Pitch, an annual summer event where motorcycle-riding investors visit 10 towns across Vermont, hearing pitches at each one.
Following the template of Peak Pitch in the Green Mountain State, chairlift-inspired pitch events have emerged everywhere from Albuquerque, New Mexico, to Sandpoint, Idaho. And capital-seeking entrepreneurs aren’t just heading for the ski hills. This summer Alexandria, Virginia, helped more than a dozen Beltway startups make their pitches to VC reps aboard a charter boat on the Potomac. The SunDown RunDown series operating in six Ohio cities has budding business folks conduct pitch-and-Q&As in local bars.
The shift comes in part from what the startup community calls the “sharkification” of investing. Buoyed by the popular ABC show Shark Tank, a company’s medium for delivering its message — the pitch — has become more important than ever. The backdrop, then, has seen a bump in importance too: After all, what’s narrative without setting? Cookie-cutter events have encouraged folks like Cross to get creative: “Why do I want to rent a hotel room in a chain hotel and bring in a lot of people … when that event would be the same … in Boston or Hartford or Albany?”
Unconventional settings for business pitches can be an advantage for savvy investors looking for the next Facebook where competitors are not. Most investors aren’t searching outside the obvious hunting grounds: Nearly four-fifths of American investment capital goes to companies based in three states: New York, California and Massachusetts, notes Ross Baird, president of Village Capital in Washington, D.C.
For an entrepreneur in satellite Silicon Valleys, such as Chattanooga, Tennessee, or Blacksburg, Virginia, the real value in unconventional events is finding local, like-minded mentors who can be mined for more than money. Baird points to the Rise of the Rest bus tour, which his organization participates in, and which is run by AOL co-founder Steve Case’s investment firm, Revolution.
It visits five unlikely cities in five days and invests hundreds of thousands in local startups. “The pitch event is what the media likes, but what actually delivers value is creating a platform where people can develop relationships they might not otherwise have,” Baird says.
Still, while Shark Tank may have contributed to the gamification of pitching events, it may not be improving the investing world’s track record. “The biggest problem in our innovation economy is we concentrate resources and funding in a few places and people — and the sharkification of the entrepreneurial funding landscape actually increases that concentration, rather than making it more inclusive,” says Baird, who tackles the issue in his book, The Innovation Blind Spot. Entrepreneurs are often rewarded for pizzazz over production. Meanwhile, huge deficiencies exist: Less than 5 percent of U.S. investments went to female founders in 2015 and less than 1 percent to companies led by African-Americans or Latinos.
The primacy of the pitch has become ubiquitous in other fields too, says Dodson, whose background is in marketing. “Nobody wants to watch a five-minute brand video anymore,” he says. “Even 30 seconds is ridiculously long. They want the five-second one. That’s what’s happening culturally, and the investment world is mirroring that.” The give-it-to-me-quick mindset can lead to unrealistic expectations, Cross says: Anybody expecting instant results will be disappointed. “It’s rare that somebody elbows their way to the front of the crowd at a pitch event and says, ‘Tell me what you need and I’ll write you a check.’”
At their best, though, unconventional pitching events can create a community for peer review as well as lead to investment, which was the outcome for Dodson and Mayer. In Shark Tank, Mayer notes, “the conflict seems embedded in those relationships.” But at Peak Pitch, the pair were seeking a partner. They received one, months later, when they secured an initial $400,000 investment from FreshTracks Capital, which Cross says has discovered six of its 43 funded companies from the chairlift event. Now Mamava’s lactation pods are in hundreds of locations nationwide, including airports in New York and the Bay Area, hospitals in Georgia and Louisiana, and stadiums from Fenway in Boston to Mile High in Denver. “In a way, it’s harder than Silicon Valley,” Dodson says, “but in a way easier. People are rooting for you here.”
* Correction: Village Capital participated in Steve Case’s Rise of the Rest Tour, but it does not help run it.