Founders of start-up technology firms would probably like to spend all their time on the cutting edge, developing revolutionary products and services that might change the world. But before young companies can become the next Microsoft or Sun Microsystems, they need venture capital to help finance their ideas and pay the bills. Without such support, fledgling companies can quickly falter.
For the last six weeks, a group of 15 local high-tech start-ups has been preparing for the fourth annual Southern California Technology Venture Forum, learning how to pass the hat with finesse.
Although many of the participants have had years of experience at top-flight companies, once they founded their own firms they discovered they were in need of advice on how to appeal for private financing.
Simply asking for capital isn't enough. Executives of the 15 firms are learning that good presentation also pays off: Over the last three years, local start-ups participating in the program have raked in a combined $40 million in venture capital.
The start-ups involved in this year's venture capital forum, being held Thursday at the Biltmore Hotel, are hoping to score an average of $5 million each in backing.
The forum, which is sponsored by the Los Angeles Economic Development Corp. and the L.A. Regional Technology Alliance, is expected to draw about 350 potential investors who will decide whether to take a chance and buy a stake in the companies.
The 15 firms, chosen from more than 50 applicants, have been through a virtual entrepreneurs boot camp preparing for the event. Teamed with mentors, the executives have learned to pare down wordy speeches, simplify technical explanations and practice their charm and poise as they pitch their firms as viable investment opportunities.
"I tell them to focus on their strengths, on their management, their technology and the size of their market," said Karen Gier, a mentor and manager at accounting firm Coopers & Lybrand. "Without these three key things, it's not a good investment."
Persuading start-ups to attend prep school has been difficult at times.
"Historically, companies have been defensive, saying, 'I don't need this,' " said Gabriella Green, executive director of the Economic Development Corp. "They're so busy with the day-to-day. But at the end of the process, they're so grateful. They're much more focused."
Last Wednesday at the Los Angeles Area Chamber of Commerce office, the executives got a chance to hone their sales skills. They ran through a dress rehearsal, pitching their companies in 10-minute presentations. A panel of experts, including venture capitalists, weighed in with critiques. Participants were given advice--slow down, don't pace, use hand gestures--and asked to explain, "Why are you going to win?"
Toby Lenk, 36, founder of a Santa Monica online toy retailer, eToys, gave a spirited performance on the virtues of buying toys over the Internet that included a description of a parent's struggle to pull screaming children from a toy store.
Afterward, one panelist asked, "Is the profit really sustainable?"
Another noted: "You're tall. Try not to lean down over the mike."
But it was one woman's statement that drew nods and chuckles from around the room: "As a parent of two children in a two-parent working family, I welcome this."
Participants took the constructive criticism in stride.
"If they're not getting it, we'll change," vowed Alice Muntz, 44, president of Affinity Media, a Los Angeles software company that integrates information across computer platforms. Computer slides she used during her presentation, which included a horse-lion-dragon beast and a spaceship, both wowed and confused the panelists. She said she would explain the slides and her product in greater detail at the forum.
Presenters ranged from biotechnology firm Brain Drug Delivery System of Los Angeles to electronic instrument developer Hotz Interactive of Agoura Hills.
Hopes are high for good reviews Thursday.
"The mentors have been great. I'm trying to refine my business plan. I'm getting ready to be a winner," Muntz said with a laugh.