By Matt Pross, Staff Writer
As part of its Startup Project, TEQ magazine has embedded itself at local startup incubators to gain firsthand experience into the world of tech entrepreneurs working to get companies off of the ground. I attended Interim Demo Day at AlphaLab on March 5 and listened to several investor pitches and subsequent feedback from the crowd, which included AlphaLab alumni, experienced entrepreneurs who have received funding in the past, and executives from Innovation Works, the most active seed stage investor in the country. Here are some thoughts from my experience at Interim Demo Day:
After sitting through Interim Demo Day over at the AlphaLab startup incubator on the South Side, I’m very glad that I haven’t attempted to start a company. Before I was privy to the entrepreneurs’ practice pitches and the subsequent feedback from the mentor-packed audience, I just didn’t know the types of questions investors ask themselves before they pull the trigger on a relatively high-risk venture investment.
After getting about 15 minutes to present their pitch, each entrepreneur fielded questions like:
1) Who is your target customer(s)?
2) What is your exact market focus?
3) Do you have any customers yet?
The mentors in the crowd really forced the novice entrepreneurs to think how an investor thinks. In hindsight it makes perfect sense: Why would a savvy investor throw money at an idea or an entrepreneur without a proper level of vetting?
Besides the necessary practice each entrepreneur gained from the Interim Demo Day experience, I’m sure that each one took away at least one piece of invaluable advice from the mentors’ feedback. In particular, I remembered one mentor’s comments as being especially eye-opening. He said pretty much the same thing to each entrepreneur that presented: “What pain does your solution solve?” and “Is your product a nice to have or a ‘gotta’ have?” After listening to this feedback, it was quite clear to me the kinds of questions investors ask themselves before pulling out the checkbook. Both of these questions must be easily answered for an idea to be fundable. That’s reality. Consumers and investors alike will pay for something that solves an important problem. If someone is not willing to pay for a product or service no matter how cool the technology behind it may be, it does not have market value.
With the real Demo Day less than two months away (it’s tentatively slated for either May 14 or 15), I’m sure all of the entrepreneurs in this spring’s AlphaLab class are hard at work honing their value propositions and investor presentations to succinctly answer the tough questions mentioned above. Exercises like Interim Demo Day are a great example of the value that incubator programs like AlphaLab add to Pittsburgh’s burgeoning startup ecosystem. Allowing entrepreneurs to practice and receive feedback before they have to pitch to investors could mean the difference between a successful startup and a nice idea that was never funded. With the national venture capital community paying more and more attention to Pittsburgh’s growing startup scene, having more fundable companies in the marketplace can only help our technology industry and regional economy.