What almost every aspiring entrepreneur seeks is the opportunity to meet active investors, not only to pitch their own business, but to hear firsthand their insight about starting and building highly scalable businesses. On April 1, the Disruptive Technologists of NYC held a panel discussion at the Microsoft building in Times Square titled,Balancing a Cool Idea with Profitability, a timely topic in view of the current hot pursuit by entrepreneurs to start highly scalable ventures in the model of Uber and Airbnb. The panel comprised of very seasoned and successful investors and entrepreneurs addressed a range of questions, enjoying the opportunity to share many of their experiences, while dialoging with the audience.
Bruce Bachenheimer, a Clinical Professor of Management and Executive Director of theEntrepreneurship Lab at Pace University, moderated the discussion. The panelists were: Ed “Skip” McLaughlin, founder of four B2B companies, as well as an investor and author of the recently published book, “The Purpose of Profit: Secrets of a Successful Entrepreneur From StartUp to Exit”; Harry Edelson, an investment manager, venture capitalist, securities analyst and engineer who has invested in business valued from $1B to $80B; Thatcher Bell, an Investor-in-Residence at Cornell Tech who also serves on the Board of Directors of the NY Tech Meetup; and Patrick Freuler, the Founder and CEO of Audicus, a company that provides invisible, high-tech hearing aids at affordable prices.
As posed by moderator Bachenheimer on the issue of just focusing on the venture idea, two of the panelists attempted to provide a more balanced perspective.
Thatcher Bell stated, “Whatever it is that they’re producing at that time, whatever it is they’re building, whatever their product is, it’s not going to be a product that makes that company really large. Whatever it is, it’s gonna evolve. It’s gonna change and so, that is why the market is so important, why the team is so important.” His encouragement to access to the intended market in order to pivot to a more fine- tuned business model will improve the chances of a startup success.
Patrick Freuler furthered this by saying, “Market size is super important but, I think it’s also where the market is going. Is it a market that is inherently growing with stable growth dynamics or is it a market that’s on a downward trend?” He added, “When I talk about Audicus, I always mention the example of investing in an emerging customer segment, which is the aging, baby boomer segment that is moving online. If you look at the 50-70 year old demographic, there’s so much growth happening there in how they use and adopt the web. It’s a trend that’s only about to go up.”
During a discussion about Shark Tank, a reality TV entrepreneurship competition, Bachenheimer expressed the importance of the venture’s potential profitability when pitching to investors. Revenue or customer traction and profitability catch an investor’s more quickly than just a “cool” idea.
“The one thing that impresses me is that when the person making the pitch has this idea… [The judges ] don’t seem to be too thrilled with the idea or think it’s a cool idea. But then, if they ask about sales or profitability and the person does in fact have real sales and decent profitability, they’re like sharks in a feeding frenzy. They want to be part of it,” said Bachenheimer. “Even when they didn’t think the idea was cool, when they’re able to prove to them that there’s real traction, real sales and real profit; they were very interested.”
Entrepreneur and investor McLaughlin countered some of the panel criticism about Shark Tank, feeling that it “gets the conversation going.” That conversation has brought opportunities to a greater diversity of entrepreneurs, noting that there are more women entrepreneurs and they are tapping into more sources for investor funding.
Investor Edelson, however, offered a cautionary tone to the discussion when it moved into crowdfunding. In his view the end of the bull market may come in the latter half of the year. “Things go down, as well as up,” he stated. He foresees that an economic downturn will change investor thinking that may place pressure on entrepreneurs to give a return on investment””that is not occurring right now as investors are being more patient because the economy is flourishing.
