Brrrrr....
Today, I saw the president of this Ajax, Ontario- based SEO firm on ROBtv making an "elevator pitch" to some VC's asking for $500,000 to buy pencil sharpeners and hire more people. This is sort of a torture show where the host and the VC's sound unimpressed (with reason) and lob inconvenient questions at the would-be recipients of funding. Neat that the Canadian media are just getting all fired up about the venture capital phenomenon now... the week after Red Herring shuts down. It was like living in a time warp! And most uncomfortable to watch.
Nearly as unsettling was the prez of GotMarketing.com - an email marketing firm - making a similar pitch, though for a significantly larger sum of money. Problem is, when you go looking for firms that already went down this path (I happened to go looking for Sandy Bay Networks today - they received $6.5 million in venture funding in 2000, but like MessageMedia, FloNetworks, et al., they just didn't have the scale, product quality, or profit margins to justify such fast growth, and are no longer in business), you find a lot of broken dreams and burned VC's. Is GotMarketing different? I highly doubt it. All the arguments against making a business out of sending other people's email were waged long ago against MessageMedia (a firm that Steve Harmon touted as the "next AT&T") when it was publicly traded. You could look it up.
I really don't know much about venture capital (in spite of reading, like everyone else, way too much about it during the boom). But to me, the "pitch" aspect of this process seems too focused on the story. But surely the best kind of story shouldn't be a story at all - it should be about a history of revenue growth and key accomplishments that would naturally lend themselves to further (but quicker) growth. VC's, it seems, don't want to be like banks - they don't want to fund safe businesses that have already turned a small profit, preferring to ask about burn rates and time to profitability. It makes you wonder, what kind of a world would we live in if VC's were a little more like bankers, and bankers took a few more risks?
Posted by Andrew Goodman
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