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Ask Slashdot: How Do You Sell an Algorithm To Venture Capitalists?
dryriver writes "Dear Slashdotters, We are a two man crew who have spent almost three years developing a video processing algorithm that 'upgrades' the visual quality of digital video footage. We take video footage that is "of average quality" — think an amateur shooting on a cheap digital camcorder or on a smartphone camera — and use various mathematical tricks we have developed to make the footage look better — optically sharper, better lit, more vivid colours, improved contrast, enhanced sense of three-dimensionality and of 'being-there realism.' In about a month, we will be presenting our algorithm to some venture capitalists. We have the obligatory before-and-after video demos prepared for this, of course. But there will also be a short PowerPoint presentation where we explain our tech in some detail. Now here is our main question: What, in your opinion, should we — or indeed should we NOT — put in the PowerPoint presentation to impress a Venture Capitalist? Should we talk about how we developed the algorithm at all — what kind of R&D and testing was involved? Should we try to walk the VCs through how our algorithm works under the hood — simplified a bit for a 'non-engineer' audience of course? Or should we stick to talking about market potential, marketing strategy & money-related stuff only? If you were in our shoes — presenting a digital video-quality improvement technology to professional VCs — what would and would you not put in your PowerPoint? Any advice on this from Slashdotters with some experience would be most welcome!"
how it will make them money.
Know your audience, that's for sure. As far as how much detail to let them in on, send me the copy of the details and I'll get back to you.
I would focus your presentation on how the VCs would get ROI from your technology, in other words: what's in it for them. For example, what do you see being the primary use for this technology? Who would it benefit and how? How is this an improvement over what is already available? Etc.
That's the way it's going to end anyway. At least this way you save time, money, hassle, and the anguish of actually thinking they give a shit about your success.
VC: "Ideas are like assholes, everybody has one and I'm going to get as much money out of selling yours as I can."
Don't give your future away by taking money from VCs for this. It sounds like you have enough already to write a small standalone processor for video files and charge money for it. You give up a lot - everything if you're not careful - when you do a deal with VCs. If you can build a company with any profits at all on your own, do it.
Do not go into too much internal detail. Focus on visualization of outputs. Make a powerpoint with these visualizations that walk through some real world problems. Get your elevator pitch down pat. Profit!
1. Do you have Patents on the Technology?
2. What kind of money are people/corporations willing to pay for this type of video enhancement?
3. How big is the market? (e.g. Can you deploy the technology in a smartphone app, or does it require specialized hardware)
You don't sell technology to venture capitalists, you sell a business plan with well done research and projections.
Or, alternatively, you should start by licensing the technology to those interested first (figure out who) and create a steady income from there.
Or create a product that end users might find useful directly, like an iOS app.
One example of successful business model based on an algorithm is elastique, which is used in pretty much all major audio and DJ apps.
Hope this info is useful!
It'll sell really fast if you include those features.
As people has said, know your audience and what they expect.
Watch a few episodes of “Shark Tank”. Its entertainment so don’t take it as gospel. But it does show a lot of people doing rookie mistakes. Such as talking about how big the market is and if we can only get a sliver.
Also, focus on making a clean presentation.
Make sure all of the programs you will be using are up and running prior to the presentation – don’t start the programs in the middle – you are just asking for problems. Turn off everything else – in particular things that pop up.
Little errors & inconsistences make it seem you have a half-baked product.
There is a fine line between confidence and arrogance, between insecurity and honesty (I am assuming your product is not 100% perfect yet). . Find that line before you go in.
Tell them broad strokes, not enough to figure it out. Remember that they're called Angel Investors because they can swoop in, take your idea, and do it themselves with their own money. Otherwise, most advice here is solid. They want to see how you develop it, what the exits are, and how much they can reasonably make.
If you can explain it in ways they can understand then its probably not worth much and if you do explain it they can share it with others.
You're really lucky you have an algo where they can see the effect, leave it like that.
They want a cash flow over time, which means:
1: Patent protection
2: A version 2,3,4,5, read up on Dolby Studios, they started decades ago doing the same thing but for hissy audio tape, still going N versions later on totally different media.
3: Get the word "mobile" in this. VCs are obsessed with mobile currently, I assume this will make phone pictures better ?
4: They want an exit strategy, is this going to be sold to join people's patent armouries or a firm they can float ?
5. Have you talked to Google, this sound like just what they might want for YouTube and to stop others getting it.
Dominic Connor,Quant Headhunter
Here's my take. As others have stated VC's are in this for money, thus you show them the business case and that incudes explaining the barrier to entry - why another 2 bright guys, suitably funded couldn't easily reproduce your efforts. Now my real advice is this: VC's are not interested in small play's, they want to put a significant chunk of money in, and take a large multiple on that back. What that means is they are interested in large $$ opportunities that may take some time to come to fruition ...and that involves plenty things that can go wrong along the way leaving you with nothing to show for it. You are 2 guys, you already have something you think is very impressive to show, you don't really need lots of capital to continue development, it's really just your time. Go shop this to the incumbents in the applicable spaces looking for an immediate sale, Adobe/Apple in authoring S/W, google/vimeo on the backend, go-pro/contour/canon/nikon etc etc on the consumer H/W side. What you are looking for is enough money for the 2 of you to have a nice 7 figure bank balance..which means sell it, go work for the buyer for a while, take the money now whilst there is no obvious competition or the market changes and minimize the risk. Don't hold out to be a bizzilionaire, the chances not matter how good it is are vanishingly small.
I've seen a whole lot of video enhancement 'algorithms', boxes, programs, etc. Not one of the press-button-get-video variants have actually improved video quality, and almost universally they just make things worse; more often than not, they just shove up contrast and saturation and add an unsharp mask, but some are genuinely innovative in their uglyness (e.g. the dreaded WarpSharp, Q-Tec's BD butchery, etc). The vast majority of 'easy to use' variants, with a few sliders to move about or checkboxes to flip, are equally ineffective.
Do you have any examples of your 'algorithm' that show it to be something other than run-of-the-mill?
Just a thought if a lot of people are going to benefit from your algorithm then you could think about having a kickstarter campain to open source the code. With the amount you are looking to get from the VC's. Maybe with stretch goals of a iPad and Android version. You'll get money up front and might also be able to license it to somebody that doesn't like either (lgpl or gpl) depending on the strategy you choose. You could try having the opportunity of corporate sponsorship and trying to contact Google they are probably going to love having something that makes Youtube videos look better. It would trow some money your way because we need more funding of R&D through crowdsourcing. And remember to have some accessories for people like T-shirts.
(1) The team is most important. Have you assembled a team with the necessary experience to convert an idea into a successful product. VCs mostly invest in people, not so much ideas. Ideas are plentiful, people that can ***deliver*** are not.
(2) The idea is of secondary importance, but it must be something that can be protected by ***patents*** and/or other intellectual property. It does not matter how good the idea is if it is something that can be replicated by others.
We have the obligatory before-and-after video demos prepared for this, of course. But there will also be a short PowerPoint presentation where we explain our tech in some detail. Now here is our main question: What, in your opinion, should we — or indeed should we NOT — put in the PowerPoint presentation to impress a Venture Capitalist?
Give them an overview of the process. High light the points that can be protected by ***patents*** and other forms of relevant intellectual property.
Should we talk about how we developed the algorithm at all — what kind of R&D and testing was involved? Should we try to walk the VCs through how our algorithm works under the hood — simplified a bit for a 'non-engineer' audience of course?
They will not care beyond determining that the algorithm is in fact ***your creation*** and not related to previous employment or other potential conflicts.
Or should we stick to talking about market potential, marketing strategy & money-related stuff only?
They both care and don't care about this. They care in the context of determining if you are being realistic. Have three sets of numbers. One covering the scenario if things go as planned, another more pessimistic one, and another more optimistic one. The pessimistic one should not lose money.
That said, they will not trust your numbers. They will do their own research and do their own numbers. Do not let this deter you from doing the best job you can on your numbers. You are being ***tested***.
Are you telling me you can't acquire 80's pr0n, run it through this algorithm, and then make a bundle reselling it. Recent reports say this is more profitable that Netflix and prime. This should give enough funding to do whatever else is wanted.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
I've worked directly with a lot of VCs and private equity guys.
First question you have to ask is "do I really want VC money?" Make no bones about it, VCs will scalp you. They will take control of the company and there is a good chance you will be pushed out. (No you will not retain control ala Mark Zuckerberg in all likelihood) Furthermore the cost of capital from a VC is VERY VERY high. They expect a big return on their investment. If you can fund your company with Angel investors, loans, friends and family, etc, then do that. You'll come out better in the long run most likely. Most people that think they want VC money really don't. I know it's a bit of a cultural thing in Silicon Valley but even the VCs will tell you that you don't want their money if you don't need it.
If you decide that VC money is still the best way to go then yes they will want to see the technical details of your product. They will do considerable due diligence regarding it and they will call in experts they trust to look it over. However you don't need to get carried away with technical details in the initial meetings. What they are going to be looking for is a business model around the technology that they can develop. VCs aren't typically going to want to develop the business themselves - they want to invest in people who are going to develop the business. They may bring in their own people to help or take over if needed. So what you need is to be able to explain very concisely who you are and why you are worth investing in, why this technology matters, what the market opportunity is, who the competition is and how you will overcome them, and how the VCs will be able to get a return on their investment. You should be able to say all of the above in 60 seconds or less.
Don't assume your technology is unique from a business standpoint - it probably isn't. There will be competing products out there and you'll need to explain why your technology is special and more importantly why you and your team are especially positioned to take advantage of whatever market opportunity you see.
Frankly VCs will be less interested in the technical details than in is your business plan and especially in the team you have around you to execute said business plan. VCs really don't invest as much in technology as they do in the people who are trying to bring that technology to market. They are investing in YOU more than anything else. Tell them about your leadership team. Show them your team has a track record of bringing technologies to market successfully. Guys like Elon Musk can raise money for almost anything because of their track record. If you don't have a track record of building successful businesses, get people on board who do BEFORE you try to talk to VCs. Get a team of advisors who can poke holes in your business plan and help you get on the road to success.
Finally, VCs tend to specialize. Odds are most won't be interested in what you have. Kind of like publishers you have to look around for the right one and you'll probably get a lot of doors (politely) slammed in your face. The VC community is a small one and they tend to all know each other. Don't be rude or talk smack about anyone else because word will get around.
As others have said, 'It is all about how the business makes cash.'
Who buys it, why and for how much money?
Is it an online processing via a web portal & FTP or does the customer license for use on a PC/Mac/Linux?
Bo.
Don't go the VC route: there is enough slashdot anecdotal evidence to make it clear that being impoverished, enslaved, and destroyed is a repeatable experiment.
Don't take it to Apple: The Stoltzfus' (who invented Rosetta Stone) tried that with a previous product, and their failure and loss -- and the point that you never heard of the previous loss are an object lesson.
My advice? Contact the Stoltzfus' in Harrisonburg Va, and ask them to give advice (as a mentor). They might agree. Then give your basic presentation to them. Then listen to the advice, and market the idea yourselves.
Correct Horse Battery Staple: 72 bits of entropy. Enter "Correct H" into google. When it generates the phrase, that's