Raising Venture Capital for your Media Startup

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– Melinda Wittstock, Founder CEO, verifeed.com

Originally presented at the event, "Women Media Entrepreneurs - Making New Ideas Happen," on Sept. 12 at the National Press Club, Washington, D.C.

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  • OK we’re going to get everyone energized. Stand up if you are an entrepreneur. Stand up if this is your first business? Second? Third? Stand up if you’ve bootstrapped? Maxed credit cards? Stand up if you’ve raised angel money? Stand up if you’ve raised venture capital? Stand up if you’ve had a ‘successful’ exit – an acquisition or IPO? Stand up if you’ve closed a business down? Stand up if you think entrepreneurship is glamorous!
  • So who am I, and how can I help? My grandmother was the first to call me disruptive at age 5 when I landed my first $100 in revenue. Got neighbors to pre-pay for my “show”. I’ve done a lot of things in my life but nothing is as exhilarating as the roller-coaster ride of innovation and learning otherwise known as founding a technology business in need of venture capital. So I’m going to talk about that today from the perspective of all the mistakes I’ve made a long the way, with the hope that you don’t have to make them! Verifeed is my third business, and I’ve had my share of hard knocks – see there it is, MBA from the School of Hard Knocks.
  • In a moment I’m going to do my top 10 don’ts… and explain how we evolved and what I learned, but first I want to put my company in context … with a short ‘elevator pitch’ . And during that pitch, I want you to think like an investor. Assuming you have a lot of money, imagine getting out your checkbook How do you feel?
  • Seriously, think about what it feels like to write a check for $100,000, $1m, $10m. Flutter in your tummy? Imagine writing a check to yourself for your own business. Is it easy? Hard? Why?Also think about comps in your industry that dictate present value and your likely multiple at exit (how many times your EBITDA at 3-5 years. Can you be a $100m revenue business with 40%+ EBITDA? What are exits in your industry looking like? How do you value what you do? Now think about how much control you want? Where do you want to be in 5 years? In control? Or with 5% of your baby? Do you want 75% of a small pie or 5% of a big pie?
  • But first, I’m going to give you our VERY short pitch … and you tell me if you think I hit all the things investors want to know:--If information had a ‘gold standard’ what would it be?Think of what makes information valuable to you and your company. It’s got to beuseful. So it needs to be relevant. Accurate. From a trusted source. All in the moment.At Verifeed we mine for ‘information gold’ by filtering social streams in real time … to provide enterprises with actionable and trusted social intelligence. Why are we different from all the other social listening / sentiment platforms out there? We’re unique in replicating with algorithms the shoe-leather investigative and analytical processes of the best journalists to put information in context, qualify source reputation and more… to be first and right.
  • Think about it. 300 billion gigabytes of social data, three times the grains of sand on earth doubling every two years.
  • No wonder a lot of businesses and brands feel like this. Most companies have no idea how to harness Social Data in a meaningful way to derive valuable insights in an age of Infobesity. They know they need a clearer signal of what’s actionable but have many don’t know where to start.
  • Our mission is to make sense of the world’s social conversations to connect the right people to the right information in the right moment – for enterprises that need to be::: First to know – and right – like hedge funds, day traders, journalists.:: Closer to their customers like consumer brands who need to source fresh insights, identify and reward ambassadors, engage people around contextual social content:: Focused on driving traffic, time on site and other metrics to monetize content such as broadcasters and publishers
  • Verifeed has massive addressable markets in US…and globally. $1bn is now being spent on social software, a spend which has a growth trajectory at pace with exponential growth in social data itself. Our first targets are the massive multimillion dollar marketing budgets of leading brands – consumer goods, airlines and financial institutions among them. Social intelligence will claim growing slices of those budgets as mobile and social changes advertising into ‘word of mouth’ social marketing, reciprocal connection and contextual content creation. Already the content marketing spend in 2013 is $118 bn.
  • How do we make money? Recurring revenue from a yearly platform license for proprietary software and algorithms that parse the data … and the real time intelligence and reporting that results. The annual deals range from $60K to $210K. We scale budget by budget within companies, and penetrate verticals one by one.
  • Our team has deep domain expertise across our target markets and core technology – and we how to innovate and drive revenue and results. Founder & CEO Melinda Wittstock’s grandmother was first to call her disruptive at age 5 when she earned my first $100 door-to-door demanding pre-payment. She’s a serial media-tech entrepreneur, proven executive and award-winning journalist - creating content and driving revenue/ratings/traffic (Times, FT, CNBC, ABC, NPR, CNC, BBC),and building businesses.Verifeed is her third company. Verifeed has a top notch tech team led by Chief Data Architect Paul Herzog (Nuance, JP Morgan Chase, MacSpeech, NBA, Cendant) and data scientist Ronald Zhangand access to top Ruby on Rails, iOS and other developers. A second data scientist, product manager and BD / Sales ‘growth hacker’ and closer are identified and ready to join immediately.Hands-on advisors Duncan Work (fmr Chief Scientist, LinkedIn), David Lawrence, (enterprise data architect Harvard, Gartner, ProFlowers, State St Bank and others), Peter Harrison (fmr CEO Global Logic),Matt Prohaska who has sold or managed teams selling $2.5bn in digital advertising and platform licensing deals from CNET in 1995 through AOL and the New York Times,Renee Lewis (software entrepreneur with multiple exits), Tim Berglund (data architect & chief trainer at Gitbub formerly of Mapquest and Intellidata who built Verifeed’s first algorithms).
  • We’ve done pilots and tested use cases for sports, veterans, weather, broadcaster’s second screens, PR crisis management and brand content marketing:Increasing traffic for a local NBC station around basketballFiltered tweets for compliance with Finra regulations for a financial services companyHelping a brand find potential customers (first Iams, now Lily’s Kitchen), a self-help group increase its mailing list, and a hiring platform identify the best and most relevant jobs on Twitter.We’re now negotiating a huge re-seller deal with Airguide to supply the world’s airlines, airports and others in the vertical with real time social intelligence reporting to guide marketing, passenger services and competitive research. One platform, many use cases.
  • And for the UK brand Lily’s Kitchen. We’re identifying influencers and customers ahead of their US launch next year.
  • These are some of the ‘influencers’ we identified with an early search using our platform: These folks were picked for a combination of # followers, # lists, #starred tweets, # RTs, and frequency of their postings.
  • One of our first customers is a recruitment platform – that uses our technology to connect the right people searching for jobs on Twitter to the right companies Tweeting about available positions.
  • Here’s what our platform looks like on More than Money Careers.
  • How are we different? Information is only valuable if you can trust it, and our algorithmic processes beat sentiment (which cannot discern intent let alone accuracy). Ours is a systems-oriented approach that replicates what investigative and analytical journalists do to discover game-changing, market moving and predictive stories : a mix of pattern recognition, source qualification and cumulative knowledge, separating commonalities from outliers, and cross-referencing or weighting outliers with source reputation, expertise, proximity (first hand or second hand account) and discerning agendas (who gains, who loses) by ‘gaming’ out a story. Verifeed’s algorithms and algorithmic roadmap leverage these processes. Here are just four ways in which we execute:Weighted expertise. Cross reference LinkedIn API with data mined from Twitter/Facebook and other social profiles to establish expertise relative to a user’s post – and assign a weight accordingly.Strength in numbers. Multiple sources in agreement strengthens the probability of accuracy. Our systems will detect ‘outliers’. For instance a one-off report like the hacked AP tweet would have been flagged as questionable, irrespective of the source: if a bomb had gone off in the White House there would have been a deafening number of tweets. First hand vs. second hand. Eyewitness reports are more likely to be true. We already dig into each tweet to see if it has a link or not, and dig into the meta data of the link to establish whether it is a first hand or second hand account. Geolocation will also be used to establish proximity to an event.Authenticity. Cross reference Tweet timeline and bio to see if person really is where they say they are, and how much expertise they have built in a topic area, including how much of a following they have.
  • So what’s our competitive advantage? to the sentiment and ‘social listening’ platforms out there like Radian6, Mass Relevance, and Crimson Hexagon for brands that want to know what people think about their products. There are alsotools like Hootsuiteto help companies ‘push out’ and manage their outbound messaging on social networks. Consumer-focused tools like Klout help identify ‘influencers’ to help companies amplify those messages and others like Storify to help editors curate social feeds manually for use in stories. Others like Datasift provide complex search filters and infographics for companies to search for contextual relevance, while Topsy focuses on indexing historic tweets for analysis and Dataminr provides early warning of market moving news/trends for financial services companies.Here’s how Verifeed’s Twitter search tool is CURRENTLY differentiated:Reduces redundant, off-topic, search resultsEliminates spam, viruses, porn, unauthenticated users, irrelevancies and repetitionAllows instant custom publication via widgets (soon SDK) Enables real-time engagement/recruitment of usersVerifeed soon adds a mobile SDK, additional social sources (Facebook, Instagram, Tumblr and others) and automates discovery around preferences and contextual content.And here’s what NONE of these other vendors selling into our target markets do that Verifeed is progressing quickly to achieve:Establish veracity (probabilities of accuracy) of posts in real timeEstablish credibility (reputation scoring) of sources cross-referenced/weighted with expertiseReal time discovery and customized publishing (web & mobile) of relevant, accurate conversations
  • Verifeed scales deal by deal, vertical by vertical, upsell by upsell, worldwide. This is a $100mm+ revenue company in 5 years. Social software / data currently has a multiple of 6x-7x Ebitda at the 5 year point.
  • Verifeedsoft-launched the early Twitter platform in March. Within two weeks we’d built a pipeline of more than 260+ top companies. We spent the summer with early demos and pilots (and qualification of early adopter leads), incorporating customer feedback into our platform (enhancing user experience and analytics). We now convert pilots into paying customers with at least 10 paying customers by the year-end with monthly revenues targeted for $30K monthly by January.
  • We want to speed our success! Verifeed seeks funding right now support sales, marketing, data/hosting costs and platform enhancement engineers as we close early revenue. Current burn is $30K per month. We can sustain at current pace for 4 months with $150K – and can progress faster to grow revenue with $500K or more right now. For example, $500K would allow us to hire a sales ‘growth hacker’ to help negotiate/close deals, a Product Manager, and several more data engineer and part time design/presentation layer freelancers – to result in $30K MRR by January 2014, upon which we can sustain if it takes us longer to close a Series A than January 2014 target date. Our objective is to significantly increase valuation between now and Series A.
  • Why Verifeed? It’s scalable, high margin, and game changing.One platform, multiple large addressable markets, a great team and global reach. It’s win-win-win for partners, Verifeed and the right investors at the right time. Thank you.
  • So, each of my don’ts, I’m embarrassed to say, is something I did (and learned not to do ever again!)
  • No matter how great your idea is, long gone are the days when VCs – even angels – back an idea. Unless they are your family and BFFs. (By the way, that’s how it needs to start, and convincing your friends and family to invest is part of “traction”. It shows you can raise money, be persuasive, sell.
  • Ah, the chicken and the egg.
  • They want to know about your competition, your defensible secret sauce, that you can scale. That you have the right team, expertise.
  • Raising Venture Capital for your Media Startup

    1. 1. Trusted social intelligence for the enterprise Melinda Wittstock @Veriate @NewsiTnews
    2. 2. (and what happens when you don’t ) How to raise millions in VC dough … …and live happily ever after
    3. 3. (and perpetual fundraiser) Melinda Wittstock Serial Entrepreneur Award-winning Journalist Media-Tech Exec Social Media Maven Mother of 2 (plus a dog) MBA, SHK So how can I help?
    4. 4. Brands WHAT NOT TO DO: MY TOP 10 DON’TS
    5. 5. a Brands A little early tip for all entrepreneurs… THINK LIKE AN INVESTOR (and do the math)
    6. 6. Trusted social intelligence for the enterprise
    7. 7. …and its growing faster than Moore’s Law. Think about it. Brands THE AMOUNT OF DATA CREATED ON TWITTER & FACEBOOK TODAY IS MORE THAN THE DATA BEING CREATED ON THE REST OF THE WEB.
    8. 8. make better business decisions engage with contextual content identify and reward customers, sources, ambassadors Our mission at Verifeed To make sense of the world’s social conversations so enterprises can:
    9. 9. Why Verifeed is massively scalable Brands Publishers Financial $100 Bn US News Publishing & Broadcasting $1Bn+ Social software spend (Growing as fast as the data itself) Gartner, 2013 $1.3 Trillion US Financial Services $10 Bn Financial Ad spend 2012 $432 Bn US Consumer Goods $118 Bn Content marketing spend, 2013
    10. 10. How Verifeed makes money B2B Platform Licensing Enterprises pay recurring monthly fees on annual contracts with pricing tiers based on: ―Data usage ―Social sources ―Service level
    11. 11. Eliot BergsonTim Berglund Peter Harrison Renee Lewis Duncan WorkMatt ProhaskaDavid Lawrence Why we’re the right team to execute Paul Herzog Chief Architect Melinda Wittstock Founder & CEO ‘Hands on’ advisors BD/Sales ‘Growth Hacker’ Data Scientists, Product Manager Identified
    12. 12. Use Cases & Metrics Publishing: March Madness Challenge: Boost traffic, time on site Action: Publish relevant Tweets from/about the players and coaches on NBC TV affiliate Result: Time spent up from 10 to 26 seconds, Twitter referrals up 129% Brands: Dog Food Challenge: Find US customers/influencers Action: Filter Tweets about UK luxury brand & competitor products, consumer attitudes Result: Ambassadors identified; ‘intel’ guiding US launch marketing strategy Financial: Compliance Challenge: Assure Tweets are compliant with FINRA Action: Source and parse market-moving news for reliability & exclude Tweets with investment advice to eliminate liability. Result: Verifeed technology delivered 98% FINRA compliance
    13. 13. Verifeed: Brands Lily’s Kitchen Goal:  Identify influencers and ‘early adopters’ in U.S. market (focus NYC, CT, NJ) ahead of 2014 launch  Obtain critical ‘intelligence’ to guide marketing efforts Convert into paying customers Verifeed Platform:  Identify and qualify targeted ‘WOM’ influencers & customers  Capture key insights into pet owners’ motivations, desires, behaviors to guide launch marketing strategy in the US Q1/14  Enable direct interaction with targeted users & custom publishing to engage, reward and convert into customers
    14. 14. Pet Influencers on Twitter
    15. 15. Verifeed: Recruitment MTM Careers Goal:  Connect the right people to the right jobs via Twitter  Improve service to both job-seekers and employers to increase revenue Verifeed Platform:  Identify all relevant job ads on Twitter  Identify all people Tweeting about specific jobs/sectors  Match specific job ads to relevant job seekers by industry and job title  Capture key insights into job seekers and employer in the clean tech and ethical investing industries  Enable direct interaction with targeted users & custom publishing to engage, reward and convert into customers
    16. 16. How Verifeed IP is differentiated Verifeed’s algorithms and automated processes uniquely replicate what investigative and analytical journalists do to: — Identify patterns — Put developments in context — Qualify source reputation and expertise
    17. 17. Uncovers credibility of influencers Eliminates redundant, off-topic, search results Allows instant custom publication Enables real-time engagement/recruitment of users 100% Twitter fire hose, complex filters Soon automates discovery/contextual search Competitive Differentiation Twitter API Limited to 5% fire-hose & single-term searches by hashtag or handle, no engagement tools, analytics Social media management Twitter search engines Influencer assessment Broad social data search/analytics Social management dashboards, mediocre Twitter search, no source reputation/accuracy filters Focused on Twitter brand monitoring only, not content Focused on user influence (not credibility or expertise); not intended for search Complex search filters, analytics, dashboards; no veracity / reputation emphasis; price point too high Historic Twitter search Early warning for market moving news/trends
    18. 18. How Verifeed forces global growth Beach-heads first US verticals Up-sell with more social sources / data & features Increase market penetration Grow globally Sports Brands Add verticals Hiring Publishing Politics Financial
    19. 19. Timeline to Stage Execution ― Debuted 2013 SXSW ― Grew pipeline to 260+ in 2 weeks ― 62% wanted next steps post SXSW Market Validation ― Prove metrics ― Test use cases ― Find early adopters ― Incorporate customer feedback ― Average of 9 demo requests per day Product Paying Partners ― Convert pilots to charter revenue ― New use cases ― Up-sell new features ― Automated contextual alerts/discovery ― Add social sources ― Mobile SDK ― Enhance algorithms Platform Growth ― Expand sales, biz dev, product team ― Expand into next verticals ― Full price point ― Expand reach & revenue within each company ― Enhance ‘fact check’ algorithms ― Ongoing UX/UI improvements ― Reputation scoring MARCH 2013 PRESENT – 3Q-4Q 2013 1Q 2014 ―-Enhance UX/UI ― Expert scoring ― Automated @mention recruitment ― Automated pre-filled search Pilot Programs Product Product
    20. 20. Hire ‘Growth Hacker’/Deal Closer Engineers/Product Manager Support Data Scientist(s) Support Q4/13-Q1/14 Tech Roadmap Data /Hosting Costs Marketing/Sales Investment Sought $30K Monthly Revenue Jan 14 $5mm Run Rate Q1/15 $92mm Annual 2017 Q4/13 Q1/14 Enhance Reputation scoring, pattern recognition & other algorithms; UX/design; automated adaptive discovery Mobile X-Platform/SDK Social sources Expand / Scale BD, Sales, Engineers $500K+ Bridge $3.5mm+ Series A
    21. 21. Financials: Five-Year Projected 2012 2013 2014 2015 2016 2017 # Enterprise Deals Recurring Fees Ad Revenue Share TOTAL REVENUE Cogs Operating / Sales Gross Margin EBITDA Margin EBITDA $166k $163k ($329k) 9 $42.5K $42.5K $377k $389k ($711k) 47 $1.8mm $153K $1.9mm $2.3mm $2.6mm (21%) ($2.9mm) 175 $9.3mm $1.1mm $10.5mm $4.4mm $6.1mm 56% (1%) ($52k) 456 $28mm $6.2mm $34mm $10.3mm $12.5mm 70% 33% $11.8mm 776 $75mm $20mm $92mm $18.4mm $19.9mm 78% 54% $44.8mm Cash positive Q2/15
    22. 22. Thank you Melinda Wittstock | CEO & Founder 202 274 1479 Melinda @ Verifeed.com Twitter @Veriate Demo at Verifeed.com Trusted social intelligence for the enterprise
    23. 23. Brands WHAT NOT TO DO: MY TOP 10 DON’TS
    24. 24. $30K monthly revenue Customer Trials Proving Use Cases & Metrics Yahoo!’s Marissa Mayer: “Revolutionizing social media with a differentiated solution” Our evolution… $100K Founder & Family Nov/13-Feb/14Mar/12 Sept-Oct/12 Mar/13 First Revenue Jul/13 Sept/13 $3.5mm+ Series A Platform Enhancement & Sales $500K Equity Round ($3mm pre) 2,0 iPhone B2B platform debuts at SXSW Pipeline 260+ rebranding $316K Angel Convertible
    25. 25. Don’t Avoid mistakes 10. (DO learn from them!)
    26. 26. Don’t Assume the goal posts won’t shift 9. (What you need to prove)
    27. 27. Don’t Assume you can raise money when you need it 8. Ask for it when you have plenty …
    28. 28. Don’t Assume you can control everything 7. Timing matters & a lot is beyond your control
    29. 29. Don’t Hire employees 6. You want ‘believers’ with skin in the game (who will sweat it out with you when cash is running out)
    30. 30. Don’t Put fundraising ahead of sales 5. Investors want to know someone somewhere will pay you for something
    31. 31. Don’t Assume investors will believe your numbers 4. They won’t and you shouldn’t either
    32. 32. Don’t Spend anything you don’t absolutely need 3. Be frugal and conserve cash
    33. 33. Don’t Talk only about how cool your product is 2. Investors only care about how much money it will make them and when
    34. 34. Don’t Know it all. 1. Why ‘teachable’ matters
    35. 35. Don’t Don’t assume VC is your path. OK, there’s one more... Will you have $200m revenue in 5 years?
    36. 36. Don’t Do it just to get rich. OK,and one last thought... Most entrepreneurs don’t. (If you want to live on a beach, do it now!)
    37. 37. Thank you Melinda Wittstock | CEO & Founder 202 274 1479 Melinda @ Verifeed.com Twitter @Veriate @NewsiTnews Demo at Verifeed.com

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