VC Pitch Reveals Keys to Assessing Business Ideas

Simulated entrepreneurial funding pitch – first for Global Alumni Reunion

26/10/2015 Munich

Pablo Graiver

Graiver’s TrialReach won a simulated 3.4 million euros at the Global Alumni Reunion, Munich / Photo: Edu Ferrer

Take three entrepreneurs in search of funding for their startups. Add two professional venture capitalists. Put them in front of a live audience of 1,000 international executives. And give them each the ability to award 20,000 euros to the startup of their choice.

These were the ingredients of a dynamic session at IESE’s Global Alumni Reunion held in Munich on October 17. The session, titled “Entrepreneurial Impact,” was moderated by Rob Johnson, a visiting professor in the Entrepreneurship Department at IESE and a successful entrepreneur and VC investor himself.

The three entrepreneurs were: Antonio Rami, co-founder of a foreign currency exchange platform called Kantox; Pablo Graiver, founder of a platform to match patients with clinical trials called TrialReach; and Michael Altendorf, co-founder of a personalized customer intelligence solutions provider called Adtelligence.

After pitching their businesses to the audience, each was questioned by two investors: Hendrik Brandis, of Earlybird Venture Capital; and Rainer Strohmenger, of Wellington Partners. They pressed the entrepreneurs on the robustness of their business models, their competitive advantage, their track records and their market positioning. Most important, they asked, “What differentiates you? Why should we invest in you?”

Three Key Criteria for Investors

In the process of conducting this Dragons’ Den-style experiment, the keys for assessing a business opportunity began to emerge. Brandis summarized the three criteria that were crucial for him:

1. The credibility of the team. As well as passion and energy, investors look for signs that the entrepreneur is able to exercise sound business judgment. A good entrepreneur is able to recognize patterns, make links and think laterally, seizing emerging opportunities that may lie outside the direct area of business they are currently active in.

2. The size of the opportunity. How large is the market? How large is the potential to innovate if the opportunity is more niche? Are there substitutes that will compete in the same space? Is the business model scalable?

3. The potential of the business model to create lock-in and network effects. Both investors insisted on this point, as revealed through the way they repeatedly questioned the entrepreneurs to prove that their business models were well-insulated from copycat competitors.

In addition, the investors urged European entrepreneurs to “think big,” explaining that all too often European entrepreneurs sold themselves short or only thought in terms of being the biggest fish in a little pond, rather than setting out to conquer the globe with game-changing business ideas, the way that their Silicon Valley counterparts were more likely to do.

In the end, audience members were invited to vote for the startup that appealed to them most, using a custom-built IESE GAR app that they had previously downloaded onto their phones. Each person had 20,000 virtual euros that they could award to one, two or all three ideas, in increments of 5,000 euros.

And the Winner Was…

The main winner of the real-time vote was Graiver’s TrialReach. The audience opted to put 3.4 million euros into his startup. Rami’s Kantox received 1.6 million euros, while Altendorf’s Adtelligence received 1.1 million euros.

Speaking afterward, Graiver – who already boasts the successful launch of the travel search engine – speculated that perhaps one of the reasons his startup attracted the most VC was because of its life-saving potential. Most clinical trials do not finish on time or at all, he explained. Clinicians frequently complain they never have enough people taking part in the trials necessary to bring new drugs to market, which represents not only a waste of time and money, but means the hope of treatment is that much farther away. TrialReach aims to solve that through its platform.

Having a solid, profitable business model that also aims to have a transformational impact on lives is certainly one of the features that IESE emphasizes through its educational programs, which may be why alumni leaned toward that venture.

“It was fun, interesting and exciting,” Graiver said of the IESE GAR session. “In fact, some new opportunities came up just in talking with people right after the session. We’re always interested in sharing experiences and telling people more about what we are doing.” Meanwhile, audience members and fellow entrepreneurs can learn from what Graiver is doing right so far.