Demo Day at The Pageant

Capital Innovators 2013 Demo Day Wrapup

Edit: Please join the discussion on YCombinator’s Hacker News site

On Wednesday I had the pleasure of attending the Capital Innovators Demo Day at The Pageant theater in St. Louis. Overall I was very impressed with the companies and pitches. Capital Innovators and its partners are doing a great job fostering the startup community in St. Louis. Kudos for making my hometown look good!

I’ll do my best here to summarize each company’s pitch, and I’d also like to share some information about the event sponsors.

The day opened with a brief welcome speech by Judy Sindecuse, CEO & Managing Partner of Capital Innovators, who also served as MC throughout the event. She mentioned a “5x return on capital” on the previous batch of CI companies and then quickly introduced the next speaker.

Joe Reagan, President & CEO of the St. Louis Regional Commerce and Growth Association (RCGA), gave a short introduction that focused on how startup companies and entrepreneurs help strengthen the local/regional economic base. He made one great point that really resonated with me: he asked why our area business leaders chose the name “Spirit of St. Louis” when they sponsored Lindbergh’s famous cross-Atlantic solo flight. Seemingly, at that time there must have been a spirit of innovation that permeated St. Louis- one that 1920s entrepreneurs recognized and wanted to accentuate. So, just what was it about STL in the 20s that gave it that spirit? And how can we rekindle that flame?

After the intro came the company pitches, 11 of them total, each limited to a maximum of ten minutes. I’m listing each company according to the order they presented in. Without further ado:

 

TrakBill logoTrakBill

Steve Marciniak of TrakBill was the first presenter to take stage. He entered to the music of “I’m Just a Bill” from Schoolhouse Rock!, the veritable 1970s animated TV series.

Fundamentally, TrakBill is a service that delivers automated updates about pending legislation [1]. Steve offered a compelling pitch about the difficulties faced by concerned citizens and big corporations keeping track of new legislation in Congress: “Every year over 150,000 bills are introduced,” Steve explained, and “Every day thousands of legislative actions take place”. The pitch included some screenshots from their existing app as well as screenshots of the frontend design changes they’re currently working on.

TrakBill closely monitors the status of proposed bills and offers legislative updates on a subscription basis. But their technology extends much further. They use a search algorithm “like Google does” to deem the relevance of each legislative action according to recency and other factors. Apparently TrakBill is capable of delivering this information to clients in “real time”, and pricing is structured based on the frequency of alerts. Customers can choose monthly, weekly, daily, hourly or even minute-to-minute updates.

Perhaps the most intriguing part, though, was TrakBill’s forecasting engine. By collecting data from a variety of sources (including historical voting records, demographics and public sentiment on social media), TrakBill offers to estimate the likelihood a particular bill will pass. Obviously it needs to be reliable, and that will probably take some tweaking over time, but I was fascinated.

Other interesting features included:

  • Cross-platform mobile app for alerts on-the-go
  • Event scheduler tracks political events/deadlines & sends reminders. The events feature syncs with popular calendar software.

TrakBill identified its core market among ‘Governmental Affairs’ firms, which I suppose means NGOs, lobbyists, et al. They also recognize a market in big corporations as well as individuals and citizens groups. Currently TrakBill offers a free “Basic” subscription that allows individuals to monitor up to three bills simultaneously. Their “Standard” and “Pro” premium plans are aimed at businesses and larger organizations. According to their numbers, TrakBill has a potential market size of 2.5M customers and operates in an existing $4.5B market.

Killer Feature:

The forecasting engine, for sure.

What I’d Consider Improving:

  • Stronger marketing emphasis on the forecasting
  • Since the status of legislation can have an influence on financial markets, I believe there may also be a market for TrakBill monitoring among financial services companies

 

IDC Projects logoIDC Projects

The second company to present was IDC Projects, a company that promises to make mobile advertising efficient. Cofounder John Dunlap took the stage and boldly proclaimed, “We are big data for mobile advertising.”

He went on to provide a little more about the company and its history. IDC Projects is a “post-revenue startup” with 11 full-time employees and a team that has worked on “more than 25 projects together”. Their biggest successes so far have been with Memory Matches, a mobile game, and Barcodescan, a mobile app for bar code scanning that has gained popularity.

Currently their biggest project is a targeted mobile advertising network that leverages location information. The pitch included a promising graph about the future of mobile advertising in general (currently a $2.68B market forecast to grow to $20B+ by 2016), but pointed out a potential problem for mobile ads: current platforms show ads that are obtrusive- and negatively perceived by consumers- because targeting is poor.

The new IDC Projects advertising platform improves targeting by incorporating location data. While they didn’t offer many details about the technology, I inferred this meant they were drawing on the GPS function to track user locations (?). Apparently they juxstapose this location data with other datasets, including Census information, to enable geotargeting with a high degree of specificity.

Right now the ad network has capacity to serve 300 ads per second, and they have a total ad inventory of 5,000 advertisers through a “partnership” with AdMobi. IDC Projects is seeking additional follow-on funding in order to optimize their platform to serve up to 10,000 ads per second. They see growth opportunities by expanding their inventory via further partnerships with other mobile ad networks.

Killer Feature:

Simplified geotargeting for advertisers

What I’d Consider Improving:

  • Well, this presentation left me with quite a few questions. Does the “location data” rely on access to GPS data from consumers’ phones? If so, how are they convincing consumers to consent to this level of tracking for advertising purposes? Likewise, does the location data require software be installed on mobile devices? If so, how do they get consumers to install their ad software? Location tracking seems to create serious privacy concerns that could hinder adoption.
  • Beyond that, I felt IDC Projects was perhaps too focused on building inventory through partnerships. Why not sell ads directly to advertisers / media buying agencies? From my perspective, direct ad sales could improve margins plus help trench them against potential competition.

 

BidRazor logoBidRazor

Mike Pulley, CEO & Cofounder of BidRazor, was third to present. The pitch started with a powerful personal anecdote: Mike explained how a turbulent housing market, combined with new regulations, had devastated his burgeoning real estate business. He was essentially forced out of real estate brokerage and wound up working as a home remodeling contractor. While he achieved success in the construction business, he also realized the process of quoting new bids was painfully slow and inefficient.

In Mike’s case, he was spending an inordinate amount of time bidding on new jobs while still completing other projects; juggling both responsibilities was time-consuming and stressful. BidRazor was born out of that frustration.

BidRazor is a mobile app contractors can use to streamline the bidding process. By standardizing the approach to preparing a quote, the app can apparently reduce the average time spent on a quote from 20 hours to just 2 hours (90% time savings). Plus, BidRazor automatically exports a thorough proposal with line-item details for every piece of material. *According to a separate conversion with Mike, BidRazor is ideal for general contractors, but works perfectly for the needs of specialized subcontractors (like painters, drywallers, etc.) too.

BidRazor also offers some persuasive benefits for homeowners, and for mortgage lenders who finance remodeling projects. Presently, there is no industry standard format for construction quotes. Bids from home remodeling contractors are notoriously unclear, often vague and are of questionable accuracy. Both homeowners and lenders love BidRazor-generated quotes because they offer tremendous detail and transparency for all parties.

While there are other mobile apps for construction bidding (and some giant construction firms have their own proprietary apps), competitive offerings are focused on specific fields such as engineering and architecture and most are way too complicated for the average contractor. BidRazor is aimed at smaller builders and fills the need of a large niche. The company has a “defined market” of $4.7B and a potential total serviceable market of over $12B. This market is forecast to grow as remodeling loans gain popularity (750% historical growth in FHA remodel loans from 2007-2012).

BidRazor also has a unique feature that sets it apart from other contractor apps. They have partnered with MagicPlan, the preeminent mobile app for creating home floor plans. MagicPlan integration offers contractors the ability to take accurate measurements using the camera built into their mobile device and rapidly generate floor plans. Compared to using a tape measure, the MagicPlan feature (included with the “Pro” version of BidRazor) reduces time spent bidding a new project even further.

In terms of traction, BidRazor is already available for purchase in the AppStore and has been achieving downloads. The app is already “changing the game” for small construction firms and is earning lots of positive reviews and user testimonials. BidRazor has also partnered with CCA Global Partners (a major wholesale supplier of construction materials and parent company of ProSource Floor Coverings) to market the app to an existing base of 300,000+ contractors.

Right now BidRazor is working on its new companion app, BuildRazor, which promises simplified project management for small and medium construction contractors.

Killer Feature:

MagicPlan automated floor plans are super slick- and a great product differentiator

What I’d Consider Improving:

  • I think adding an affiliate/referral program with paid commissions could extend marketing reach quite a bit. I think there is a strong opportunity for referral traffic.
  • If they haven’t already, I would add a feature so contractors can send a quote to their customer directly through the app (rather than need to export and then email later). That would allow them to have BidRazor branding on the quote, which would ultimately be seen by homeowners and lenders- providing more reach and more impressions.
  • This type of branding also creates the opportunity to offer a premium ‘White Label’ pricing tier which removes BidRazor branding.

 

The Sea App logoThe Sea App

Walter Harrison from The Sea App gave the fourth pitch. The Sea App strives to be “the Kayak.com of online shopping”, a consumer destination where, according to the company’s slogan, ‘Finding the Best Price Can be a Breeze!’. The Sea App takes its name from its underlying core technology; SEA is an acronym for Search Engine App.

The pitch went on to propose a core struggle in online shopping. On one side of the equation, there are merchants who wish to sell high volumes of merchandise at the lowest possible distribution cost. On the other side, consumers seek the lowest possible price that’s available from a reliable merchant. These competing goals create an opportunity for intermediaries who can efficiently, and profitably, bridge the connection between consumers and merchants at the time of sale. Likewise, aggregators like The Sea App have unique insight into the behavior of both buyers and sellers.

Right now TheSeaApp.com is up and running. Current revenues are divided into three categories: advertising accounts for 85% of revenue, affiliate commissions (from CPA programs) account for 7.5% of revenue, and the remaining 7.5% of revenue is generated from selling keyword search data back to merchants. In an early round of test marketing, TheSeaApp.com is achieving very high “acceptance rates” and already seeing double-digit monthly growth in merchant user signups.

While I’m not doing it justice, overall The Sea App had a quite impressive presentation, and their representative, Walter Harrison, was eloquent and composed. They also showed some revenue growth forecasts that seemed realistic and well-justified. Their final slide was a convincing look at the members of what appeared to be a very strong team.

Next up for The Sea App is an undertaking code-named “The Rubicon Project”. Walter intimated this is an internal optimization engine that promises to always deliver the highest possible CPM on their ad inventory. Their primary growth track is through advertiser and network partnerships.

Killer Feature:

I thought the biggest feature of this company was its current traction, as indicated by the rapid growth they reported.

What I’d Consider Improving:

  • After taking a quick tour of TheSeaApp.com, I was unimpressed with the results. There simply weren’t enough advertiser offers to be a comprehensive shopping destination. I would recommend they add inventory from additional partner networks as quickly as possible to expand product selection.
  • The search functions are awfully limited right now. There is no advanced search, advanced search operators do not work, there is no sorting, there are no user controls to customize the UI (like how many results to show on a page). Looks like the only parameter they support is a simple price range filter with minimum and maximum price values. I would recommend they follow suit of other search utilities & comparison shopping sites to extend the UI controls.
  • Right now search results pages offer very limited product information. Each listing is just a thumbnail, an item title and a price. There is no way to distinguish products based on availability, shipping cost, shipping options, etc. I would suggest providing shoppers with more product details so they may compare the results without leaving TheSeaApp.com site.
  • TheSeaApp.com could be criticized as a ‘thin affiliate site’. Since they don’t list merchant names alongside product listings, users must click through each product link if they want more details. That lack of transparency- and the encouragement to click through all their affiliate links- seems intentionally deceptive.
  • I also believe The Sea App needs a strong strategy for traffic acquisition. Merchant growth may be tremendous, but the startup company’s success also hinges on bringing consumer searchers to the site. Based on my SEO experience (and an inherent conflict of interest with Google’s own product search engine), I doubt TheSeaApp.com will receive inexpensive organic traffic through search engines. As a result, they will need to either a) spend a lot driving traffic to their site; or b) employ brilliant (or lucky) tactics to achieve viral user adoption through social media/ word-of-mouth… but that will be tricky without a more refined product.

 

adFREEQ logoadFREEQ

The fifth presentation was given by Peter Meng, CEO of adFREEQ, a company aiming to reinvigorate the classified ad market for newspaper publishers. Peter started his presentation with some staggering figures about publishers’ classified ad revenues dwindling in the digital age. Since 2000, newspaper classified ad sales have shrunk by more than 50%- from $19.2B to just $8.6B in 2012- as ads have increasingly moved online to places like Craigslist and eBay.

adFREEQ hopes to resurrect newspaper publishers’ former dominance by offering a seamless digital solution they can deploy quickly to integrate print and online ads. The adFREEQ product is described as a mobile-friendly, self-contained ‘ad portal’ that consolidates any newspaper’s classified advertising section. In the context of a mobile user experience, the ad portal fills the entire width of a smartphone screen. Readers who visit the newspaper site on a desktop or laptop computer, however, see the ad portal displayed as a website sidebar instead. Ads which appear in the portal are targeted contextually based on the content of the article or web page where the portal is displayed.

The adFREEQ portal serves several purposes. It’s the primary display mechanism for serving classified ads themselves, but it also includes self-service features for advertisers. Advertisers can compose and preview a new ad, schedule publication and pay for their ad- all within the portal and without ever leaving the current web page.

Plus, adFREEQ offers a number of other features:

  • Built-in user search feature
  • Built-in alert system (with notifications by SMS or email)
  • Link to open the portal in a full-screen window with infinite scrolling; ads are organized into a multi-column view, just like a real newspaper
  • Map integration so users can sort/filter ads based on location or proximity
  • Photo thumbnails link to full-size photos (photos open in modal overlay window)
  • User ‘collections’ allow shoppers to save and categorize ads for future reference/review

adFREEQ has already launched and is actively boarding new publishers. Compared to its competition, adFREEQ offers several key advantages for publishers:

  • FREE to deploy online classified ad platform
  • Installation & initial setup takes just 30 minutes
  • Publishers keep 70% of classified ad revenue

Right now adFREEQ is preparing to launch its product in China (Summer 2013) upon explicit invitation of Chinese authorities. Sounds like that deal could offer tremendous growth potential. My only real hesitation came when the pitch explained the current product is only compatible up to iOS5 and won’t be prepared to launch an iOS6 version until sometime in the “next few months”. Apple released iOS6 in September 2012, and rumors indicate iOS7 might be unveiled at Apple’s WWDC event next month.

Of all the presentations, adFREEQ did the best job delivering a clear call-to-action to investors. Currently they are seeking $500k for the purposes of extending their development runway an additional 18 months. After that, they do not anticipate any need for further financing.

Killer Feature:

Probably the ‘collections’ and alerts features that put shoppers in control of the experience. The pitch included a good real-world example of buying a used car through the classifieds. Typical shoppers already know the type of car they are looking for (usually just one or two makes, maybe a couple of different models, and within a specific range of model years). adFREEQ makes it easy for shoppers to compare all the available 2008 Ford Mustangs, for instance, based on parameters like price, mileage and distance. And shoppers can be notified when new ads appear. This focus on the user should help improve adoption and engagement among shoppers (although without emphasis it could go overlooked by publishers).

What I’d Consider Improving:

  • Speed up the development cycle; start preparing for iOS7 now
  • Since they’ll already have ad inventory from papers across the country, I think it makes sense to republish those same ads on one primary, nationwide site too. An adFREEQ-owned ‘megasite’ that consolidated all the ads at a single destination could compete directly with Craigslist for online local ads, and they’d already have advertisers. *Obviously this raises a conflict of interest since newspapers don’t want adFREEQ competing with them for traffic, but I think it could be resolved by offering publishers a substantial commission for new ads/ advertisers they refer.

 

Manufacturers Inventory logoManufacturers’ Inventory

Manufacturers’ Inventory cofounder Brian Kohlberg took the stage, ushered in by the music of “Money” by Pink Floyd, to give CI Demo Day’s sixth pitch. Brain started the presentation by explaining that in his experience as an industrial wholesale distributor, he and his partners were constantly faced with tough decisions on what to do with aging inventory. Their business, and many others, had shelves filled with idle, unmarketed inventory that was sitting dormant. In some cases, brand new (but older/ obsolete) items were simply thrown away in order to make room for new merchandise.

Dismayed by the prospect of throwing out perfectly good stuff, or at best to spend a lot of time and energy to recoup only a small fraction of the original cost, Brian and his team started Manufacturers’ Inventory (formerly Dead Inventory Management Systems) to make inventory liquidation more efficient.

Their solution is a worldwide industrial parts marketplace, built partly on the premise that one company’s trash may be a treasured commodity in some other part of the world. The pitch included a strong real-world example: imagine a big printing company upgrades its presses and no longer has any use for its stock of replacement parts built up over the years. The replacement parts inventory is virtually worthless to them. In some other state- or some other country- however, there might be a printing company with its production halted by lack of a specific component. With plant capacity at a standstill, the printer is willing to pay a healthy premium for the replacement parts needed to resume production.

By consolidating the market for older industrial goods, Manufacturers’ Inventory offers sellers a much better return compared to liquidation value (55-85% of original cost vs. a more typical 5% today). For buyers, their marketplace increases the availability of hard-to-source items and supplies. This seems to create a good win-win scenario for buyers and sellers and a massive opportunity for Manufacturers’ Inventory.

The company has also done a good job identifying and mitigating against potential objections that could hinder growth. For example, they recognized overseas delivery is complicated and expensive for sellers. So they handle international shipping on behalf of their clients to eliminate headaches for both sides of the transaction. Similarly, they know it’s critical that seller listing prices remain competitive. When sellers list a new item, the platform automatically searches for and displays the lowest available price online. That way sellers can make an informed decision and price aggressively to ensure faster liquidation. That same feature, in turn, helps Manufacturers’ Inventory by increasing the likelihood a sale will take place on their market.

Manufacturer’s Inventory estimates the market for industrial parts liquidation at $20B in the United States and a potential $200B/year worldwide. Currently their site is hosting more than $9 million worth of real inventory value uploaded by 20 sellers invited to participate in the beta testing. The primary unanswered questions, in my mind, were about their marketplace fees. What is their sales commission (a.k.a. the Rake)? Do they charge a fixed per-item listing fee (like eBay does)?

Killer Feature:

Dramatic improvement on liquidation value for sellers.

What I’d Consider Improving:

  • If they haven’t already, I would focus on some serious SEO optimizations (like adding Schema.org HTML5 microdata) to increase chances for organic search exposure. That could be a great, inexpensive source of user growth.
  • If they haven’t done so, this also sets up well for social media integration (i.e. auto post on seller’s Twitter/Facebook feeds when a new item is listed for sale)
  • I’d recommend giving sellers some tools to customize the look of their listings & item templates, just like eBay does

 

viewpoint logoViewpoint

After a brief intermission and a couple of sponsor presentations (see below), the stage was handed over to Curtis McCracken of Viewpoint.

Viewpoint is a simple-to-deploy mobile app for Microsoft SharePoint. For those not familiar, MS SharePoint is a multipurpose enterprise software product widely used for intranets, collaboration, project management, process management and dozens of other corporate IT systems. 80% of large enterprises use SharePoint, and there are more 150 million SharePoint user licenses have been sold worldwide.

However, for as many capabilities as SharePoint delivers, it is woefully inadequate for mobile device users. In many typical corporate scenarios, SharePoint is used to manage a LOT of data (such as document archives), and a diverse variety of different types of data. Loading all of that into the confines of a small mobile device screen becomes troublesome. At the same time, employees don’t normally need access to everything stored within SharePoint. Any single knowledge worker just needs access to a small, personalized portion of corporate data they are responsible for. That’s especially true when SharePoint is accessed from a mobile device.

Apple, in fact, recognized the mobile-friendly limitations of SharePoint and sought a solution. To Apple, SharePoint’s pervasiveness in big corporations combined with its lack of mobile support created a marketing setback: enterprise decision-makers are reluctant to purchase iPhones for their workforce if those expensive phones aren’t compatible with SharePoint. Apple knew they could sell more devices if they could figure out a way to bridge SharePoint support.

At the same time, and perhaps more importantly, employers are facing a situation where more and more staff are bringing their own mobile devices with them to work. Yet big enterprises are also wary of allowing employees to access SharePoint from a mobile device because of the sensitive nature of corporate data often stored on the SharePoint platform. Any mobile solution would need stringent security measures to prevent unauthorized access and meet regulatory compliance.

In its search for a fix, Apple came to Coolfire Solutions, a highly-respected mobile development firm based in St. Louis. Viewpoint is the direct result of that appeal from Apple; Viewpoint is a company spun out from Coolfire to focus specifically on creating the mobile software product Apple requested.

While “there have been other attempts to mobilize SharePoint,” Curtis McCracken told the Demo Day crowd he believes Viewpoint offers an innovative product with significant competitive advantage. Throughout the development process, the Viewpoint team has balanced the needs of business managers who demand security and cost efficiency with those of end-users who need functionality and a simple user interface. Viewpoint allows SharePoint users to customize their own “Tiles” which are visible in a mobile context while hiding less-important data in the background. And the entire system remains protected- even in the event of a lost or stolen phone- with rigorous security measures.

The widespread adoption of SharePoint and the popularity of the iPhone create a massive market for Viewpoint. Viewpoint anticipates strong distribution through its partnership with Apple and foresees additional growth opportunities by partnering with existing SharePoint consultants and IT process engineers. Their pitch offered a reasonable growth forecast that, based solely on their current sales pipeline, would reach 238,000 users by 2016 (yielding $8.5M annual revenue for Viewpoint). But, they emphasized, that only represents a tiny fraction of total SharePoint users.

Killer Feature:

Giant market of deep-pocketed customers

What I’d Consider Improving:

  • Beyond SharePoint consultants, there are also partnership opportunities with other SharePoint service providers like hosting companies (including my former employer, Fpweb.net)
  • If they’re not already doing so, this app should be offered in the Office365 marketplace for companies enrolled in the SharePoint Online platform (even if that requires some refactoring of the software).
  • I’m always hesitant to build products that are wholly reliant on someone else’s product, and the IT industry seems to change rapidly. Viewpoint’s success hinges on the continued success of Microsoft SharePoint. If enterprises choose to replace SharePoint with some alternative or substitute product, Viewpoint may struggle to remain nimble enough to meet future demands. Viewpoint might look for other ways to leverage its core technology beyond SharePoint to hedge for the future.

 

Time to Cater logoTime to Cater

Next up to deliver the eighth company presentation was Ed Spinaio of Time to Cater. Time to Cater is a web-based Time to Cater platform aims to help individuals and corporations cater their ideal event. Ed explained that in his previous line of work as a medical sales representative he was constantly in need of food catering for his business meetings; offering to bring breakfast or lunch made it much easier for him to get appointments with doctors.

Time to Cater operates as a marketplace to reduce purchase friction for catered meals and events by offering nationwide event catering through one simple order form. The company uses an online purchase form to collect all the necessary information from clients, including event times and scheduling as well as food preferences, special dietary needs and any special dietary restrictions or allergies. This client data then sent to local caterers who fulfill each order.

The Time to Cater pitch estimated the overall U.S. catering market at $7.9B annually and added that mobile shopping for food and groceries is also quickly gaining steam. Yet the catering industry is highly fragmented where even the biggest leaders control only a small portion of the market. Apparently the top 50 catering companies combined total just 15% of U.S. market share. And while these bigger catering firms could be prospective competitors, most only serve a small handful of local markets and several lack a web presence altogether. *The pitch failed to mention ZeroCater, a YCombinator-backed company, as another competitive threat.

To focus its marketing efforts, Time to Cater has established three primary segments to pursue: medical sales, self-service and corporate events. According to the pitch, the self-service market ranges from large planned meals at big events down to folks who only “need a sandwich or two quickly”. Corporate events more consistently need dozens (or hundreds) of catered meals.

So far, Time to Cater has seen promising growth in both revenue and user base. They have served over 180 clients to date, and 300+ caterers in the U.S. and Canada have registered to participate. Their most notable win has been serving food at Google Inc. events around the country. Because it needed to serve food at multiple events, at multiple locations, all at the same time, Google identified Time to Cater as one of the only consolidated, nationwide catering providers. After impressing the execs at Google on their first assignment, Time to Cater has received repeat business from Google in the form of two, successively bigger contracts.

Ed’s cofounders include an experienced caterer and an experienced web developer.

Killer Feature:

Reducing purchase friction in a big market

What I’d Consider Improving:

  • Reading between the lines, the pitch seemed to indicate most of their historical revenue has come from just a few corporate event jobs. Assuming corporate is a sizable market on is own, I would focus there & discontinue the small meal service (or at very least set a minimum order amount). Promising to deliver a “sandwich or two” seems inefficient and difficult to scale.
  • If they do choose to continue pursuing small ticket lunches, I would recommend looking for tertiary markets that resemble medical sales. Presumably there other types of critical sales meetings (maybe Board of Directors meetings or committee meetings too) where catered food would be appropriate.
  • Rather than fret about the top 50 caterers as potential competitors, I would aggressively target them to join the network. If Time to Cater can preemptively convince those biggest players their solution is more cost-effective than attempting to build something in-house, there is considerable market share at stake.

 

FoodEssentials logoFoodEssentials

Dheeraj Patri, CEO & Cofounder of FoodEssentials, gave the ninth presentation. His pitch opened with an introduction to his company, already a trusted source of food data and analytics to both government agencies and food distribution companies. From there, the presentation progressed into a clear problem/solution format.

FoodEssentials has identified information overload as a core problem for consumers seeking nutritional information at the point of purchase. Grocery shoppers face all sorts of competing, often confusing, messages when they walk down the supermarket aisle. And these messages may or may not be relevant depending on each shopper’s dietary needs and preferences.

FoodEssentials pitch at 2013 Demo DayFor example, some shoppers might look for products that are ‘heart healthy’ while others focus instead on items made for a ‘low sodium’ diet. Those two shoppers may ultimately choose the same granola bar, for instance, because it features both ‘heart healthy’ and ‘low sodium’ attributes. Yet very rarely are products labeled or marketed as both, so at least one of those hypothetical consumers will be forced to read the nutrition information more closely before making a purchase decision. When the father of one of the cofounders’ father fell ill and required a special diet, this problem was illuminated and FoodEssentials was born.

Their solution, LabelInsight, is a food labeling platform that delivers a high degree of detail about product attributes. LabelInsight also offers food manufacturers and distributors unique customization opportunities for food labeling. At its foundation, the FoodEssentials LabelInsight platform is built on a comprehensive database that includes hundreds of unique product attributes. Products are categorized according to these attributes, and both nutritional and marketing aspects of product labeling can be customized based on one or more attributes, combinations of multiple attributes, lack of specific attributes, etc. Likewise, food merchants can choose to customize which attributes appear on product packaging based on common local dietary needs, local buying preferences or demographics differences between stores.

FoodEssentials has determined a serviceable, addressable market for LabelInsight at $300M worldwide. Currently FoodEssentials is seeking $1M in additional financing to further develop their technology, scale the volume of its license sales and conduct further tests on new brand engagement features.

Killer Feature:

Personalized packaging. Customized, ‘smart’ product labels can be tailored to user preferences using big data.

What I’d Consider Improving:

  • This pitch seemed very strong, and without knowing more about the industry mechanics I’m reluctant to make any suggestions. I do know the broader product packing industry serves a surprisingly large $ market. From my limited exposure to the packaging industry, I also know there is a fairly healthy/vibrant M&A market for private deals; FoodEssentials could be a solid acquisition target for a large packaging company – there may be good potential for an exit here.

 

Juristat logoJuristat

For the tenth presentation, Drew Winship, Cofounder of Juristat, took stage to pitch his company. Drew is a commercial litigation attorney with experience representing large corporate clients.

Drew explained that he and his colleagues were always under pressure from clients to estimate the likelihood of a favorable outcome in various legal disputes. Yet, when it came down to it, these estimates were little better that educated guesses- biased and skewed by anecdotal evidence. But the stakes were huge; clients and their legal counsel knew the odds of a victory had a big influence on settlement decisions and proposed settlement amounts.

Drew Winship of Juristat presents

Juristat was created to leverage ‘big data’ to improve estimating the probability of a favorable result in legal cases. Right now Juristat is “collecting terabytes of data” from a wide variety of sources that can be used to predict jury and judge behavior with a high degree of accuracy. Their dataset includes historical case law but also incorporates data from Centers for Disease Control (for seasonal illness statistics), public financial markets, sentiment analysis from Amazon, Facebook and Twitter, jury pool demographics and other factors.

Plus, Juristat is crunching all this data using their own proprietary natural language processing (NLP) engine combined with “Supervised Learning” artificial intelligence technology that constantly refines algorithms automatically.

In terms of competition, Juristat recognizes they are going up against the big providers of legal data- Westlaw, LexisNexis and Bloomberg. However, the Juristat product extends way further than any of those services. Current providers only supply access to case law and lack the powerful “process engine” Juristat has developed. The pitch also mentioned LexMachina, a Silicon Valley startup developing its own proprietary process engine, but pointed out that company only indexes intellectual property cases in the U.S. Federal courts. Juristat, on the other hand, is effective for all types of cases in both state and Federal cases.

The Juristat deck also offered some insight into the size of the opportunity. Juristat operates within the ($8B annual) legal research market. They aim to serve attorneys and law firms based, in part, on a premise of modernizing legal marketing/advertising. With this new technology, lawyers will for the first time be able to offer their clients outcome predictions based on empirical evidence. So, rather than navigating the ‘Old Boys network’, attorneys can distinguish themselves and attract new clients based on solid competitive advantage.

Of course, the Juristat team also acknowledges a healthy market directly to in-house corporate legal departments too. And the figures they offered were pretty staggering: Fortune 200 companies each face an average of 140 lawsuits each year, resulting in average legal costs of $131M per year (and that doesn’t include judgement or settlement figures). With those sizable figures at risk, it seems to me big corporations would be willing to pay quite a bit to improve the accuracy of their pre-trial predictions.

Currently Juristat is in closed beta testing. They anticipate offering the software to law firms and corporate counsel on a subscription-based SaaS model, but they will also offer a la carté transactions for “as low as $84 per analytic”. Legal case alerts are also available, per transaction or by subscription, for a lower fee.

Killer Feature:

Predictive trial odds based on history, sentiment, NLP & AI. Wow!

What I’d Consider Improving:

  • I really struggled to brainstorm improvements on this one. Seems like a very promising company backed by some amazing technology & a solid team. Maybe a couple thoughts here:
    • Like I mentioned for TrakBill, I think there may be a market (at least for the case alerts feature) among financial services firms. Just as the financial markets may influence legal cases, so do legal cases have an impact on the financial markets.
    • Based on my SEO & UX experience, I would recommend that Juristat reorganize its website into multiple pages (right now it’s just one long home page).

 

Tunespeak logoTunespeak

Tom Pernikoff of Tunespeak gave the afternoon’s eleventh and final company pitch. Tunespeak is a self-described “Band-to-Fan reward platform”, offering musical artists an opportunity incentivize their network of fans.

Tom, along with his brother, is a member of The Pernikoff Brothers, a critically acclaimed touring band (they’ve even opened up for Willie Nelson before). Along the way, The Pernikoff Brothers have made numerous music industry connections, especially with artists and labels in Nashville. Tunespeak is presently using drawing on these contacts and existing relationships to accelerate sales and user adoption. Additionally, the Tunespeak cofounders have considerable startup experience having been early employees at Loopt.

Based on their experience in the music industry, the Tunespeak cofounders identified a need for this type of platform. Apparently right now it’s commonplace for musicians to offer giveaways and incentives to their fans and social media followers. But currently there is no way for artists to correlate rewards directly with a fan’s ‘performance’ as a referral partner. Using Tunespeak, bands can gather deep analytics about which fans are responsible for generating the most reach/ referring the most new fans. This system permits artists and labels to directly attribute growth to specific fans and reward them with incentives according to performance.

The mechanics of the platform involve musicians hosting “contests” via their websites and social media feeds. Fans are rewarded with “points” based on the number of shares they are responsible for generating. Prizes/ giveaways are distributed to fans according to the number of points accumulated during the contest period.

Tunespeak has identified three distinct customer levels they will target and have estimated the market size of each. According to their deck, there are approximately 200 “Superstar” bands in the U.S.; these are the highest-grossing mega acts that you hear on the radio and have achieved considerable recognition and fan support. The next customer segment, “Working Bands”, includes the roughly 10,000 professional music acts working in America. The largest group of potential customers, “Baby Bands”, are those early recently-formed groups and aspiring musicians who are eager to grow their fan base as quickly as possible; there may be as many as 1,000,000 “Baby Bands” to target in the U.S. alone.

The Tunespeak platform also includes built-in advertising enabled by custom ad targeting technology. This ad serving technology delivers Tunespeak an incredibly high $4 CPM (vs. more typical $0.50 CPM for web ads) using detailed relevance tuning. The tuning engine evaluates a musician’s fan base using factors like demographics, historical performance and even artists’ individual fashion tastes and brand preferences to deliver ads with tremendous personal appeal to fans.

Those astonishing CPM rates also permit Tunespeak to pursue an aggressive, disruptive model to negotiate with the biggest bands. Because their advertising is so lucrative, Tunespeak can offer its “Super Band” clients a large, upfront payment (perhaps as high as $30k per contest) and/or a healthy share of ad revenue. But rather than relying on ad revenue altogether, “Working Band” and “Baby Band” segments will be directed to a subscription pricing structure. As a result, Tunespeak expects to have revenue diversified between recurring monthly subscriptions (produced by smaller bands) and online advertising sales (generated primarily from the “Super Band” contests).

Killer Feature:

2 killer features in my mind: performance attribution + multiple income streams

What I’d Consider Improving:

  • From my outsider perspective, things I’ve read about the recording industry seem to indicate it’s notoriously corrupt[2]. While partnerships with record labels will certainly be important, I think Tunespeak needs to also focus on grassroots growth/ user adoption among smaller bands. A giant userbase of both dedicated music fans & indie bands would also give them more negotiating leverage with record labels.
  • More broadly, the idea of rewarding online referral partners isn’t new. But it goes by a few different names: Cost-Per-Action (CPA), Performance Based Marketing, Affiliate Marketing, Referral Networks and so forth. For their marketing purposes, and for SEO reasons, I would suggest Tunespeak tweak some of their messaging to use some of these phrases/terms. That might help clarify their premise- at least within some internet promotion circles.

 

Event Sponsor Presentations

During the intermission, two of the event sponsors came on stage with brief presentations.

First up was Marie Carlie of the Stone Carlie CPA & wealth advisory firm. She congratulated all the Capital Innovators companies and said how proud she and her partners have been to provide management services to all the startups under their sponsorship of the CI program. Then she and another woman performed rap song (lyrics courtesy of Think Big Partners) which managed to squeeze in the name of every Demo Day company. The rap was a little bit uncomfortable but did prove she- just like the budding startup entrepreneurs- was willing to take some risks. 😉

Next up was Scott Levine, Managing Member of AEGIS Professional Services. He and Jeff Joseph of Prescient Capital Partners introduced their new iSelect Fund. iSelect is a professionally-managed fund allowing accredited investors to invest in early-stage business ventures with an investment threshold of just $50,000. The fund managers then diversify that investment among multiple ventures to mitigate the traditional risks of angel investing. iSelect also performs all due diligence on behalf of its investors. And, compared to ‘crowdfunding’ equity opportunities (which may or may not ever materialize), iSelect has strong appeal to high net worth individuals who seek bigger investment sizes- and correspondingly bigger returns- than microcapital investments permit. The iSelect Fund is currently seeking applications from qualified early-stage companies which have raised at least $100k and are seeking a minimum of $500k in additional financing.

After the last company presentation, a representative from Innovate VMS briefly took stage to remind everyone about the Startup Connection event (October 3rd at the St. Louis Science Center). This year’s Startup Connection will feature 60 startup company pitches and is offering a total of $115k in prize money. Applications to pitch are being accepted from June 1 – July 31, 2013.

 

Conclusion & Takeaways

Pernikoff Brothers perform at 2013 Demo Day eventDemo Day wrapped up with a special performance by The Pernikoff Brothers band. Afterwards attendees had the opportunity to visit startup booths and speak directly with the cofounders and their teams.

Having been at last year’s CI Demo Day, I also had the opportunity to draw some comparisons. The 2013 Demo Day was much better organized, and- more importantly- attracted a considerably larger crowd. Except for some irritating decorations hung from the ceiling [3], 2013 Demo Day was outstanding. Capital Innovators has come a long way, and I expect they will continue to make improvements for future events.

 

Disclaimers:

I went to high school with Brian Kohlberg (Manufacturers’ Inventory), although he graduated a couple years ahead of me. Mainly I recall him as sort of a ‘Big Man on Campus’, and he was frequently mentioned for his involvement with Future Business Leaders of America (FBLA). Also, Jordan Woerdnle (Juristat) and Mike Pulley (BidRazor) are casual acquaintances; both are extraordinarily nice guys, BTW.

If you read this far, you should probably follow me on Twitter


 

Credits:

Photo of The Pernikoff Brothers Band provided by Ronak Sheth (@rosheth) of FoodEssentials & used by permission. Other photos gathered from Twitter via Downtown T-Rex and @InnoVoxSTL.

 

Footnotes:

[1] Total tangent here: the premise of TrakBill cued a funny random memory. It reminds me of a service called “20/20 Vision” that Jon Fishman (drummer of Phish) promoted to Phish fans in the early 1990s. *If you listen to the very beginning of first set on 08-03-1991, the famous show at Amy Skelton’s Farm, just before the band opens up with “Wilson” you’ll hear Fishman recommend 20/20 Vision- a service that cost $20/year for topical legislative updates. He tells phans, “their table is located over there, next to our van.” Trey agrees, “It’s a great service.” Classic.

[2] It only takes hearing stories about Vanilla Ice being held out a window, forced to sign a contract or Interscope’s negotiating tactics with Monster Audio for ‘Beats by Dre’ or Payola scandals or modern day payola schemes to reckon the music industry can be devious and cutthroat. Personally, out of conflict avoidance, I stray away from industry segments that are prone to deceit, manipulation or outright violence.

[3] Maybe it’s a little nitpicky, but the choice of decorations for Demo Day was poor. Along the back row of seats there were strips of fabric hung floor-to-ceiling. Since they were hung on plane with the row of seats, a number of seats were totally unusable; you couldn’t see the presentation through the fabric. These opaque columns also obscured visibility for anyone sitting/standing behind that row of seats, too. Hopefully next year they will open it up to provide as much seating as possible.