Act 1: Rehearsal
"Oh, God."
Chief executive John Wilson has good cause to pray. He has just 60 seconds to explain to a roomful of entrepreneurs and a panel of venture capitalists why his Boca Raton company, Cynocom, should get millions in financing. And he's forgotten what he wants to say. "This happens to everybody," he says, more to himself than to his audience. "I apologize." The silence drags on. Nothing comes. "Embarrassing."
It's December, and 22 entrepreneurs have gathered behind yellow-draped tables in a Boca Raton Resort & Club meeting room. It's a select group. Of the 270 entrepreneurs who applied to participate in the 10th annual Florida Venture Capital Conference at the resort in January, the forum has selected only 26 to attend. Only a handful of the 26 will eventually get money, swapping pieces of their companies for the millions of dollars it takes to make their dreams a reality.
But right now, the Venture Capital Conference is still weeks away, and Wilson and the other entrepreneurs are just rehearsing. Florida Venture Forum Executive Director Jeanne Becker has assembled a panel of VCs to give the entrepreneurs feedback on their "elevator speeches." Entrepreneurs need the one-minute monologues -- in which they describe what their companies do and why they need money -- in case chance throws them together, as in an elevator, with a venture capitalist next month.
The VCs want the entrepreneurs to show enthusiasm and passion. Becker sits by the podium, watch in hand, randomly calling on CEOs to come up and practice their quick pitches.
Surprisingly, only a few of the 22 executives can pitch adequately -- a function of pressure as much as lack of skill. An executive draws a blank on one of his company's target markets; it has only three. Most, waiting for their names to be called, frantically rewrite a 60-second script -- pointlessly. After hearing a few of the elevator speeches, the VCs on the panel ban the use of notes: A CEO shouldn't need a cheat sheet to explain what his company does.
Wilson was the last called. A 53-year-old in a blue, double-breasted suit, Wilson is an experienced speaker who has already started and sold a company. His latest effort, Cynocom, uses the internet to automatically route requests to the right person -- such as sending requests from employees with a computer problem to the right tech services staffer.
Wilson's speaking experience shows: His authoritative voice booms more loudly than those of the 21 presenters who preceded him. And then he goes blank. "Oh, God." He apologizes. His train of thought returns to its tracks, and he is off again, to the relief of the room. No one likes watching a speaker die. But then, another blank. Wilson again stands his silent ground.
Quietly, Becker, watch in hand, calls time. "Time," Wilson repeats to the room. "Thank God."
The Entrepreneur
The "elevator speech" trial ends, and a group of entrepreneurs heads for lunch to compare notes. Over salad and penne pasta with grilled chicken, Michael Miller, CEO of a company called Qode (pronounced "code"), complains that his company's scope is just too far-reaching to capsulize in a single minute. Miller holds up a bar code scanner that could double as a key chain. With it, he says, a customer can scan a product code ... He's interrupted. Another entrepreneur likens it to another bar-code scanner company -- there are several -- that he read about.
"That model sucks," Miller fires back. He and his brother Greg, "chief vision officer," founded Qode in 1999. They say Qode has the world's largest database of bar codes, with 70 million products. Manufacturers, through Qode's technology, can push coupons and promotions to interested customers. Consumers can link from bar codes to retailers to compare prices.
Miller and his 52-employee company have raised $8.8 million. He projects a profit by the fourth quarter. Smiling, goateed, Miller gives no hint of how high the stakes are for Qode at the conference. Corporate officers have been deferring salary -- $83,154 in all -- to help Qode get by. A few weeks after Miller's lunch with his fellow entrepreneurs, Qode will end 2000 with an $8.9 million loss and just $18,686 in cash on hand.
Act 2: Countdown
With exactly a week to go before the venture conference kicks off, Michael Meiser and Thomé Nicocelli, the founders of internet purchasing company Medmundo, take a seat in Ernst & Young's 38th-floor conference room in downtown Miami. If the vultures soaring outside the window are a bad omen, no one in the room mentions it.
Meiser and Nicocelli meet with Richard Ramko, a 35-year-old senior manager with Ernst & Young, whose conference room sports the spectacular view of Miami and the vultures. They're here to practice yet again for the venture conference. In addition to holding the December session, the forum assigns a lawyer, accountant or other professional to each presenting company to coach it -- pro bono -- on its executive summary and on a formal, 12-minute presentation, with slides, that the chief executive will give in a ballroom that easily seats 1,000.
Coach Ramko has the good professional's knack for giving a client his full attention. To all appearances, the intricacies of Meiser's market, Latin American healthcare purchasing systems, are the most fascinating thing Ramko has ever heard -- even though he heard it all just two days before at another practice in Medmundo's bare-bones office in the Miami Design District.
Meiser's only 33 but seems more seasoned -- either because of his size (6-foot-4) or because he holds both M.D. and M.B.A. degrees. A Venezuelan of German descent, blond and ruddy, Meiser got his entrepreneurial start in med school. He borrowed $5,000 from his father, traveled to the states to buy high-quality, low-priced stethoscopes and other med school necessities, then resold them in Venezuela to fellow students. In 1999, he teamed with Nicocelli, also an M.B.A. and M.D., to found Medmundo. Hospitals list their needs for syringes and other supplies on Medmundo's website; manufacturers and distributors bid to fill them.
Meiser says Medmundo will short-circuit Latin America's inefficient and corrupt purchasing markets -- $6.6 billion lost in inefficiencies alone -- with the power of the internet. In return, Medmundo takes a 2% to 4% commission from suppliers on goods sold.
To date, Meiser and Nicocelli have raised $4.8 million from VC firms Cisneros Capital Group in Miami and CrossBow Ventures in West Palm Beach. They want another $11.5 million to develop Medmundo's technology and expand geographically.
Ramko tells Meiser to emphasize that (unlike a lot of dot-bombs) Medmundo already has revenues -- $8 million projected for 2001 and a cash-flow positive fourth quarter coming. And he has other advice for Meiser: "Speak to me. Don't speak to the slide." Meiser takes his point. "I want to get it down so I can say it in my sleep," he says.
Ramko reminds him that "nobody's going to invest in you based on" the 12-minute presentation at the forum. The point of the presentation, Ramko says, is "to get somebody interested enough" for another meeting.
Act 3: Showtime
Green tags. Look for the green name tags. It's January, and the Venture Capital Conference is in swing. The entrepreneurial hopefuls step through the Moorish entrance of the Boca Raton Resort & Club and into the crush of people around the registration desk on the conference's first day. They begin their hunt for venture capitalists.
The VCs aren't hard to spot. Their tags are green -- like money. It makes them very popular. Entrepreneurs "hang on your leg like a dog," says one VC over the salmon served on the conference's first day lunch. That's good, he explains. "Don't want the bashful ones."
The Florida Venture Forum held its first venture capital conference in 1992 at Don Shula's Hotel in Miami Lakes -- to "literally import the capital into the state," as Executive Director Becker puts it. That year, you could count on one hand the number of VC firms in the audience of 70. At the 2001 conference, there are 125 venture capitalists -- the highest turnout ever -- among 910 attendees.
What the VCs want is easy to sum up: A few days in sunny Florida in the winter -- and a chance to invest in the next Netscape. How they place their bets isn't as easy to summarize. No one cares much for charts showing dramatic future growth; no one believes them. Some VCs look only for managers who have made money for investors before. Others want a particular type of company -- mobile internet, for instance -- to round out their portfolios.
Many VCs aren't looking for companies at all -- to the dismay of the entrepreneurs. Those VCs are here to pitch to other VCs. The techno-crumble left many VC firms scrambling to shore up companies they put in their portfolios in the glory days of the internet bubble. They had planned to stake those companies only for a year or three. Now, with the IPO window closed, their charges might need financial nurturing for perhaps five years. In VC jargon, it's called "circling the wagons -- you hear that over and over again -- and then feeding the young," says Rhys Williams, a VC with SI Ventures in Fort Myers.
Williams is a 36-year-old former Special Forces captain and magna cum laude Harvard graduate who holds law and M.B.A. degrees. He praises the Florida forum for fostering a network of VCs, entrepreneurs and service providers in Florida. He's hunting this week for a wireless company for SI's portfolio.
Talking with VCs, it's clear that not all the lessons that the entrepreneurs have been given in preparation for the conference are of equal weight. Williams and other VCs say a company's substance matters more than an entrepreneur's style -- up to a point. A good presentation can help a company stand out from the thousands of business plans the VCs see each year: At the least, a presentation must pass what Williams calls the "give me a break" test: Senior executives, after months of preparation, should be able to effectively and clearly communicate their idea in 12 minutes. If they can't, "give me a break," says Williams.
In the long run, style matters only for the CEO's future, not the company's. Investors in VC funds expect returns of 30%. The company may be the CEO's baby, but the day he can't produce -- whether it's managing or communicating -- he goes. VCs may demand veto power over spending and the right to take over if things don't go well.
Williams gently explains the bargain: The entrepreneur gets "this money and a world of contacts and experience from the best" human resources people, lawyers, managers and financial partners a VC can find. "The deal is: You become the first or second most successful company in the world in your space or die trying."
The Pitchman
In the afternoon of the conference's first day, the VCs and other businesspeople take their seats in the resort's sprawling Grand Ballroom. The time has come for the centerpiece of the conference -- the 12-minute formal presentations in which the entrepreneurs explain their visions.
The vision of John Textor, a du Pont heir and one-time pro skateboarder, for example, is the confluence of the internet and entertainment. The 35-year-old is about to show what that means. Textor wants $10 million to $20 million to keep his Jester Digital Corp. on the leading edge of 3-D website development. Co-founded in 1999 by Textor and Pearl Harbor director Michael Bay -- Textor's Wesleyan University frat brother -- Jester creates, manages and hosts 3-D websites. It operates from an office with wood floors and brick walls in a renovated Clematis Street building in West Palm Beach.
Textor has a presentation prepared for the ballroom's big screen that will take the audience on a tour of the colorful virtual city that is his company's jewel. He can show off Metallica's London recording studio or the Pyramids of Giza.
But as Textor steps to the podium, he sees by the frantic moves of the cursor on the screen overhead that someone's trying to reboot his presentation. And it's not working.
Entrepreneurs, when they finally get on stage, find themselves staring into the glare of six spotlights. On the gray podium they see a digital clock that will flash yellow when it's time for them to wrap up and will flash red to stop. On a screen behind them appear their PowerPoint slides. A second screen shows a larger-than-life, live feed of the entrepreneur, speaking.
There's a monitor on the floor so that the entrepreneur doesn't have to turn his back on the audience to see his slides. Unfortunately, speaker after speaker spends too much of the presentation looking down at it. On the screen behind them, the presenters look like men turning their faces from a cold rain. The men -- all but one presenter are white males -- may be technological whizzes with intrinsically interesting ideas, but most of their presentations are dull. If this is the grand stage where entrepreneurial initiative meets the capital markets, it comes off as community theater -- without the enthusiasm.
Textor has a rule against talking about his company unless he can show what it does. The conference's computers holding his presentation apparently don't care about that rule, and the only thing Textor sees on the screen is the forum's generic 2001 conference slide. "This is the slide we developed with our $7 million to date," Textor cracks.
He gets a laugh. The slide goes down, and up goes a live shot of Microsoft's web browser in action. "We built the Microsoft browser as well," he quips. The audience appreciates a showman.
Backstage technical support staff hectically connects to the internet and Jester's website. In seconds, Textor, unfrazzled, is showing off his virtual, 3-D city.
The Prince of Serendip
Later that afternoon at the forum, LatPro CEO Eric Shannon and CFO Clark Golden amicably greet passers-by at their booth in the resort's exhibition hall. Trade show ambience dominates -- noise, displays, tote bags. Shannon promised himself the conference wouldn't distract LatPro from focusing on internal growth. It did anyway. "It's hard to do anything without putting the quality in," Shannon explains.
A year earlier, people were telling Shannon that LatPro would be a $500 million company in a short time. Shannon, whose youthful face and dark beard could win him the part of young disciple in a biblical epic, knew better.
LatPro's job-finding website for Spanish and Portuguese speakers puts resumes online so that recruiters can find them. Unlike most internet businesses, LatPro was profitable in its first full year.
But Shannon had to choose: The e-commerce model of raising money to ratchet up everything -- the quest for the internet grail of scale -- or growing from internally generated revenues like a service business of old.
Shannon worries some dot-com rival that might never be profitable but has a gusher of VC money behind it will overwhelm LatPro. And global job-board company Monster.com is thought to be eyeing the Latin American market. So Shannon bit at the chance to pitch at the conference. CFO Golden says LatPro needs $10 million to $15 million to win Latin American market share and position LatPro to be acquired by a global internet job-board gorilla. "We need to pull this off in the next six months," Golden says.
And serendipity is afoot. Unbeknown to Shannon when he applied for the conference, the forum booked Jeff Taylor, CEO of Monster.com, as the final day's luncheon speaker. Golden tracks down Taylor's hotel room and leaves a message asking for a meeting. The next day, Taylor is at the LatPro booth chatting.
After his speech on the final day, Taylor mentions that Monster won't take up Latin America until 2002. That gives LatPro time. He tells the LatPro executives to stick around for a talk.
Mr. Wilson
John Wilson waits a long time for his 12 minutes. He steps to the podium as the fifth-to-last presenter on the conference's final day. The forum holds a golf tournament for VCs at the end of the second day to draw them to the conference and keep them for the duration. The room Wilson looks out on is nearly empty anyway. Still, there may be a green-tagged VC out there somewhere in the gloom, and Cynocom is looking for $10 million.
If Wilson is nervous after his "elevator speech" debacle the month before -- when his 60 seconds running out was a blessing -- it doesn't show. (In retrospect, he says it was "kind of comical." He says he loves being an entrepreneur: "It's exciting. There's nothing that gets the adrenaline going more -- good times and bad.")
Wilson has rehearsed and rehearsed his formal presentation. It shows. In the cavernous hall, he is a presence -- a better speaker than most politicians. With a strong voice and bold, demonstrative hand gestures, Wilson moves lucidly from point to point with the energy of a preacher on Easter Sunday.
But as he builds to the point of his presentation -- how much money Cynocom needs -- something goes awry. The wrong slide appears on the screen. In his commanding voice, he tells the unseen backstage handler of the error. It's not fixed.
Wilson pauses at this strange occurrence. Then he realizes what has happened and announces: "I talked too long." He rapidly sums up.
Next!
In the months following the Boca Raton conference, the Florida Venture Forum held panel discussions on intellectual property and venture capital in Orlando, Tampa and Jacksonville. Forum Executive Director Jeanne Becker aims to make the forum truer to its statewide name. To that end, she's looking for a host site for the 2003 and 2004 conferences outside of south Florida -- perhaps Orlando. Meanwhile, the forum begins taking entrepreneur applications this month by mail or online at www.flvencap.org for the 2002 conference at the Doral Golf Resort and Spa in Miami. Entrepreneurs, start practicing your pitches.
Epilogue: Final Cut
The months after the January conference have been hard for fund raising in Florida. In the first quarter, VC investments in Florida fell 78% to $108.2 million compared to $500 million a year earlier, according to the Money Tree survey by Pricewaterhouse-Coopers. The Florida share of the national VC picture fell to under 1%, down from 2% the year before.
The 26 presenters at the January conference sought a total of $258 million. As of July 1, they had raised a combined $18.9 million.
Jester Digital
The 3-D website company raised $6.8 million. Some of that was from co-founder John Textor's own Wyndcrest Partners Ltd. Jester received positive attention for its Pearl Harbor film website. A virtual Walt Disney World may be coming.
Medmundo
The Latin America healthcare purchasing play decided to put off another round of fund raising. CEO Michael Meiser says it has landed important contracts in Costa Rica and Venezuela and now is seeking $12 million to $15 million.
LatPro
After the conference, the online Latin American job-finding service raised $300,000 from Perkins & Associates in Miami. The investment follows a $1 million investment Perkins made in LatPro last year. LatPro has topped 100,000 in active job candidates; on the recruitment side of the business, 75 of the Fortune 100 companies have registered and used the service. LatPro hasn't broken even. LatPro executives talked with Monster CEO Jeff Taylor -- just talk. But, says LatPro founder Eric Shannon, "It's great the CEO of Monster knows who we are."
Qode
In March, CEO Michael Miller sold Qode's assets to Fort Myers-based NeoMedia Technologies, a print-to-internet company. The terms of the stock deal are complex, but the top price is no more than $10.7 million -- not much more than Qode's cumulative $10.3 million loss since inception. The price can be reduced based on how the assets perform. In May, three Qode creditors filed a Chapter 7 involuntary bankruptcy petition against Qode. The creditors say a court should oversee the distribution of Qode's assets. Miller, who was named NeoMedia's vice president of sales following the asset sale in March, is no longer with NeoMedia. Efforts to locate him for comment weren't successful; NeoMedia CFO Chuck Jensen says he's off on new ventures.
Special Forces
Rhys Williams, the VC with SI Ventures, didn't find a wireless company at the conference that fit SI's parameters.
Mr. Wilson
Cynocom's John Wilson resigned the week after the conference in a non-rancorous disagreement with the Cynocom board about the company's direction, says new CEO John Calia. (Calia says that judging by the compliments he heard from VCs, Wilson's 12-minute presentation was well-received.) Cynocom raised no money as a result of the conference.
It has scaled back funding expectations and is focusing on turning cash flow positive, a condition Calia hopes to achieve by the end of the fourth quarter. Cynocom has updated its product, put it into production, expanded its selling effort and signed new customers, he says. Calia in June said it was close to landing new money.