Venture capital pitches polished
By John Duchemin
Advertiser Staff Writer
Dustin Shindo is about to present his baby, Honolulu start-up company Hoku Scientific, to a group of venture capitalists who may as well be a gauntlet of knives.
The 28-year-old entrepreneur knows he needs a thick skin for this, but he can't help sweating a little. His back stiff as a board, Shindo jerks through a 10-minute PowerPoint presentation intended to show why Hoku Scientific's various gizmos are worthy of a $4 million investment.
The knifework begins.
"Are you nervous in front of people?" asks Kirk Westbrook, managing director of International Venture Fund. He thinks Shindo is passionless in his delivery. Darlene Blakeney, president of Bank of Hawaii's small-business investment arm, says Shindo's presentation is choppy and uninformative.
Slice, slice, slice — but it's quickly over, and after a humble thank-you Shindo retreats to let the next entrepreneur ascend the stage.
So goes the morning, as the venture capitalists focus their eviscerating attention on a half-dozen Hawai'i technology companies. The session is hard on egos, but time is short: On June 20, the start-ups will present themselves to more than 100 potential investors at the Investor's Choice International conference in Maui.
The annual event has proven one of the best and few ways for Hawai'i high-tech companies to attract attention from national venture firms and other top-flight investors. Last year, Hawai'i companies Viata Software and Hawaii Biotech each got several million dollars in venture support after presenting at the conference.
This year, investment prospects are still pretty grim. Investors burned by the dot-com collapse and the economic downturn are likely to be conservative, says Brad Bertoch, president of the Wayne Brown Institute, the event's main sponsor. But solid companies are likely to draw attention, Bertoch says.
"There's not as much money being invested in venture funds, but there's still not enough quality deals for the money that's out there," he says. "That means a well-built Hawai'i company will get funded."
Hence the feedback session Wednesday, designed to put some polish on the Hawai'i companies' pitches — and provide a taste of VC logic.
"Selling to that market is one of the most brain-damaging things you can do," Westbrook says to Mark Lane, founder of Empowerosity.com, a company that wants to make Internet management software for universities.
The venture capitalists like most of what they see. Several of the presenting companies have been extensively groomed. Hoku and Hawaii Biotech, which is returning to seek $20 million in new investment, are clients of mentoring organization HiBeam, while a third, Zoji Golf, recently won the University of Hawaii's second annual business plan competition.
Empowerosity has worked extensively with Hawai'i Pacific University, while Internet security company WhiteHat has an advisory board of top Silicon Valley programmers.
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Six Hawai'i companies will dance for dollars next month at the 2002 Investors Choice International meeting of venture capitalists on Maui. A look at who wants money, and their chances of getting any, as described by local venture capitalists: • The company: Hawaii Biotech Inc. The mission: Develop vaccines and therapeutic drugs The pitch: The company is well on its way to developing a vaccine for dengue fever and a drug that limits damage from heart attacks. Both products could generate tens of millions of dollars in revenues. The catch: The company needs $20 million in additional money. The VCs' prognosis: The company has become a poster child for Hawai'i start-ups, with a quality management team, intriguing products and perhaps the best chance to walk away with venture money. • • • • The company: Hoku Scientific The mission: Create cost-saving components for fuel cells The pitch: Its products will save hundreds of millions of dollars for companies trying to build fuel cells for use in homes and cars. The catch: $4 million sought The prognosis: The technology and ideas seem solid, but the company's youthful CEO needs to establish credibility and prove Hoku can hang with the big boys. • • • • The company: WhiteHat Securities Inc. The mission: Develop Internet security software that learns as it works The pitch: Online security is on everyone's mind, and the company says it has created the best application on the market. The catch: $6 million needed by year's end The prognosis: Security is a hot issue and VCs could be interested — but only if WhiteHat can show why it's different and better than dozens of competitors. • • • • The company: Zoji Golf The mission: Design customizable golf clubs for kids The pitch: Golf is booming among preteen fans of Tiger Woods, but no one is making high-quality clubs for children. Zoji has designed clubs with shafts that can be replaced as kids grow. The catch: Needs $1.7 million The prognosis: VCs like the concept, which won the UH business plan competition, but are concerned that large-scale club makers such as Ping could gobble up Zoji before it gets going. • • • • The company: Empowerosity The mission: Design simple Internet management tools for colleges and universities The pitch: Hawai'i Pacific already uses software designed by the company, which claims it's cheaper and better than competitors. The catch: $1 million to $2 million over the next two years The prognosis: The company's revenue model needs some work. The product might be useful, but will slow-moving university bureaucracies figure that out fast enough to keep Empowerosity afloat? • • • • The company: 3Clic The mission: Design an Internet directory that filters Web content based on experts' evaluations of each site's usefulness The pitch: Businesses would use the directory to speed their online searches for information, and pay $20 per employee per year for the privilege. The catch: Needs $800,000 this year The prognosis: VCs aren't convinced that 3Clic's product would be useful to its target market. It's not likely to attract money without satisfying the skeptics.
Who they are, what they want
