A look at the Pittsburgh environment for raising capital

Raising capital for your startup isn’t easy or comfortable, but it is necessary. A serial entrepreneur, a veteran financier and a startup capital expert explore what you should know at March’s ASPIRE 2018. The ASPIRE Conference brings together the region’s entrepreneurial, deal making and investor communities for a day-long event filled with dynamic keynote speakers, engaging panel discussions and power networking.

The discussion, moderated by Thomas B. Grealish, president of Henderson Brothers, featured:

Pete M. DeComo, Chairman and CEO, ALung Technologies Inc.

John Haynes, Senior investment manager, iNetworks Opportunity Fund

Catherine Mott, President and CEO, BlueTree Capital Group and BlueTree Allied Angels

 

The state of Pittsburgh’s capital

I’ve had the experience of traveling around the country and I have seen D.C., Boston and San Francisco. We are neck and neck with the guys out west, and I think we are extremely strong. I think that where we are — I don’t want to say weak — but where we can improve is clearly after those guys get that first stage. They hit that first metric or that first scalability event, and then where do they go?

— John Haynes

When BlueTree Allied Angels invests, we’re not the only players. And what I mean by that is, we have to syndicate. We bring in our colleagues from out of town because we can’t do an entire round. A company needs $1 million, $1 million and a half, and I’m contacting my colleagues in Philadelphia or in New York.

— Catherine Mott

Funding that gap between that early-stage money and the latter-stage venture capital money is extremely difficult. The company that I’m currently CEO of, ALung Technologies, I think is a perfect example of that. I joined after my last company in 2009, and since I joined ALung Technologies, raised about $90 million — and 65 to 70 percent of that $90 million has come from the angel community. Others coming from the outside looking in will often say, ‘Where did you get your money?’ Because the automatic assumption is you have $100 million — plus in a company, you have to have big venture capital money. When they hear we have $60 to $70 million of angel money, they’re just flabbergasted.

— Pete M. DeComo

 

Get out there

I tell people get off your island. One of the things I was so impressed about is I was asked to speak at a conference in New Zealand and it was the South Asia angel community. When I met with the New Zealanders and I went to their incubators, I was very impressed. They were very successful in getting in front of Fortune 500 companies and major investors because it’s an island. They know in order for them to expand their business, they have to get off the island.

— Catherine Mott

If you’re not comfortable coming out of your shell and networking, you’re in the wrong business. You will never raise the money. It was not a comfortable process for me when I first started to do it, but the more you do it, the more comfortable you will become with it.

— Pete M. DeComo

 

Stay sharp

Once you have some capital, don’t assume that the rest of it is just going to flow right in because you’ve already raised some capital. Be very, very conservative with your cash. As we said, you’re a startup and things never go the way you expect it.

— Catherine Mott

 

Rejection is normal

The first ask is always a no. Or, always a ‘come back later’ or ‘let’s revisit this again’. Getting the ‘one and done’ is like a unicorn.

— John Haynes

It’s a lot of rejection. I’ve been on the other side of the table myself raising a venture fund. But one time I saw on Bessemer Ventures, if you ever go to their website, there’s a list of the ones they missed. If you ever need inspiration; they turned down Airbnb and they turned down Facebook — and you’ll see the reasons they said no to them. So, don’t feel bad when they’re telling you no.

— Catherine Mott

 

Keep in touch

You don’t always have to email or call to let us know exactly what you’ve accomplished. You can also just say that this is where we are right now; so, just an informational update. You always want to build your relationship up with your investor for the simple fact that if, heaven forbid, things don’t go well, you have that relationship to fall back on.

— John Haynes

I have over 300-plus investors — individual investors in my company. This by definition is almost a public company. Can you imagine if you don’t proactively communicate, how many phone calls you’re going to get from 300-plus investors?

— Pete M. DeComo

 

Get the pitch down

When you go to present and you give a presentation, try to do away with the mystery. The first 20 to 30 seconds, at the most, I should know what your product is, what it’s going to do and how it’s going to benefit. I think one of the biggest problems I see when investors come in is that they give you the whole story — what, why, what problem they’re solving— and by the time we get to what the product is and what it’s going to do, I’m lost.

— John Haynes

 

Be a connector

There are CEOs that hold their information very close to the vest — don’t communicate proactively with board members and their investors — and for the life of me I can’t figure out why. They may not also want certain investors to meet other investors. I encourage all of that. Our investors that come together at the annual meeting actually love meeting each other and mingling with one another.

— Pete M. DeComo