Industry dinosaurs like me can still remember when there was no such thing as a startup pitch competition. But times have changed: the glaciers have retreated, bipedal mammals have become the dominant life form, and there are now more startup pitch competitions each year than there are apps in an app store.
Good for startups, right? Yes and no. Abundance creates problems of a different kind.
At BlueChilli, the startups in our incubator and our accelerator program aren’t sitting idle — they have challenging goals to hit, limited runway in which to hit them, and no shortage of sceptics to prove wrong. And yet, nowhere in any of the Lean Startup bibles does it say, “Thou shalt take a lot of time out to enter all the startup pitch competitions because, who knows, you might win some cash.”
If you’re a technology marketer asked to engage with the startup community I can see why running or sponsoring a pitch competition might seem like a great idea, but here’s the rub: the bar is getting increasingly high ($100k cash prizes are the new $10k cash prize) and the best startups might not even want to enter your competition, much less try to win it.
All is not lost. You can improve the chances of a successful startup pitch competition by following these helpful guidelines, which I’ve formulated by studying the interest (or lack of interest) in pitch competitions amongst the fourty-or-so startups in the BlueChilli portfolio.
Have a lean, well-documented application process and stick to it
Every additional step in an application process adds time for busy startup founders who would rather be raising capital than competing against the odds for a cash prize. The fewer steps (and the less time) required out of their busy day, the better. A written application is usually quicker to complete than a video application. Financial performance details take longer to collate and are more commercially-sensitive than other metrics like customer growth and average customer lifetime. Commercially-sensitive metrics may require external shareholder approval or approval from a quorum of startup founders before they can be disclosed.
When you don’t stick to the application process you’ve published, you cause frustration and annoyance. Founders never forget the pitch competitions where the “one online form and then one Skype pitch” process devolved into a series of in-person and Skype meetings, with repeated requests for further data and metrics, and a finalist round that included twice as many finalists as had been promised in the application process documentation. Once you’ve got a process, stick to it, because founders will remember and warn others not to enter next year.
- How many application stages there are;
- How many applicants in each stage;
- What information will be requested; and
- How that information will be safeguarded.
Publish clear judging criteria
The number one question when I encourage a founder to enter a pitch competition is, “what are the judges looking for?” and far too often, that’s unclear. Early-stage founders have seen one too many ‘startup’ competition prizes carried away by an older business with established customer base and revenues to fall for the “we’re looking for all types of startups, from ideas on the back of a napkin to established VC funded businesses”. If you’re asking someone to give up three days of their time and fly interstate to pitch to a room of industry peers, only to see LIFX walk away with the prize, you’re not being fair and you won’t get entries from the best people.
If you want to appeal to a wide range of startup types, offer a wide range of startup categories, with their own relevant judging criteria based on realistic parameters for that category, and offer relevant prizes…
Many smaller prizes beat one large prize, and cash is king
Good founders are hustlers, and it doesn’t take much of a hustler to establish the odds of winning any randomly drawn prize. When the criteria are broad and the cash pool is largely concentrated on one or two prizes, it feels like a random draw to a savvy founder and maybe they don’t feel like playing the lottery today. You can increase the perceived odds of winning by offering smaller cash prizes for, say, five finalists in each category. It comes with an added bonus: you can really say you’re supporting the industry if you’re spreading the prize value as wide as you can.
Honestly, most startups don’t need your help finding good mentors, lawyers, accountants, and publicists. What they really lack is cash in order to engage with those providers once that initial non-cash prize award of a three-hour workshop with the service provider is over (and Marita Cheng, I still owe you a workshop if you still want it.)
Many things are not equivalent to cash. A convertible note worth $100,000 is not equivalent to a cash prize of $100,000 — it is a debt instrument that can be repaid in cash at a fixed interest rate or converted into equity in the startup at a later date according to the wishes of the investor. Nor is an equity investment of $100,000 a cash prize. Both an equity investment and a convertible note of $100,000 have a value determined by how much of your startup’s equity you will be asked to exchange for the $100,000 and whether there are any other preferential terms attached. Google “convertible note” and “down round” — you’ll be glad you did.
Don’t take their intellectual property
If you’re just offering prizes, it’s unfair to claim some stake in the intellectual property of the winning startups. The value of your prizes is already fixed and known in dollar terms, whereas the potential future value of a startup’s intellectual property could be worth a great deal more. The best startup founders are smart enough to read the fine print, understand it and warn the rest of the startup community to stay away from your pitch competition. It can also ruin your chances of getting a return on that investment in years to come; when the startup goes to raise more capital, an investor might ask, “Why does [Corporate Brand X] own 10% of you?” and unless the startup is able to show that your contribution has been far greater than a $10,000 cash prize in the intervening years, it’s quite likely to be a major speed bump in negotiations.
It can also ruin your chances of getting a return on that investment in years to come; when the startup goes to raise more capital, an investor might ask, “Why does [Corporate Brand X] own 10% of you?” Unless the startup is able to show that your contribution has been far greater than a $10,000 cash prize in the intervening years, it’s quite likely to be a major speed bump in negotiations. It can reduce the pre-money valuation and in some cases, kill the deal entirely.
Have major media partnerships
It’s great that a local, state or federal government body wants to support your pitch competition and it’s awesome that all those major brands are contributing towards the prize pool, but if cash is the number one priority for most startups, media coverage is the number two priority. Winning a competition only makes a difference if someone other than the organiser writes about it, and there are many media outlets that will be open to your approach if you’re smart enough to negotiate a media partnership to guarantee coverage of your entrants, finalists, and winners.
No social media requirements
Really? Can’t founders enter without sharing this shortened URL with their social media contacts? You’ve demeaned yourself and your brand. Go stand in the naughty corner and don’t come out again until you understand why that’s always a bad idea.
No application fees
Just don’t go there, unless you’re OK with paying the startups and your audience for their time attending your pitch event.Please, b
Please, help us build diversity!
I shouldn’t need to mention this and yet I definitely do: include the best women applicants in your pitch roster and the best women judges on your judging panel. Way too many startup pitch competitions still don’t do this and leave themselves (and the brands they represent) looking like fools and dinosaurs. If you want me to join your judging panel and it doesn’t already include women, I will decline and nominate an awesome female industry expert to take my place, to remind you of how important this issue still is.
Help your winners with branding
Brand association is a powerful force, and you can really help your startup finalists and winners with framed, branded certificates, a JPG logo they can put in their footer, a photo of them shaking hands with you, and a pre-written press release template with a quote from someone senior in your company that you’ll help distribute at no cost through your own PR agency. Stretch goal: awesome video interview with each startup’s team, where their brand features as prominently as yours — awesome social media juiciness.