EVAs ‘R Us.com

Due to my late registration in this course, I’ll focus on two Pitch Pools:

·         Recombo

·         Ingenia

The title of this article suggests we/I are/am Educational Venture Analysts (EVAs). I certainly did not feel like an EVA. My M.O. throughout these pitches was to start/stop them frequently (to decipher what was said and see how it fits with the criteria). Here are the results of my efforts.

Recombo 2004/2005

Over the years I’ve learned (the hard way) to listen to my “gut instincts.” As an EVA, my gut says “pass.” Here’s why:

  • Within one year they’ve transitioned from a products company to a services company. This “flip” in focus implies the organization did not have a strong understanding of their proposed market. They didn’t do their research. They’re basically functioning on a trial-and-error basis. That’s an unattractive concept for investors. Do you want to invest money in a company an experiment? Sure, a company must adjust to customer needs and so on, but this appears to be a complete overhaul.
  • It seems that Brad’s business motivation is to sell off the company once it gets big enough (i.e. 100 million). A bit of a “cart before the horse” scenario.
  • The business model relies heavily on customer’s opening up their client lists to Recombo. For example, Lighthouse would allow Recombo access to their learning clients. Since Recombo has already changed focus once, what’s to stop them from gathering large client lists from other companies, change focus to service them…basically steal customers from Lighthouse.
  • Having various computer systems share data streams is the panacea of most technology companies….i.e. everyone’s working to that end. I would invest my money in a proven company..e.g Sun.
  • No real discussion about the management team, their credentials etc.

I could go on but think you get the point.

Ingenia

The pitch started off wonderfully and she almost had me sold on investing, but here’s a few reasons why I decided not to investment:

  • It’s primarily a consulting firm. Consultants are a dime a dozen! I’m interested in investing in companies that “do” instead of companies that “tell you how to do it” All the “do” stuff is sub-contracted so I’d anticipate Ingenia’s margin for profit would be low.
  • They’re going after foreign markets when they really haven’t established themselves locally…besides a few government contracts which we don’t really learn about. Asian markets are culturally sensitive so wondering if they have an Asian within their management team.
  • 40% of my investment would go to pay for their travel! I’m  not investing money in a company so they can travel.
  • Ramona claims to be a guru in her field.  I don’t see any evidence in the pitch.

For both pitches, I’ve included some of the pitch criteria within the given points. Again, I looked at it as an EVA looking to invest my hard earned money. Hopefully, this synopsis doesn’t come across as being too gnarly…I don’t like to foolishly part with my money J

4 comments


1 David Vogt { 09.15.08 at 1:05 pm }

Hi Doug –

Thanks for leaping in and catching up. Some equally brief responses to your good gut instincts:

– Very few companies get it right the first time, so flexibility (the ability to “flip” business models) is actually a good thing if the new model is compelling.

– having a credible exit strategy (e.g. “sell to IBM”, etc) is also an important asset – as long as it isn’t an obvious pipe dream. It’s not all that different from students setting realistic goals for themselves.

Cheers,

David


2 Cheryl Milner { 09.15.08 at 2:26 pm }

Hi Doug,

I agree with David on this one! If you agree with the principle that the market is generally fickle, then it follows you have to be attuned to it. If you are astute and have the flexibility to move in a new direction because many forces are indicating a new trend, then why is it bad to move in that new direction?

Best, Cheryl


3 Bryan Funk { 09.15.08 at 9:12 pm }

I felt that Recombo addressed their plan to channel through to the 700 clients that their Lighthouse company had. If in fact it was written into tohe contract and the deal was inked then obviously it looked to be a win-win for both Recombo and their client.

There were some things left for me to wonder, but I was generally impressed that Recombo had learned from the previous year and the changes that they were making reflected good business decision making. No point in staying on the train that’s headed in the wrong direction.


4 Crystal Pullman { 09.20.08 at 3:47 pm }

I agree with the comments that Recombo is on the right track with changing streams. The markets change, and companies have to have the ability to change their product / service accordingly.

Also, the strategy of sell to IBM? Many companies when they get as large as Microsoft, etc., lose the creativity (I’m not sure if this was discussed here or in another course, or just in my group of software engineer friends). Microsoft compensates by buying up smaller creative companies and adding their ingenuity to the Microsoft name. If Macphee can get his company out there, and large enough to be noticed, the exit strategy of getting bought is entirely plausible.

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