After being turned down by a local startup fund in Canton, OH (which is being ran by a statewide accelerator program) I enjoyed the spirited 45 minute conversation I was having with the investment analyst who was in charge of turning down my application, and listening to his reasoning on why I was not even eligible to EVEN PITCH my concept to the local commission who decides who receives funding .
Let me set the table for the story, I applied to the fund September 30, and was contacted by the analyst (who shall remain nameless), after having a brief talk about my idea, he told me to send in an executive statement. During this conversation I also told him I was applying to Ycombinator (which turned out to be a mistake lol). I had never made an executive statement b4, and after just finishing up my ycombinator application, I couldnt help but feel an executive statement for an early stage tech start up is a huge waste of time. But I still spent much more time then I could afford (law school full time/ as well as developing a company), because the $25,000 the fund was offering would be a welcome addition to our start ups financial situation (besides being funded solely by a poor graduate student). 3 weeks after sending the executive statement in as well as a follow up email trying to verify he had received my message, I had yet to receive any sort of reply. So I contacted the accelerators offices, and eventually was able to get in touch with the financial analyst over the phone.
After not initially remembering who I was, and having to check to make sure he had recieved my emails (he did), and after briefly visiting my beta for the first time, he told me that my website was not at a point where it was elible to recieve funding. My idea failed for several reasons, which I would like to discuss more fully below.
1. I applied to Ycombinator- part of the start up funds conditioning on recieving investment is that the company must stay in Canton, OH for the next 10 years. My application to Ycombinator 3 month program showed that I wasn't dedicated to staying in the area, and was a major part of his reasoning on passing on my application to pitching to the start up commission. I found this entertaining on several levels, and apparently my points listed below couldn't convince him.
1. There aren't a lot of people who would question my dedication to my hometown. I have lived here my entire life, including while finishing my under grad degree at Mount Union University, and while pursuing my Law degree at The University of Akron, not to mention locating my start up here.
2. The odds of getting accepted to Ycombinator are between 1-3%, horrible odds no matter how you look at it, I'd consider anyone applying who places their start ups future on getting accepted a pipe dream. So I didn't, after my application I continued building my company and working on my product, business as usual. So I find it funny that a potential investor would take my APPLICATION to a program he knows to be a long shot, as a definitive signs that I would leave the area. If accepted to Ycombinator it would be a tough decision for me to make on whether or not I should relocate to the Valley full time, but this is a road I haven't crossed yet, and I'd appreciate if someone who understand the ycombinator process (he knew about the program, the analyst is originally from The Valley) would be able to understand this, and at the very least not throw my application to his program out the window just because I applied to another potential fund.
2. Uniqueness- according to him my idea wasnt unique enough. After outlining several ways in which my product was unique from the competition, and outlining areas where I believed our start up had a significant advantage. His reply was, whats to prevent one of you major competitors in the social media field from adopting your idea, and at this point I knew he had no idea what he was talking about. If my idea is unique enough to where major competitors in the field would try to adopt it, then I suppose its at the very least unique, and potentially a market that my competitors would be interested in acquiring us or by competing with us.
3. lack of market validation- according to him my company wasnt suitable for the start up fund because it lacked validation, after all when he visited my beta for the first time I only had 4 members who have joined the site. I explained to him that currently my start up is in stealth mode, and the "members" accounts are there simply for testing. He couldnt understand the concept on why a start up would want to remain in stealth mode(or at least how his fund couldnt invest in a company still in stealth mode), and without market validation they couldnt tell if the idea whether the market would accept it. He couldnt distinguish between a startup that had launched, and one that was simply an idea, prefering to place my site in the latter merely because of a lack of market validation. At this point I began to get slightly agitated. If you work for a start up fund, and are unable to invest in ideas that have yet to been released, or had significant market validation, good luck. Good investors/entrepreneurs are able to make a living because they don't need market validation everytime they evaluate concept, if they did they would have much more difficult time making money, because by the time the market has been validated its either to late or much more difficult to enter it, the competition being more formidable.
There's a reason the valley has had a stranglehold on the tech innovation that has been changing the world. Its because outside of the valley, this is the shit the future entrepreneurs deal with on an every day basis.
