Accelerators
June 11, 2013 posted by Jason

Blue Startups Demo Day: How Was It?

After months of anticipation, Hawaii’s first startup accelerator, Blue Startups, held their Honolulu demo day last week, introducing their eight startups to a standing-room-only crowd of around 200 people. It was quite the fast-paced event, with little pomp at the opening and with quick, six-minute pitches from their inaugural cohort.

Flo Water pitching to the crowd at Blue Startups' Honolulu Demo Day

FloWater pitching to the crowd at Blue Startups’ Honolulu Demo Day

Each startup’s pitch is quickly covered below, but overall, this was a great group of entrepreneurs who gave very polished, practiced presentations. The pitches were well above the quality and professionalism typically seen locally, and kudos should be given to the Blue Startups team and their group of mentors for pushing these entrepreneurs to such a high standard. For other local startups and entrepreneurs: your bar has been set.

Speaking of mentors, I spoke with a few and they all gave high marks to the program. They commented on how engaged they were with the teams, how well the Blue Startups program was structured, and how accepting the teams were of feedback and assistance.

Although this event began as invitation-only, it was eventually opened to the public, and clearly had a ton of interest. While there were many faces familiar within Honolulu’s startup ecosystem, from Hawaii Angels to State lawmakers to other entrepreneurs, there were also many new faces, which is fantastic. But, there was no mention by the emcee of who was in attendance, if there were any active investors present, any press, or any other attendees of note.

Format

Each startup had only a single presenter, regardless of their team size, and no Q&A was offered after any of the pitches, which really helped to move things along quickly but also left a lot of unanswered questions. One common theme mentioned by many in the crowd during breaks was that the information presented was very “thin,” with only a superficial explanation of how these startups were going to accomplish their lofty marketing and revenue goals. (Example: A “social marketing campaign and some PR” is not a go-to-market plan). Even more, there were no product demos and, for the software-based teams, little to no product screenshots. The only products shown were from the two startups who manufacture tangible product companies, Flo Water and Volta.

Regarding the lack of details, yes, each team only had six minutes to present, which is barely the blink of an eye when it comes to a presentation. But, this is a demo day, so there is an expectation from the crowd of at least understanding a bit more about the how and a bit less about the why. Many teams spent a lot of time setting up the problem and little time articulating their solution, and a few appeared as though they might not even have a working product (there were no live demos, so how could we know?). Sure, accelerators in general spend a lot of time on the demo day pitch and less time on the demo, but unless you have a working product and some market traction, you’re fighting an uphill battle in your already uphill battle to get to the next step, which, for all of these startups but one, is more funding.

As an aside, entrepreneurs (and even the accelerators themselves) need to be able to manage constructive criticism and feedback. Lots of it. Constantly. Especially from VCs. And it will rarely be sugar-coated. It will be blunt. It will call your baby ugly. And it needs to be understood, parsed, diluted with the hundreds of other conflicting and unsolicited suggestions you’ve already heard, and then responded to in a professional-yet-overly-confident manner. A response of “you don’t understand” or “you’re jealous” or “you have ulterior motives” is worthless, and only serves to hurt your chances (and, in this case, Hawaii’s startup ecosystem, too).

Get used to being rejected, having your rock-solid go-to-market plan ripped apart in front of a crowd, and having to defend your strategy, even when everyone else in the room is confident that it’s doomed.

OK, with that out of the way, let me reiterate that this was the best group of startups to pitch in Hawaii in the last several years.

Onward…

Minded

BSmindedMinded provides automated gift suggestions and reminders tailored to the person and the occasion. It works by importing your contacts, using “likes” and e-commerce wish lists to determine the types of items they might like, then reminding you when they have a birthday or other gift-giving event. Minded then gives you an easy method for purchasing those gifts as well. Their revenue model stems from the 8.5% commissions that they’ll receive by funneling purchases through Amazon.com.

Other apps, like GiveEmThisShopycat, and Karma, are also focused on this market, but there doesn’t seem to be any big players in this space as of yet. Reminders are one thing, but Minded’s approach to suggesting gifts with their “gift profile database” could be their competitive edge–if it’s good. If you’ve ever tried any of the gift-suggesting apps, you know that they are weak. If their developers can better mine Facebook data, the potential for more accurate recommendations could become their differentiator.

Minded is now seeking $200k in seed funding in order to develop iOS and Android apps and to launch by October.

Pharmly

BSpharmlyPharmly is a tool that allows medical facilities to source pharmaceuticals from multiple vendors at a much lower cost by disintermediating the wholesalers and distributors and resellers. According to their founder, who has an extensive background in this industry, the typical markup of pharma products is 400% by the time it gets to the medical facility. Pharmly hopes to connect buyers directly with sellers then charge an 8% commission. It was unclear if they would focus on pharmaceuticals (i.e. drugs) or healthcare products (i.e. bandages), or both. Obviously, one would be more bogged down by regulations than the other.

Since their recent launch, Pharmly says that 16 hospital buyers and 4 pharma vendors have signed up in just the first 10 days. For competitors, they list Ariba, one of the pioneers in e-procurement, and Alibaba, a global vendor exchange, but just listing those two companies indicates that Pharmly hasn’t thought through the bigger space in which they plan to play, particularly as it relates to healthcare.

Pharmly’s presentation was very thin on the marketscape and the competition, but just listening to the constant news on healthcare reform, or the lack thereof, this space is tough (and expensive) to work within. The healthcare industry’s back office is frequently well behind the technology curve, sales cycles are typically very long, and regulations cause excessive roadblocks. But, if successful, this could be a huge opportunity.

Pharmly is currently seeking $500k in seed funding to develop their software.

Surrounds Me

Surrounds Me wants to simplify and automate social media marketing by selling pre-written content plans to become the “app store for social marketing content.” They were quick to point out that it wasn’t canned content, but customer-specific copy developed for each customer, which increases the value.

BSsurroundsOf all of the pitches, Surrounds Me was the most difficult to get behind based solely on their pitch. Their weak problem statement was boiled down to “social media is important.” They touted the founders as social media consultants, but then slammed the importance and undermined the worth of social media consultants (and even joked about that irony). Then, after slamming consultants, they list consultants as a key reseller channel (good luck with that!). For competitors, they list some big Silicon Valley startups, but those listed are, conveniently, not close to competing with Surrounds Me’s offer. What about “I’ll do it myself” as a competitor? What about HootSuite, which charges only nine bucks per month for an entire suite of tools to manage social media marketing? What about Scripted, which charges $2 per custom-written Tweet or $3 per custom Facebook message?

As far as strategy, it remains murky. Surrounds Me intends to target the country’s 27 million small businesses and expects to charge an $89/mo starting price with a $499/mo average price. That’s a huge expense for any small business, especially ones who are already doing most of that social media work themselves (or not at all). Surrounds Me’s “first step” is to “dominate 26,000 Hawaii businesses.” Again, and I know this from first-hand experience, local SMBs aren’t going to spend $89, let alone $500, on social media marketing. They are already doing it themselves, and it usually amounts to simple Tweets and Facebook posts. While everyone in the startup space surely understands the potential of social media, small business owners–restaurants, car washes, surf shops, bakeries, etc– need a huge amount of education to convince them that it’s truly something worth spending money on.

Finally, their pitch included nothing related to their product, how it works, or their go-to-market plan. It also lacked an ask at the end, so it’s unclear of their next move. What they did say is that they plan to launch a closed beta this month, an open beta in July, a public product in October, and the plan to have 1,000 users by the end of the year.

Tealet

I’ll be honest, Tealet is one of my favorite Hawaii-born startups. Their founder, Elyse Petersen, has the immense commitment, joy, and enthusiasm needed to succeed in the startup world. Anytime I hear her speak, her love of all things tea infuses (ha!) the conversation, and she obviously loves this space. It’s not a job to her, it’s a lifestyle. Even more, Tealet has a noble cause driving their business, which gives more of the profits directly to the growers.

BStealetSince their launch nearly a year ago, Tealet has gone from an idea to funding from 500 Startups to, according to their pitch, 500 customers. They’ve also switched gears to move from a direct-to-consumer play to including a wholesale play (although their pitch wasn’t completely clear on this move and if they were abandoning their consumer business).

As with nearly all of these pitches, Tealet was thin on details and didn’t mention much about logistics or packaging or customs costs, how they find and work with growers in remote areas, or how the move to wholesale is going to impact their overall business. Tealet also didn’t mention why a team that has already graduated from an accelerator went directly into a second accelerator.

Volta

BSvoltaVolta, which provides free, ad-supported charging stations for electric vehicles, is another great Hawaii-born startup that has what many of the others on this list lack:  significant traction. Their model is to sell to real estate companies, property management firms, malls, shopping centers, and other destinations that have parking lots and garages. Volta installs the physical charging stations, charges a few thousand bucks per month for ad space, and gets a payback in 8 months. Since launching in Hawaii in 2012 and installing 15 charging stations, they’ve expanded to the mainland and have contracts signed to install 37 more stations.

Given that traction and duration, their pitch was, obviously, much more polished and professional than the others. They offered more detail, clearly articulated their strategies and costs, and had deep revenue models.

They are currently closing in on the final stages of a $1 million note, which they said would probably be bigger, and they expect to have 50 new units installed over the summer with a $1 million revenue run rate, and they’ll then look to raise a Series A round.

Similar to Tealet, why a startup with close to $1 million in funding and closing in on $1m in revenue run rate would enter or even need an accelerator was not addressed.

Wicked Loot

BSwicked

Wicked Loot is a game developer that focuses on games featuring user-generated content. Although they’ve developed their own games, their strategy is to build the platform on which other game devs can build their own games. With this space capitalizing on the in-game purchase revenue model, Wicked Loot’s platform will provide the storefront for items, such as hats that your character can wear. They’ll then split the revenue with the game’s creators and developers.

Wicked Loot has already launched a few games and hopes to raise $200k to continue proving out their concept.

They are also one of the non-Hawaii teams graduating from Blue Startups, with headquarters in San Francisco.

Flo Water

BSfloLike Volta, Flo Water is a non-tech play with a physical product and good traction. Their product, water bottle refilling stations, can be installed with a pay station to charge for water and share revenue with the host, or can offer free water refills and be paid for by a sponsor or advertiser. In either case, the $150/mo revenue works out to about a 12 month payback. Flo Water also has the added benefit of reducing the number of plastic water bottles thrown into the trash heap, and they play up the environmental angle very well.

Along those lines, Flo Water has done a great job of marketing, especially in Hawaii, by working with pro surfers as “celebrity ambassadors” and offering their machines at the Triple Crown of Surfing events last year. They are also taking a wide approach to their sales channel, working with full-time reps, commission-only reps, and partners. And, they mentioned focusing on college campuses, with 60 colleges already engaged.

Flo Water has already raised $850k from Tech Coast Angels and Hawaii Angels, and seems to be another team that was well beyond the accelerator stage.

Tow Choice

Tow Choice offers a mobile app designed to put your need for a tow truck out to real-time bid. Their strategy is to use search ads to advertise a tow service and, when someone clicks, gather their information, put that tow out to live bid, then connect the lowest bidder with the driver in need. Tow Choice supplements their software with a live dispatcher.

BStowAs a driver who has recently needed towing services (twice in the past year, but, more importantly, only three times in my life), I think that this is going to be a struggle for Tow Choice. First, there’s the competition. Nearly all cars built in the past decade come with an 800 “help” phone number either in the owner’s manual or on a sticker on the window. For Mercedes, Audi, GM and other manufacturers, they offer OnStar or a similar support phone system built right into the car. And, most car insurance companies offer either tow coverage and/or an 800 help number for disabled drivers. So, just off the top of my head, there are a huge number of known and more established methods to secure a tow. Oh, and there’s your local mechanic.

Second, there’s the cost of marketing to compete with these other, more visible options. For this, Tow Choice claims a marketing cost of $10 per tow. On Google’s AdWords Traffic Estimator, using a cost-per-click of $5, they’d get about 130 clicks per day...across the entire United States of America. Considering a very generous conversion rate of 10%, they’d need to spend closer to $50 per tow, not the $10 that they estimate. And, Google’s estimator shows a max of 162 clicks per day, regardless of how much money you spend, in the whole country. The numbers just don’t add up.

Third, I’m sure every tow truck driver/operator has a mobile phone. And, I’m sure a segment of those are savvy enough to see the need for advertising and understand and use a mobile app that brings them more business. But, again, it’s a small segment within a small market.

Finally, there’s the market need. When is the last time you needed a tow? How many times per decade does the average person need a tow?

Tow Choice is plowing forward, however, and has already launched in two markets. They expect to hit 18 more markets this year, and 100 total by next year.

They’ve already raised $90k and are seeking an additional $300k to continue developing their platform.

Parting Thoughts

As I mentioned in the opening, this event sets the bar for all future startups in Hawaii.  Regardless of my nitpicking, the entire Blue Startups team, the mentors, and all of these entrepreneurs should be very proud of what they’ve accomplished, and the State of Hawaii, and by extension, taxpayers, should see at least this Blue Startups portion of their tax dollars as money well spent.

This is amazing experience for these teams, and it really prepares them (or those who haven’t yet pitched on the mainland) for their first exposure to next-tier investors. It also readies them for the competition they should expect when they pitch later this week in Silicon Valley and in the future. Sure, there might be some work to do on some of these and they’re not all going to be around in a year, but that’s how the startup world works:  good ideas attract a team, good teams get into accelerators, good graduates get funded, good startups get acquired or go public, but most (75-90%) fail along the way. It’s a gamble, and we should be proud of these teams, regardless of the outcome, as they not only move on in their own entrepreneurial endeavors but as they represent Hawaii’s startup ecosystem.

What do you think? Don’t mutter to yourself or complain to your friends. Step up and leave a public comment below!

3 Comments

  • Wow, amazing recap and analysis! Good to hear about some promising companies!

  • Jason, I’d like to provide answers to some of your comments about Tow Choice. First, we target those individuals who do not have coverage through AAA, insurance, auto warranty etc. My co-founder Rob has been doing this on a manual basis for over 2 years so we have validated the demand on a local basis. In addition, upon full build out of our network, we will be working with some of the associations and auto companies you mention, allowing us to address the $5 Billion U.S. tow market. We’ve already presented to a well known auto manufacturer’s innovation group in Silicon Valley and will continue discussions as we grow the network.
    Regarding the cost per tow, we are basing our figures off of actual results. Google Adwords estimator is a great tool, but you typically need to dig down and run some actual tests to decipher your actual results. Otherwise it can be misleading.
    On the last two points, it’s a $5 billion U.S.market (compare to Uber’s $6 billion U.S. market) and we are not limiting ourselves to the low hanging fruit in initial $1 billion segment.
    I invite you to come by and get the full story any time. It’s pretty hard to squeeze it all into a 6 minute pitch.
    Dave

  • Jason,
    Thank you for the well thought out review of our demo day! You were able to grasp the overall concept of most of our startups as well as ours, Pharmly. As you mentioned, we have 6 minutes to convey our product. SIX whole minutes to convey to a vast audience, with a wide array of backgrounds and experiences. It is with this in mind, that we in particular, decided to spend certain amounts of time on specific areas geared to our overall audience. We focused in particular on how can we peak someones interest and keep it throughout the pitch to get them excited to speak to us after about anything specific (or more importantly how can they help with funding).

    To respond to your comments above about some things that were perhaps not conveyed well in the 6 minutes time span:

    1. Pharmly is allowing medical facilities to source pharmaceuticals. These include everything from injectables, tablets, over-the-counter meds. As we are focusing our initial market penetration to include hospitals. Most of the products purchased by them through our system will be injectable drugs.
    2. Regulations – Actually, because Pharmly is simply “matching” the vendor to the customer, we do not incur the regulations as would a regular pharmaceutical distributor. We allow the vendor and customer to facilitate the transaction outside of the site on their own, once they are matched up. Also, because of the regulations & focus on “securing the supply chain” to remove any possible counterfeit drugs and illegal sellers, we have a compliance team headed by our co-founder & general counsel Kubs Lalchandani that vets all customers & vendors to insure they are properly licensed and are not in trouble with any of their respective state boards of pharmacy.
    3. Competitors. As we realize the space we play is extremely large – a $300Bn market , we are focusing on this initial market that i have over 10 years of experience in. Our most direct competitors are alibaba & ariba as they have similar models of “requests for quotes” from multiple vendors. As everyone knows who uses these systems, Ariba is extremely vast & complex and Alibaba sells everything from shoes to nail polish and oh yes drugs as well, not very trusted in this arena. We are aware the “big 3″ wholesalers Amerisource, Cardinal, McKesson are also competitors in a sense once we tackle this larger overall market.

    We look forward to sharing our development & progress! In the meantime check out some recent PR since our launch and follow us @pharmly on twitter! :
    http://healthsparx.com/episode-13-pharmly-overhauls-the-supply-chain-for-medicines/
    http://medcitynews.com/2013/06/an-ebay-for-pharmaceuticals-connects-hospital-purchasers-with-secondary-wholesalers/

    Aloha!
    Samantha Godfrey
    Co-Founder & CEO
    Pharmly

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