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July 9, 2015

New entrepreneurs win chance to pitch for angel money

PHOTO/MATT VOLPINI Barb Finer of TechSandBox: “It's hard to network your way to investors, especially as a first-time entrepreneur."

For nine lucky first-time entrepreneurs, July 14 could be the day their dreams are realized. For the third summer, Hopkinton-based science and technology incubator TechSandBox will give them a chance to make their case for critical financing.

“It’s hard to network your way to investors, especially as a first-time entrepreneur,” said Barb Finer, TechSandBox’s CEO.

That’s where Piranha Pond comes in.

'Pitch party' brings together entrepreneurs, investors

Piranha Pond was launched in 2011 by 128 Innovation Capital Group (128ICG), which provides open forums for entrepreneurs to meet with investors, managers and service providers. It is, essentially, a “pitch party” in which each of nine hand-picked entrepreneurs gets five minutes to pitch a product or service to a panel of five investors, much like on the ABC-TV show “Shark Tank.” The goal is to receive financing from at least one of these “angel” investors.

“It is difficult to get angel financing without a personal or ‘warm’ introduction,” Finer said. “Investors have hundreds of products thrown at them over the fence every day. Events like Piranha Pond help entrepreneurs jump that step, and let them meet investors face to face for that warm introduction.”

An angel investor, also known as an informal investor or business angel, is an affluent individual who offers capital to start-up businesses in exchange for stock or partial ownership. It’s becoming increasingly common for angel investors to organize into small groups called “angel networks” to share research and pool investment capital.

“This kind of financing is very significant,” said panelist Maia Heymann, senior director of CommonAngels Ventures, a $27-million pooled capital fund.

“Individuals have been funding innovation since before Leonardo DaVinci. Not all businesses are appropriate for funding by venture capital companies, and that’s where angels come in.”

According to the Angel Capital Association, 300,000 people have made more than $24 billion in angel investments in the past year. Many of these investors were once entrepreneurs themselves.

“We like to think that we’ve been in your shoes,” Heymann said. “We’ve built (initial public offerings) and companies, but we also know that what you pitch to us is your company.”

The pitching process

This year, Finer said, a record-breaking number of applications were received, leading the board to select nine companies instead of the usual eight. The companies chosen were: Femme Forte, Enflux, SmartDiet, Intagora, Innoblative Technologies, ThinkInsite, Fremont Scientific, Rumi Spice and Ridgewing. Their products include medical devices, innovative guitars and ethically-sourced Afghan saffron.

To pitch to investors, an entrepreneur must submit an application and a $50 fee online. Finer said TechSandBox usually receives 20 to 40 applications every summer. Once they’re in, the TechSandBox board whittles the list to eight finalists.

“Applicants usually lean toward science and technology,” Finer said. “We don’t receive many applications from entrepreneurs involving consumer products. We have a lot of websites and mobile apps. Last year, we had applicants making prenatal vitamins. Even though the product itself wasn’t technological, there was science behind it.”

The companies most likely to be chosen to pitch are those “furthest along,” meaning they have a finished product, beta customers or paying customers.

“For me, it’s all about the team,” Heymann said. “How uniquely qualified is this team? Why are they the best people to do what they’re trying to do?”

Entrepreneurs who don’t make it to the pitching stage are invited to watch Piranha Pond. But even if they’re not pitching their ideas that night, the investors will still show them what to expect when they get the chance to pitch.

“People can really learn from each other,” Finer said. “Entrepreneurs get feedback from investors, they get experience pitching, and sometimes they gain new followers without even realizing it. An investor on the panel might not be the right fit to invest in an entrepreneur, but may know someone else who is and introduce them.”

Investing is an art, not a science, according to Heymann. And different investors have different approaches.

Diversifying the pond

This year, all five investors are women. Finer says that was no accident.

“There are not many women in this field,” she said. “My board is more than 50 percent women: there are four women and three men. Especially in business, we tend to hire people like ourselves. I wanted to make a conscious decision to bring people together who are diverse. I wanted new blood.”

While women make up more than 46 percent of the U.S. workforce, they hold a disproportionately small percentage of management positions, according to the nonprofit organization Catalyst. Only 12 Fortune 500 companies have female CEOs—just 2.4 percent.

However, according to a 2014 Catalyst report, women are becoming much more common in the financial sector: more than 55 and 62 percent of financial managers and accountants/auditors, respectively, are women. Also, women hold 61 percent of banking positions, 59 percent of insurance jobs, and nearly 75 percent of positions at savings institutions and credit unions.

Though the report does not factor in position level, it does show that women are becoming an increasingly large part of financial organizations, including investment banking.

Best in show

At the end of the day, Finer says Piranha Pond is all about the entrepreneurs. “I knew a lot of people would love to have this sort of thing,” she said.

“There’s a rebellion in entrepreneurship,” Heymann added. “It takes tremendous courage to be an entrepreneur. I feel privileged to work with people who are taking great risks. I get to meet and work with smart, hard-working people who are trying to make change happen.”

(Piranha Pond is open to public spectators. Admission is $25 for members of TechSandBox and 128ICG, and $35 for non-members. Drinks and snacks are provided.)

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