A true story about classic VC Guys, Angel investors and an infomercial Dame.
Once upon a time there was a lady in a Blue dress who dreamed of becoming a documentary film maker… she was a good storyteller so she chased that dream… fast forward through the pages of the story to the present where the Lady makes infomercials instead… because of her ability to tell a great story still. But wait! There’s more to the story still. Monthly, weekly, often daily her iPhone rings and on the other line are various Rich Guys and Angels offering her gifts in exchange for her ability to see the future in stories yet untold… and this is where it gets interesting…
- “45 minutes of your time in my private plane. I promise you’ll enjoy the experience.”
- “I would like to treat you to a Broadway show. Curtain is at 8p. We’ll be done in the office by 4p!”
- “Please choose a watch of your liking. And I’d love to hear more.”
- “I’ll show you around the Penthouse. The view is amazing.”
What kind of Rich Guys like this, say things like this, to an infomercial lady like this? Rich Guys, who stay rich, by investing in great opportunities – Venture Capital Guys!
The Lady in Blue has seen some of the most stunning boardrooms in the Unites States as the guest of one financial firm or another. She is asked to join opportunity review meetings, fly to investment evaluations for the day, or Skype into a conversation about increasing investments. The VC Guys ask her to help predict the future of their investments based on her experience in the past. Why? Rich guys are getting smarter and smarter with each passing year.
And recently, the Rich Guys are not the only ones calling for a glimpse into to the future of the companies they are considering – she has Angels calling as well. Why?
It is said that out of 10 start-ups, only 3-4 completely fail with another 3-4 returning on their original investment, and 1-2 producing substantial returns. (Sounds strangely similar to the success rate of infomercials) Still the National Venture Capital Association estimates that 25% to 30% of venture-backed businesses fail. This is one reason her phone rings ALOT.
“Angel investors — affluent individuals who invest smaller amounts of capital at an earlier stage than VCs do — fund more than 16 times as many companies as VCs do, and their share is growing. In 2011 angels invested more than $22 billion in approximately 65,000 companies, whereas venture capitalists invested about $28 billion in about 3,700 companies,” says Christian Ebersol, Investor @ Comcast Ventures.
Jason Stoffer, a Partner at Maveron LLC (co-founded by Howard Schulz), explains the difference between VC and Private money like this: “we invest in small, starting out companies, and we are looking to find the next Silpada. Private equity looks for consistency, venture capital looks for hyper growth.” And while the Lady in Blue has never met this man either, she agrees with his statement.
During these phone calls, investment opportunities are presented to the Lady in Blue for her to poke holes in. She has lived through many of the mistakes these VC Guys and Angels face when dumping money into start-ups and middle-level companies selling direct to consumer and in retail. In the sometimes gangster world of direct response marketing she is often referred to as the “dame that fixes broken infomercials.”
Commonalities in these conversations revolve around two main topics:
POP my FOMO – many investors are approached by entrepreneurs who have very convincingly pitched their company. Investors get excited trying to forecast where this new product/service could go in the marketplace. They call her with FOMO – fear of missing out. After all if you were excited about the success of Tinder you might be very interested in a company that caters to high-end dating (http://www.theleague.com who received $2.1 million in seed round) or if the success of Amazon is more your style you may not want to miss out on a company that could give them a run for their money (https://jet.com/ who received $225 million) or you’ve seen the success of infomercials that became direct to consumer home runs like Proactiv, Wen, Snuggie, OmegaXL or NutriBullet. FOMO is a mistake that has been made by many investors and they are trying to stop the madness. So, they call the Lady in Blue and ask her to POP their FOMO. Usually, it is generally not that hard to convince them not to invest.
Pick Apart Perfect – this is another common discussion she has with VC Guys and Angels who call to get a second opinion on their investment choices. It is easy for investors to value a team or product or market so much that they overlook weaknesses. It’s much like falling in love… a perfect relationship until you discover that one little fact you didn’t see in the courtship. Even if one aspect of a company is amazing, you still have to be disciplined and make sure the other aspects aren’t terrible. The first place she tells investors to look is at the quality of the database that comes with the company.
VC guys and Angel investors are sharp people. By the time her phone rings they have already secured the answers to these important questions; does the company have:
- a unique business model
- a strong barrier to entry
- predictable and recurring revenue
- good internal systems & practices
- an attractive valuation
So, why are they calling the Lady in Blue with questions and offering gifts? Simple.
In 45 minutes, on your private plan or in a Starbucks, she can detail what can often make or break the success of a product. For example, if you want to get involved in the business of internal cleansing she has all the messy details that she’s already spent millions to acquire. For 2 cups of coffee she’ll tell you why investing in another weight loss product is a truly bad idea or why selling health care lead generation products could send you to an early grave.
While she loves Broadway shows, it takes her less than an intermission to point out flawed offer models that look fantastic on the front end and fall apart on the back end. She can poke holes in recurring revenue models because she’s the one companies call for help when they are on the brink of losing their investors.
Watches are great, although the Lady in Blue would never wear one. Giving her a watch is nice but many times it is like selling a product to a consumer for too little money – it makes them not respect you in the morning and literally pushes them into your competitions arms. Yes, she’s seen it before, investors throwing money at a company that is selling a product or service for TOO LITTLE and that becomes the down fall.
She’s seen 10 out of the 13 coolest hotel Penthouses in NYC… because she was filming infomercials in them for less money than the average marketer spends on developing a new landing page. So, when an investor invites her over for a private chat in his penthouse she is often underwhelmed. This is much like when investors become underwhelmed by the performance of a company that falls short when they try and scale it. Like, when a product comes attached with a talent or spokesperson (often the inventor) who isn’t built for scale. Many companies looking for investment dollars come to the table with a “proven spokesperson” and some sales history making it reasonable to assume this spokesperson has all the glitz to get the brand to the next level but when media begins to scale the spokesperson doesn’t – he or she just becomes another New York City penthouse that looks like all the rest to the average consumer. The Lady in Blue has worked with some of the most unlikely “infomercial celebrities” and product inventors that never wanted to be in front of the camera and she has seen the millions of dollars they have been able to generate.
The meaning behind this story about Rich guys, Angels, dollars, widgets and dames is this… When the Lady set out to be a documentary film maker at Northwestern University so many years ago it was because she loved telling a good story. Producing over 250 infomercials in her career may have not been the original plan but it has left her with plenty of great stories. And that is why Rich Guys and Angels offer her gifts… which she seldom accepts because her stories are now worth tens of thousands in savings when you hear them before your next investment story begins.
All the best,
Charlie A.K.A the Lady in Blue