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Shimmur (S02 Ep07)

The social media landscape is a veritable graveyard of failed startups, but Matthew Peltier believes his company, Shimmur, is different.

July 26, 2017
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From Gimlet, this is The Pitch. I’m Josh Muccio.

On this show, we venture into the world of startups, to a critical moment, when aspiring entrepreneurs put it all on the line and pitch investors for funding.

This week:

Matthew Peltier: Right now, the way it works, is it flips kind of the way social media works.

Howie Diamond: How do you address every comment, every fan, on a daily basis when there’s hundreds and thousands of messages coming in?

Phil Nadel: But does that mean a lot to the fans? Just that they liked it?

Jillian Manus: I was one of the investors in Myspace.

Howie: Were you?

Jillian: Yes. Need I say more? Like, Myspace!

Today we hear from an entrepreneur who’s built an app designed to bring social media stars — and their fans — into conversation. But the founder needs to convince investors that, unlike most social media startups, he has a plan to actually make money.

Phil Nadel is the founder of Forefront Venture Partners. In pitches, you’ll hear him put the focus on the hard numbers.  

Phil: I don’t like the model. I’m not seeing the path to recurring revenue.

Jillian Manus is here representing Structure Capital. Even more than other investors, she looks to make a connection with a founder and their company.

Jillian: There is no doubt in my mind that you’re going to do this. I really feel that.

Jake Chapman’s here with Gelt VC. Sometimes it feels like he has an angel and a devil sitting on his shoulders — one thinking about the morality of a company and the other focused on the financial opportunity. But when he can get those two to agree — he’s all in.

Jake Chapman: I think you’re making a difference in the world. And I think you’re going to make a boatload of money. And when I can combine those two things, it really gets me excited.

Howie Diamond founded the VC firm, Ranch Ventures. He looks for scrappy founders who, come hell or high water, get the job done.

Howie: It’s just one of my things, as an investor. I want to know that you can build something that’s like, actually functional.

Alright, here we go.

When today’s founder — Matthew Peltier — strides into the room, it’s easy to overlook his breezy air of confidence or his prominent man-bun, and that’s because everyone is focused on something else. Something you don’t see a lot in a pitch meeting: the guy is barefoot.

Jake: You don’t walk around barefoot on the streets of San Francisco, do you?

Matthew: Not in SF, but I do in LA a lot.

Jake: No, LA’s fine. San Francisco’s special.

Howie: On the west side, I’m assuming.

Matthew: West side, yeah.

All right, well shoes or no shoes, it’s time for Matthew to make his pitch.

Jillian: Okay. Go ahead. Shimmur us.

Matthew: Yeah, so, I’m Matthew Peltier from Shimmur, and we’re building a social engagement platform that lets influencers and fans interact at scale.

Matthew explains that the idea for his company all started when Matthew met a guy named Brent Rivera, who had over 22 million followers on various social platforms — 22 million followers who were regularly vying for Brent’s attention through comments and tweets.

Matthew: And working with him, started to realize what social media did well, what it did poorly and how him and his community engaged. Through that, we saw that social media, well-served, is content distribution, allows these creators to build their following, establish their brand, their trade, really build their stardom.

And so he and his cofounders built Shimmur, an app designed to help social media stars interact with their fans.

Jake: So how does it work?

Matthew: The platform itself is very simple. Right now, the way it works, is it flips kind of the way social media works. So rather than influencers creating content and fans reacting, the community creates the content, they up and down vote the good and bad content, and the influencer is able to interact.

Imagine a Reddit-style app, where users in a particular group upvote posts they like. Except instead of communities focused around things like gaming or shower thoughts, each community on Shimmur is centered on someone who’s known as an influencer. Users upvote posts that are directed to or about that influencer.

Matthew: Would you guys like to see a little product demo?

Howie: Yes, please.

Investor: Absolutely.

Matthew: So yeah, I’ll start over here.

Matthew pulls out his phone and walks over to the investors to demonstrate how the app works. The front page is populated with the faces of various influencers. Click on one and it takes you to a page devoted entirely to that person — known as their “tribe.”

Matthew As a user, you’re joining tribes of the influencers you love. From there, you can go into the individual communities. Almost think a paradigm like Reddit and subreddits. From there, we allow the community to create content.

Howie: I click into one of my tribes and this is content that’s being produced from other tribe members?

Matthew: Exactly. So here’s somebody asking about how this influencer refers to his girlfriend. Originally, we thought we’d see a lot more Q&A type content, and there’s a ton of that. But there’s almost an equal volume of just content creation, memes, favorite photos, even just admiration, things like that. And then the…

Howie: Yup. I get it, yeah.

Matthew: And the last piece is kind of up and down voting.

So presumably if enough people upvote the question about what nicknames Brent likes to call his girlfriend, then Brent would see — and answer — that question, and all the followers in his tribe would see his response. In this way, an influencer is able to “interact” with thousands or even millions of followers in a scalable way.

Howie: What qualifies someone as an influencer?

Matthew: Right now we really use how many followers they have. It’s a bit of a vanity, but it shows that they have people that care about them.

Jillian: How many is the average?

Matthew: I’d say on the lower end, like 150,000 plus, but on average we probably have half a million to a million, at least on a single platform. But from there, we really look at engagement.

Jillian: Howie, you can be an influencer.

Howie: I’m in.

Jillian: You’re in.

Matthew: Sold.

Jake: It looks a lot like a mobile Facebook feed.

Matthew: Yep. We wanted it to be a feed, where the influencer could scroll through. And that’s where that read receipt functionality gets really scalable. Every post they see, all those fans are notified that he had seen that. So really able to interact with hundreds, even thousands of people in a single session.

Jillian: Do they really have time? Or do they really have… Most influencers don’t do this themselves. They do some of it, but a lot of times they have others who…

Matthew: It really depends on the class of influencers. Social influencers are all authentic. Everything they create on every platform they do, everything they’re engaging with, it’s all them.

I think it’s worth noting that what Matthew is talking about — the “class of influencers” might sound kind of ridiculous — the idea that there is a whole world of people who have built careers out of getting a bunch of likes and having a ton of followers — but it’s not at all. If we’ve learned nothing else from Kim Kardashian, it’s that you can be famous for being famous.

Here’s Howie.

Howie: So an influencer wants to be inundated with all this from their fans? Don’t you think at some point it’s just not scalable? Well, I know the platform’s scalable. But as an influencer, me as a person, I don’t scale. How do you address every comment, every fan, on a daily basis when there’s hundreds and thousands of messages coming in?

Matthew: Really, the whole thesis is we don’t aggregate content. We’re not pulling in all the spammy things created in comment feeds and stuff like that. Really, it’s about quality, not quantity. And that’s where the upvoting mechanic gets really scalable. So as the community upvotes it, when the influencer interacts, all those people are notified.

Phil: But does that mean a lot to the fans? Just that they liked it?

Matthew: Yeah. I mean, uh, for social influencers, and really what it’s become is a place where influencers are more directly connected to the fans, right? What fans feel like they’re missing is understanding whether that influencer cares about them, or whether he has a presence. And, a lot of it is about almost the gaze into the eyes of an influencer. What are they looking at? What are they responding to? You know, the fact that they’re not necessarily being directly engaged, but they’re getting this more intimate look into the influencer, has been really powerful.

“The gaze of an influencer” — according to Matthew, this is why fans come to Shimmur. If they post something other fans upvote, they might just get a response from a social media star.  

But what’s the draw for the influencers themselves?

Jake: Can influencers use Shimmur to grow their own tribe via other tribes?

Matthew: Yep. So a lot of the functionality in our roadmap is how do we integrate communities?  Um, we’ve seen a lot of tribe growth both within the product, but also influencers’ social followings elsewhere have grown.

Howie: What are your numbers?

Matthew: Yeah. We just passed, I think yesterday, 166,000 users. We’ve done no paid marketing or promotions, it’s all been, you know, organic. Influencers coming to our product. Naturally, they want to let their fans know that they have this way to better engage with them.

Howie: So these are 166,000 registered users?

Matthew: Yep. We’ve had about 185,000 downloads or so, so good conversions on the signup. Retention has been strong. And typically on a daily or weekly basis we’re seeing anywhere from 25 – 30 plus percent active. So, getting good engagement metrics.

Howie: How many influencers are there out there in the market right now?

Matthew: It’s really an interesting question. I guess one of the things we’ve started to realize is there’s new influencers popping up every day. A lot of our bread and butter right now is really young and up and coming influencers that really need to cultivate their community and grow, stay highly engaged. A tremendous amount of this is really developing. I’d say a lot of the influencer space is very much so a wild, wild west.

Phil: Sounds very cool. How are you monetizing it?

That’s Phil, like usual, he’s getting down to the numbers.

Matthew: Monetization, I think, is really what our focus is post-seed. So really it’s about building different avenues for an influencer to monetize. Um, Kristen Hancher, she actually has a ton of fans that will screenshot her photos from Instagram or Musical.ly or things like that. They’ll share it and they’ll actually ask her where she got every piece of that outfit. And she’ll go through and respond and it’s a really organic way for her to influence spending decisions. And then obviously we can provide much deeper analytics. Could we do things like buy buttons or actually track conversions? Things that I think are struggling on other products.

Phil: So you’d have to pay or incentivize the influencer in that case to interact with that paid content?

Matthew: 100%. All of these things are all revenue splits. You know, even advertising now on Twitter or YouTube, it’s all about splitting revenue with the influencer. Obviously, it’s a motivation for them to continue to use the product, but it drives revenue to both the platform and the creators.

What Matthew means by “revenue splits” is an influencer has the opportunity to sell things through their posts. Say a tribe member asks an influencer where she got her sunglasses. She can tell them the brand, and then there might be a little “buy” button for fans to click and go buy the same sunglasses. The influencer and Shimmur could get a cut of any sales generated this way.

It seems “influencer” very quickly means spending influencer.

Phil: So you’ll give influencers tools to monetize?

Matthew: Yep.

Phil: And you’ll get a piece?

Matthew: Yeah.

Jillian: How do you track that then? If she’s…yeah.

Howie: Some kind of affiliate model?

Matthew: I’d say that’s one version. Another big thing we’re really focused on is directly monetizing the users. So having fans even pay premiums to guarantee their post gets responded to or engaged with. And we’ve already had some offers for five, six figure brand deals from major agencies to come through the product and advertise products or work on campaigns.

Jillian: Did you take it?

Matthew: We haven’t yet.

Jillian: Okay. What type of deal is this?

Matthew: It’s a brand integration. So it would be partnering specific influencers that match that product or the goals of that campaign and doing a campaign that is through Shimmur and also through their other social channels, too.

Jillian: And what does that look like in terms of the revenues from that? What’s the contract look like?

Matthew: Yeah, um…

Jillian: Is it $25,000? Is it $10,000?

Matthew: As far as revenue for Shimmur?

Jillian: You said it was a six figure? So it’s $100,000?

Matthew: They vary. So my cofounder Max has managed an influencer Brent Rivera. He’s done everything from five, six, even seven figure deals.

Matthew isn’t being very forthcoming with his numbers — maybe he just doesn’t want to overcommit. But what he’s saying is: there’s money to be made in the world of influencers. And through these influencers, Shimmur could be the first social media platform since Facebook to actually crack the code of capitalizing on its users. It’s a big risk, but with a potentially even bigger reward.

Jillian: What are you raising?

Matthew: Right now we’re doing a, oh I forgot that in the introduction. [laughter]

Jillian: We love having you here, but you know…

Matthew: Yep. We’re doing a seed round. And we’re raising $1.5. Really oriented towards giving us a comfortable 14-16 months to build a lot of the features that we know will drive that depth, the longevity, the deep vested interest in the product.

Jillian: And what’s the valuation?

Matthew: We’re doing right now a $7 mil pre, and those terms have been worked with Greycroft.

Jillian: So Greycroft is in?

Matthew: Yep.

Ah, Graycroft is in. So investors are thinking: if we invest we won’t be the first money in. And Graycroft is a reputable VC firm at that. This could be the final nudge needed to get our investors to take the leap.

Jillian: How much of that is done?

Matthew: Yeah. So we have about $1.1 hard committed.

Phil: Let me ask you this. For you, what is your big hair on fire question? Your big issue?

Jillian: Yeah.

Matthew: Yeah. It’s definitely a good question. I think right now, a lot of the challenge in any social product is longevity. Can you build a real experience that drives long term value that people feel like they have a vested interest in the history they’ve had in that product, or in the relationships they’re building? And can we really capture that? And I think that’s really what we need to build for in our product roadmap. With confidence, I think we’re thinking about it absolutely right.

And with that, Matthew makes his final case for why he thinks Shimmur could be the next big social media app. He’s got users. He’s got a plan to make money. Now, can he get the capital he needs to keep refining his app to make it indispensible for influencers and their fans?

Jake’s up first.

Jake: Well, Greycroft is in already, obviously, and is leading the round, so I think raising money is not going to be a concern for you. I think, for me, we’ve never invested in a social company before. We don’t really understand. So it’s very hard for me to take your engagement numbers and your retention numbers and input that in my brain and have that spit out: this is a top 99 percentile company or what. Very hard for me to process this on the fly. But ultimately I don’t think we’d be a great investor for you because of that. We just don’t have a lot of background in this space. For those reasons, I think I’m going to have to pass.

Matthew: Cool.

Jake’s out.

Here’s Phil

Phil: You know, for me, I think it’s a cool concept. I really like it. But for me it’s a fairly easy decision because it’s pre-revenue. I’ve got to pass. But I wish you luck with it. I think you’re onto something kind of cool. And it seems very, sort of, you know, cutting edge. It’s really, you’re in a good place. I don’t know if you can succeed long term. Like you said, the longevity question, we don’t know. But keep doing it. I think it’s really cool.

Phil’s out.

Now the ball’s in Jillian’s court

Jillian: I’m on the fence on this a bit. I think that your background is very impressive, and obviously you’re a high executor. And in a very short amount of time you have already some good traction.

Matthew: Thank you.

Jillian: Absolutely. I’ve worked a little bit in this space, but not enough to feel like I’m an expert. Potentially because I’m so old, maybe that’s one of the reasons.

Matthew: Twenty-one?

Jillian: What?

Matthew: Twenty-one?

Jillian: Oh, you see that was really, really…

Phil: Now she’s in.

[laughter]

Jillian: You’re such a darling. So, I think that I’m going to be out just because I don’t know if I can add value. I really worry about that. But not because I don’t think this has huge merit. And I see the merit. I just want to make sure that I always add smart money, just not money. And I don’t think you’re going to have any problems raising the rest of this. Like, zero.

Matthew: Okay.

Three of our four investors are out.

Perhaps Howie, the one investor with a vibe chill enough to rival Matthew’s no shoes policy will go in on Shimmur.

Howie: I dig your mojo, man.

Matthew: Appreciate it.

Howie: Yeah. You’re thinking about things in the right way. And I like this idea of nurturing these influencer-to-fan relationships. I think that’s…

Jake: This is your wheelhouse, Howie.

Howie: Why is that?

Jillian: Because you are an influencer, that’s why.

Investor: You’re a musician. Howie was a rock star.

Howie: When I was a musician, there was Myspace. So…

Jillian: I was one of the investors in Myspace.

Howie: Were you?

Jillian: Yeah, we were there…

Howie: Oh cool.

Matthew: What are you talking about, you can’t add value?

Jillian: No, no. That’s why! [laughter] Need I say more? Like, Myspace!?

Howie: She can tell you all about Myspace.

Jillian: The fact that you even know what Myspace is, is a shocker.

Howie: I, uh. Yeah. The only issue, the only problem I have is this just doesn’t fit really my, the thesis of what my fund, Ranch Ventures, is doing. Like, one of my portfolio companies is trying to cure cancer in space, stuff like that.

Phil: Is that a big problem? Cancer in space? [laughter]

Howie: Yeah. Space cancer.

Phil: Space cancer.

Howie: It’s worse.

Matthew: We could crowdsource feedback.

Jake: Is he using laser cats to cure space cancer?

Howie: Yeah. Sure. I mean, I look for stuff right on the edge of that, like, risk reward curve, kind of thing. If I had more disposable income, I would probably invest personally in you. I lived in LA for eight or nine years; I was in the music industry for a long time; I still have friends in Silicon Beach. And I know that’s like a thriving up and coming ecosystem. There’s an energy down there, and you exemplify that energy in a really good way. And I think this idea is perfect for that type of environment and I think you’re already executing against it, so it’s awesome. Again, if I had some more personal wealth I would probably invest personally. But just because it doesn’t fit my fund I’m going to pass for now, um, but would love to try to be helpful to you in any way that I can moving forward.

Matthew: Yeah. I appreciate it.

Jillian: And you’re going to raise this money, anyway. So I’m not worried about it. And you know as well. And you probably just came here for the exposure. But that’s okay.

Matthew: I just came here to meet you folks.

Jillian: Okay, well really nice to meet you.

Howie: Thanks for coming in.

Matthew: Thank you all very much.

To be honest, this pitch did not turn out how I expected. I THOUGHT investors would see this as the one opportunity in social right now that had a very clear path to revenue. But things didn’t turn out that way. So we decided to do something a bit different.

When we come back from break, I’m going to call up the investors this time, and find out what was going through their heads during this pitch. And why didn’t they invest in a company, and a founder that to me, seemed like a surefire win?

 

[break]

 

Welcome back.

Matthew knew his industry and his product cold, and seemed to have the right answers for all of the investors’ questions. So when they all turned him down, I couldn’t shake the feeling that there were unspoken dynamics at play in the room. To find out exactly what sunk Matthew’s pitch, I called up the investors a few months after.

Please excuse the audio quality. I recorded these over the phone in the middle of the day. You’ll hear the investors typing and phones vibrating and whatnot. What can I say, these are busy people. Unfortunately, the audio quality of Howie’s call was a little too rough, so we’ll just hear from Phil, Jillian, and Jake.

The first thing I wanna know is: what were they thinking when Matthew walked in barefoot?

Here’s Jillian.

Jillian: Wow, no shoes. I wish I could do that. I’d probably kill myself and step on something and get rabies the first moment. But that’s pretty cool.

Josh: Are you thinking anything about, like, his abilities as a founder? Are you making any conclusions about him or is it too early?


Jillian: No, and just the opposite. I’m thinking, here’s a pretty confident person to come out, pitch to a bunch of VCs with no shoes, very very, he’s very cool, he’s, really has a very nice energy about him. He doesn’t seem really to be mister salesman. Um, but we’ll see.

So Jillian was into it. But Phil? Not so much.

Phil: When he walks in barefoot, I’m thinking, who is this bum? Is this guy here to clean up the studio? Or is this the founder? I don’t understand…he’s barefoot and I’m thinking, that’s not very professional and/or he’s not taking this very seriously. And, you know, I don’t know if his lack of professionalism is going to be a good fit for me. Yea, red flag is what I’m thinking when someone walks into a pitch barefoot.

Josh: No shirt, no shoes, no service?

Phil: No shirt, no shoes, no money.

But forget about the shoes. What about once the actual pitch got going?

Here’s Phil again.

Phil: Uh, he starts describing the platform. And what they’re trying to accomplish. And what I’m thinking is, this sounds like a lot of other platforms. Like a lot of failures that there’ve been in this space. I’m thinking, this does not sound like anything new, even though he’s doing an admirable job at trying to spin it as something new, it didn’t really excite me or come across to me as something, like, any kind of a breakthrough or something revolutionary or something really new.

Jillian had a similar take.

Jillian: It seems like a combination of many companies trying to do something different but they don’t have one definitive distinguishing quality. There’s nothing that’s really setting them apart. Um, they’re—you know, you always called them copycats. This is not really a copycat. This is like a garanimal. I don’t know if you remember what a garanimal was, but garanimals were, you had to mix and match different animals. Like the head of a hippopotamus and you put it with the bottom of a, you know, a giraffe.  And this and that, and it was almost like this was a garanimal where there were bits and pieces of great ideas trying to be fit together but not creating a very coherent outfit.

But not everyone saw the idea of Shimmur this way. Here’s Jake.

Jake: So, as Matt’s talking about, you know, the problem he’s addressing, I start to actually get really excited and interested, because I’ve actually invested in a company in the space before, um, that’s trying to help influencers reach their audiences at scale and really build up personal connections between the influencer and the audience member or the followers. So it’s a problem I really get. And it’s something that I think needs a solution. I think there’s a real big market for it. So as soon as I start hearing what Matt’s going after I start to get kind of excited and interested in what’s, what’s coming next.

As Matthew got deeper into his pitch, some of the investors’ minds began to change.

Phil: As Matthew is going through his presentation, I’m impressed with the fact that he knows his numbers.

This is Phil again.

Phil: He knows his product very well. He has a real passion for it. He has a clear vision. And Matthew is really, in my view, the embodiment of the product. Right? He is this product. I feel, I get the feeling that he is living and breathing it. And now, reflecting on the fact that he is barefoot, I feel like that’s sort of part of his persona. And part of the way that he embodies what he’s trying to put out there in terms of Shimmur.

Here’s Jillian.

Jillian: I’m still engaged because, I’m thinking to myself, perhaps because this is not an area of expertise, of investment, for myself, I’m not fully grasping this. Perhaps I’m too old to grasp it. Perhaps this is, he’s not presenting it coherently and I should pay more attention.

Jake: Matt starts talking about tribes. And I’m thinking to myself, as soon as he mentions the word tribes, I hate that word. I just, it evokes an immediate negative reaction to me.

For Jake, this is when things started to go south.

Jake: Maybe I’m jealous and that’s why I don’t like the word tribes. But the idea that you have these, like, young, quote-un-quote influencers who are using an app and just, like, creating memes and then building, like, this rabid fan base and now they’re like the tribes following this chieftain. Like it all seems very perverse to me.

And here’s the thing that fascinates me about the investors’ decisions: they all got to no, but for totally different reasons.

Jake: So as Matt is talking about an influencer being able to touch a bunch of fans and make them happy because the influencer reached out, I start thinking about the kinds of businesses that just really feel icky to me. And I really hate to be this kind of judgmental. But I just, I don’t like the premise. And with certain social businesses, I don’t like that the premise is really all based on, we’re going to trigger, like, a little dopamine high in all of these people and keep them coming back. It makes them like drug addicts. And it literally is a dopamine high. You get a like from the influencer you follow, that you greatly respect or admire, and there’s a chemical release in your brain and that keeps you coming back to the app. Like you get physically addicted to the app. And I don’t know that it’s fair to really be judging Shimmer and Matt on all of this, but these are the things that are like going through my mind as we’re talking about this business.


For Jake, he couldn’t make peace with the business’ mission. And for Phil, it was all about the bottom line.

Phil: I don’t know where the revenue share is coming from. Where is the—how is the revenue being derived so that he can pay the influencers? So, that wasn’t really, that is not really answering my question, in my mind, about monetization. If a pre-revenue Facebook deal presented itself to me, I don’t think I would invest. Because I don’t invest in pre-revenue companies and I don’t know that I would be omniscient enough to know that this new, this Facebook, this company will be able to successfully monetize. So, I like to see evidence, early evidence, but evidence of product-market fit. I’m not that smart. Okay? I admit. I’m not that smart to predict the next Facebook before they’ve generated any revenue.

Jillian: I wasn’t feeling the vibe.

And sometimes it’s just about a feeling.

Jillian: I’m looking at him and saying he looks very together. He looks very confident. I like that. But I didn’t feel him. You know? I wasn’t feeling his excitement. I did not feel his energy and I’m thinking that, how is he going to motivate a team of people if he can’t motivate us to invest in this company. But that’s actually, that’s why I look at people’s energy. My grandfather used to say that if you could sell a fuller brush, you could sell anything. Because in the end, salespeople are really not selling the product, they’re selling themselves first. You have to like them. You have to believe them. You have to trust them. You have to feel their excitement. And I didn’t feel any of this. I did trust him. I didn’t have any reason not to, but I didn’t feel that he was excited. And how am I going to get excited if he’s not excited.

But there was one last piece to this puzzle. The investors had come up with a plan for how they could secretly communicate to one another when it was time to wrap up the pitch.

Josh: Oh wait, this is the one where you guys used your code word?

Jake: Yea yea, Phil used the hair on fire code word. I totally missed it.

Phil [tape from the pitch]: Let me ask you this: For you, what is your big hair on fire question? Your big issue?

Jake: Well he said hair on fire, and I remember while I was sitting there that that was supposed to be the code word, but by the time I remembered that he had said the code word it was like too late for me to jump on board.

Jake didn’t catch the code word — but Jillian did.

Jillian: Oh yea, I did. I, absolutely. I’m great at code words. Yea, no no no. And that was hysterical but that was, that was so well placed too. Because I was thinking the same thing.

After I talked to the investors, I caught up with Matthew to hear how Shimmur was doing and to find out what he thought about the pitch.

And he told me he wasn’t actually all that surprised when the investors decided to pass on the deal – this isn’t the first time he’s heard no.

Matthew: Yeah, um, you know it’s something we definitely expereince a ton of, obviously. And I think the reality of it is social media is very difficult. You’re kind of tapping into something that isn’t as tangible as other products and there is a lot of risk to it. There’s a lot of variability There’s even a lot of randomness and chance. But you know ultimately, it’s risk mitigation that’s what investing is. I think as a product like ours continues to grow and that becomes more evident that there is something here that has the ability to grow or to be a bigger player in this space. You know, that becomes more obvious that hey, maybe that can be that next product. But I think it ultimately comes down to it is a very risky unpredictable space and a lot of people just you know as obvious by you know the lack of clarity around it is they just don’t know what is going to hit next. So it’s, it causes a hesitation.

Josh: How is user growth since since you last came on? Was it a 180, 160, 180,000 users? I don’t remember which one those were active but —

Matthew: Yeah I think we were at about 160,000 active users. Since then, we’ve grown to about 230,000.

Josh: Wow, I can’t whistle but I would whistle if I could.

Matthew: [laughter] But we’ve been getting good, you know, momentum. I think it’s been consistent, at least since we put out the more public version of the product.

Josh: Okay, okay. How’s, did you finish your round?

Matthew: We’re still actually bringing in some additional capital on that. But we have made progress, um, had a few additional commits come in post that, you know, keep making progress and we’re looking to wrap it up here before end of this month.

True to form, Matthew doesn’t sound too worried about things. And, as it turns out, he was right to feel confident: in the months following our call, he was able to close out his round with VC investors.

Which brings me to our investors: they passed on this deal, and for a lot of different reasons. Whether it was the revenue model or the social implications of the product or just a weird vibe they got. That’s the world of investing. Not every investor is going to see the same opportunity in the same way. One investor’s no is another’s yes.

And so it’s a numbers game. As an entrepreneur, all you can do is keep pounding the pavement, making those calls, and meeting with investors. Sometimes it takes a while. But nobody ever said this was going to be easy.

To hear scenes from next week’s episode, stay tuned til after the credits.

Come join the conversation on social. I’m @joshmuccio on Twitter and Facebook and the show handle is @thepitchshow. You can also send us an email at thepitch@gimletmedia.com

Our website is thepitch.show, and you can subscribe to our brand new newsletter and get behind the scenes stuff at thepitch.show/email

Our show was produced by me, Josh Muccio, Asthaa Chathurvedi and Rob Szypko. We were edited by Devon Taylor.

Our Theme Music is by Breakmaster Cylinder, with original music composed by The Muse Maker, Bobby Lord, Tyler Strickland, Ketsa and Jeff Brodsky. We were mixed by Enoch Kim with help from Matthew Boll.

Thanks to Lisa Muccio for planning the Season 2 recording event last fall.  

Quick disclaimer, no offer to invest is being made to or solicited from the listening audience on today’s show.

Also, I do want to say a quick thank you to the original sponsor of Season 2, the It’s Worth Doing Right Family for taking a leap of faith on us, when we were just a little independent podcast.

Finally if you’re enjoying The Pitch, please leave us a rating and review on Apple Podcasts. It really helps us others discover the show.

All right — you’ve been listening to The Pitch from Gimlet Media. I’m Josh Muccio. See you next week.

 

Next week on the pitch

Khalil: We produce wearable technology and we allow people to play combat sports without having to hit each other in the face.

Jillian: Do you think this is going to be a trend? Is this trend sensitive?

Khalil: You know, I don’t believe so. Spinning has not been a trend, although…

Jillian: Oh it’s a trend now. It wasn’t

Khalil: It wasn’t but —

Phil: Let’s distinguish between trend and fad.

Jillian: I’m thinking more like a fad.

Phil: A fad fades quickly.

Jillian: Yeah.

New episodes come out Wednesdays at 12 pm ET. Make sure you subscribe so you don’t miss a thing.

 

Guru Games (S02 Ep06)

College students Evan Thomas and Troy Pettie have been moonlighting to build a business they hope will bring millennials back into casinos.

July 19, 2017

FITGuard (S02 Ep05)

An entrepreneur thinks he has the solution to sports-related concussions—but now he has to convince investors to buy in.

July 12, 2017

Skylights (S02 Ep04)

David Dicko is bringing virtual reality to the skies. It’s an ambitious plan, and he’s going to need $1.8 million to take off in a punishing market. Will the investors trust his team to succeed where so many others have failed?

July 5, 2017
View show transcript


From Gimlet, this is The Pitch. I’m Josh Muccio


On this show, we venture into the world of startups, to a critical moment, when aspiring entrepreneurs put it all on the line and pitch investors for funding. This week…

David: We do virtual reality on planes as passenger in-flight entertainment. Howie: You guys are building your own proprietary headsets? David: So we’ve built our own proprietary headsets. Jillian: Do you have patents on this? David: We don’t have patents. We have… Jillian: That’s a problem. You know that, right?

Today we meet an entrepreneur who wants to bring virtual reality 40,000 feet into the air. But first he has to convince investors he’s the real deal.

Phil: I’m Phil Nadel with Barbara Corcoran Venture Partners.

Phil’s investment firm is one of the largest syndicates on AngelList.

Phil: If for some reason members don’t bite, then the thing falls apart.

Phil is a straight shooter looking for companies without a lot of question marks.

Jillian: This is Jillian Manus. My fund is Structure Capital.

Jillian is something of a legend in the world of venture capital. In her early twenties, she survived domestic abuse that left her living in shelters in New York City. She was able to pick herself up, start several companies and is now a multi-millionaire.

Jillian: You can have the most incredible product, but if you don’t know how to talk about it, you’re going to have a problem accelerating it.

Jillian tends to take center stage and really drive the conversation.

Jake: My name’s Jake Chapman with Gelt Venture Capital.

Jake’s investment firm has over a billion dollars in assets under management.

Jake: they’re going to shut you down on that name. It’s definitely a trademark infringement.

As a former attorney, Jake brings a lawyerly mindset into a pitch – if a founder can hold up under cross examination, he might just invest.

Howie: Hey, I’m Howie Diamond.

That’s Howie who founded the VC firm, Ranch Ventures.

Howie: There needs to be a moral and ethical code that’s aligned.

Howie is looking for altruistic companies: he’ll only go in on a startup that’s making the world a better place.

Sheel: I’m Sheel, partner at 500 Startups.

Lastly, we have Sheel Mohnot. He broke into the big leagues of venture capital when he sold his company, FeeFighters, to Groupon.

Sheel: This isn’t going to work. You should do something else, seriously.

You can always count on Sheel to say exactly what he’s thinking – and he appreciates the same candor in an entrepreneur.


Alright, here we go.


Today’s founder – David Dicko – walks into the studio. With five investors seated in front of him, it could be easy to feel intimidated. But David isn’t. He has a swagger about him that conveys – this ain’t my first rodeo.

David: It’s a pleasure to meet you. I’m David, co-founder of Skylights. And we do virtual reality on planes as passenger in-flight entertainment. So I was an airline executive working for Air France for the past seven years. And then on top of that I was an airline pilot for eleven. And I loved that job. I’m passionate about it. But I left it because of how big this opportunity is of finally addressing the dread and boredom of long-haul flights from a passenger’s point of view.

With almost 20 years in the airline industry, David has experienced his share of long-haul flights. You know the kind – where the only thing you can do to pass the time is watch the latest big budget superhero movie on a tiny screen built into the seat in front of you.

David: I know firsthand that airlines hate the embedded seat-back screens even more than passengers. They cost $20,000 each and they’re so heavy that the airline industry spends $1 billion in extra fuel costs just to fly them around. Now, VR headsets enable passengers to escape and enjoy immersive 2D, 3D and cinematic virtual reality content on a cinema wide-angle screen. It’s first class entertainment but available to everyone.

Imagine slipping on a pair of virtual reality goggles and escaping into a wide-angle, 3D movie during your next flight. That’s the future David is pitching.

David: We’re raising $1.8 million. The idea is to move from the 100 flights that we’ve done so far to 100 flights a day.

Okay. Here’s the thing, if you’re an investor, you’ve heard this pitch before. VR is a not a new idea.


The road to riches is littered with the corpses of thousands of VR companies whose founders were sure they had struck gold. And a lot of venture capitalists have been burned along the way. But they keep on coming back – for one reason.

David: Very, very clearly, virtual reality is looking for its killer use case. It’s found one in the gaming, and it’s still looking for any other killer use case out there

VR is going to hit. And it’s going to be huge. Just no one knows when – or how. It’s like the early days of the internet, when everyone was scrambling to harness this amazing new technology. A lot of companies failed. But some people got very, very rich.


And no investor wants to be the one who passes on the next Google.


It’s this tension that you can feel in the room.


Here’s Howie.

Howie: What kind of research have you done on, have you proven assumptions and suppositions based on do airline passengers actually want this? Like, is it too early? Do they understand VR? Sheel: I don’t think it’s the kind of thing that you’re going to ask people and they’re going to say they want it. Howie: No, but I’m working backwards from this, are you building something that people want? David: The general public killer use case that we found, which is entertainment on board, is extremely strong. We have one passenger out of two – when it’s given out for free in business, we have about 50% uptake with four hours on average. Sheel: The question I have is how many people want it because they’ve never been in VR before, versus like long term? Jillian: Right. How many do it just because they’re interested? David: Okay. Obviously, we don’t have the depth of operations to be able to look at repeat customers. So the way that we can proxy that is simply by asking those passengers. And that’s what we’ve done. The basic questions that we ask is, are you satisfied? Are you really satisfied? Do you prefer this to seatback screens? And we have about 75% of people who say yes, and the same amount who prefer that to seatback screens.

Right out of the gate, investors are pushing on David to give them hard numbers to prove that they should take him seriously. And David is saying it’s too soon to be sure – but so far, results have been strong.

Sheel: Tell me about the airlines that have done it so far. How have the pilots gone? David: Very well. So we’ve done it with four airlines: Air France, KLM, Onur Air and XL Airways. The headsets were brought on board on trolleys. They were handed out to cabin crew. Essentially, free to business and first-class passengers. As a result, we had 235 minutes of average passenger engagement time. That’s five minutes shy of four hours. And airlines loved it. Howie: You guys are building your own proprietary headsets? David: So we’ve built our own proprietary headsets. Sheel: Why? David: We needed something that didn’t need to be plugged, that had at least six hours of battery life, that was very light to be comfortable enough that you could wear it for two to three movies. So that’s what we’ve built. Howie: So it’s fully immersive? David: Yep. Sheel: Good timing to show us the headset. David: Yeah, of course. Of course.

David hands out his headsets to the investors. They look like big, boxy, white snorkeling goggles.

Jillian: Oh I like this! This is actually great.

Once they’re strapped on, our investors are each inside their own private theater, as a montage of movie clips flickers on their screens.

Jillian: It’s a little heavy on the face, to watch for three hours. Jake: It’s very light. Sheel: It is very light. Jillian: On my nose. On my face. Sheel: It’s light relative to VR headsets. It’s heavy relative to what else was on your nose before. Howie: Yeah, it’s way lighter than other ones. David: You need to adjust it, for you. Because it’s very important to have it properly adjusted. If it’s too loose, it will hang on your nose. Jillian: It was hanging on my nose. Okay.

With the headsets properly tightened, the investors seem satisfied with the experience. They pull the VR goggles off, and start digging into the product.

Jillian: So what, there’s an IP? Do you have patents on this? David: We don’t have patents. We have… Jillian: That’s a problem. You know that, right? David: Well, let me put it this way. We’re not a hardware company. The heart of the technology is not patentable. We basically commit to the airlines to use whatever hardware works. I am in the business of making sure that passengers love the virtual reality experience. Jillian: So what was the content? You produce the content yourself? David: No, we’re not producing the content. We’re licensing the content. And there’s two types of content that we’re using. On one side we’re using traditional content, so 2D movies, 3D movies and TV series. And we have a worldwide distribution agreement with Twentieth Century Fox and DreamWorks for that. But we’re also now experimenting with cinematic VR. So we’re looking for content that has a strong center of attention in front of the passenger.

All right, so David said Skylights is a cinematic virtual reality company, but we’re not going to make the VR headsets. And now he’s also saying, we’re not going to create the VR entertainment.


The investors are starting to look a little puzzled.

Howie: Down the road, you’re going to license the hardware, you’re going to license the content. What’s your business? David: Content management software. We secure the content licensing deals, we write the content management software, and we source and design the headsets. Make sure that all of this works together and setting up the operations with the airlines.

The way David explains it, he’s basically created an in-flight version of Netflix – before they started producing their own stuff. Skylights assembles an entire catalog of studio movies and TV shows for passengers on long-haul flights.

Howie: So you’re a VR content management software platform? David: Yes. Jillian: They’re really not. Are you really? Because you are just… Twentieth Century Fox are, even the VR manufacturers could be doing this. Right? Just say we will provide you with our headset… David: It takes five activities. This is how I would think of it. To do what we need to do, we need five different things that are aligned. One, is you need to have the right content, and that’s very important. Two, you need to secure the content…

Okay, bear with me, because this gets a bit complicated. To get investors behind Skylights, David first needs them to understand a pretty detailed plan. For VR to work on planes, he says, number one, you have to have good movies. Second, you need to have headsets that people won’t be able to steal those movies from. Third, you need to get the airline regulatory agencies to sign off on those headsets. Fourth, you need the operations set up on the ground to support everything in the air.

David: And finally you need to package that and sell that to airlines. Let me tell you, Samsung’s not going to do that. Netflix is not going to do that. So very, very strongly, we are in a position – this is our point – we are in a position to within the next two years to become the number one virtual reality entertainment distributor in the world. Howie: Explain to me how the current model works? Where these content providers work with the airlines to provide movies, TV shows, I’m thinking of Virgin Red. Every airline has these deals. What does that business model look like? And could this conceivably be a conflict of interest for those companies that spend a lot of money to have their movies shown on a flight and now there’s this new… David: So short answer is no. Here’s the current business, how it works. You have the hardware providers. Then you have three intermediaries between the airlines and the original content owners, which are the studios.

According to David, in order to get movies to those seatback screens on airplanes, first an airline must wade through several layers of bureaucracy.

David: It’s a highly monopolistic area where there’s a big value that’s being eaten up by these intermediaries. And what we’re doing is we’re going straight to the content owners, to the studios, and bypassing everyone.

David wants to be



the



link between the studios and the airlines.

Howie: So you’re a dis-intermediary, I get that. But aren’t these other incumbents going to be pissed off and fight like hell to try to shut you down? David: Oh yeah, let’s be clear. We’re competitors to Thales, to Panasonic, to Global Eagle Entertainment, to Spafax, to these intermediaries. Yes.

This is exactly the kind of confidence investors generally want to see in a founder. He knows his stuff and he’s not afraid to disrupt the market. But, for once, they’re the timid ones in the room.

Jake: I sort of hate asking this question. It’s just like, well what if Google competes with you in this space, right? Because Google could basically do whatever they want to do if they really wanted to compete. The last long-haul flight I was on they were pushing carts down the aisle with iPads, right? And so someone is basically doing what you’re doing but they’re doing it on an iPad. They’ve already negotiated these deals with planes. So if they were to see you getting some traction selling VR headsets, what stops them from using their own VR hardware? They already have all of the licensing deals, they have the operations in place, the deals with the airlines. It seems like it would be very easy for them to just swap out the hardware. David: Yeah. So the key thing here is we’re going to have at least a year head start to any of these guys that may exist today. Jillian: You realize that a year is nothing? David: Yeah, it’s… Okay. Jillian: Okay, there are two things I’m trying to figure out. One is you said you have a year head start, and partially it’s because you have the hardware, but then that’s not your business. So that doesn’t give you… To me I’m looking for the differentiator that’s actually going to give you an edge in the business, not in the hardware, since that’s just… Right? Howie: And the defensibility. Jillian: Right. And that was the next one. David: Okay. What we’re trying to do is to make sure that we have and we showcase just a premium, fantastic premium VR experience to passengers. Jillian: So there’s a very low barrier of entry. Am I wrong?

David is trying to argue that his VR platform creates a premium experience for passengers – but, if Skylights isn’t making patented headsets, and it’s not


making its own movies…

Jillian: I mean, if there’s any other company that wants to get into this, there’s nothing that you’re doing that any other person can’t do? David: Actually, there’s a very high barrier of entry. Jillian: Because? David: I will explain. Virtual reality on planes is as old an idea as virtual reality itself. Everyone has thought of this use case. And every single virtual reality headset manufacturer has taken marketing pictures of its headset on an aircraft as a way to sell it to passengers. It’s obvious. But what makes it still not done today is because it’s really, really hard to do. To be able to have and to get access to early window content from the studios, you need to prove to them that the content that’s on your devices will never, ever end up on the internet.

One of the only things seat-back screens have going for them is that they show new releases. And according to David, the process of getting studios to let you put that early window content on your VR headset, turns out, is pretty hard. And for a while, this was Skylights’ stumbling block, until…

David: We recruited our third co-founder that had 15 years exactly with those skills which was licensing content deals and streaming those on mobile devices.

This is why David says Skylights is going to be



the



killer use case for VR. It has the dream team to make it happen.

David: The only reason why we’ve been able to succeed, and where we’ve been able to get to the traction that we have, is our team. There are no other fantastic reasons. And these are the three co-founders that we have at Skylights and that’s the only reason why we’ve been able to succeed.   We could not crack the problem until we managed to have all three of us. We are the right team. And if nothing else, the right proof of that is what we’ve been able to accomplish thus far.

Time’s up. Has David convinced investors that his VR company is the one worth betting on?


Here’s Sheel.

Sheel: I’ll say I like what you do. I think it’s really cool. I fly a lot of long hauls, a few a month. I think that it would be cool to have a VR headset on there. I’m probably not your best use case. I mostly just fall asleep as soon as I get on a plane, because I’m chronically tired. But I think that what you said is right. You guys probably are the right team to do this. I just struggle with whether this is a short-term opportunity or a long-term? Will we see lots of people with VR on planes? But totally I think you guys are the right team to do it.  And I know that United for example is locked into a shitty contract with DirecTV on a bunch of their planes. Like you said, selling to airplanes, selling to airlines is very difficult, and it sounds like you have some head starts and you’re on your way. So I wish you well, but it’s not a great fit for me, so I’ll pass.

Sheel’s out. Howie’s up.

Howie: I’m totally on the fence with you, man.  This makes sense. I think VR in general, I stay away from VR because I haven’t really found that practical use case. We’re still a ways away, there’s entertainment, there’s gaming but it’s like… I think there’s some really cool stuff in the future that’s going to happen with in-home VR where this becomes, just like you have a video game console, you have an at-home entertainment console, everyone’s going to have a VR in their homes, a VR headset. But I think we’re a ways away from that.  I think we’re five or ten years away from that, lowering that barrier of entry in terms of cost and also in terms of the value proposition. But the way that you’re applying it, on an airplane, it’s really interesting. Because I can see people who have anxiety on a plane, this could be useful for them. I know people want to be kinda removed from the chatter on an airplane and distractions and just want to be immersed in their own world for three or four hours and not think about the fact that they’re on a plane.

Howie’s undecided. Here’s Phil.

Phil: What do you see as the total addressable market? The total market size for this? David: $6 billion. Phil: $6 billion? David: Yeah. Phil: I think, my perception of you is that you have the answers. You know this business, you’ve done your research. You have a clear understanding of what you want to do. You have bootstrapped, you have your own hardware because you needed to. Kudos to you. I’m going to keep it simple. I’m in. David: Okay. Phil: I want to be in. I like this deal. Jillian: How much are you in for?   Phil: How much do you have left on the deal? Jillian: 500. Are you in for 500? Phil: No. 250. Jillian: You’re in for 250? Phil: Yeah. David: Okay. I would like to just mention one thing that’s I think very important that we haven’t touched upon at all during this discussion.

Wow. Phil just put in $250,000 to Skylights, but David moves straight to making a last-ditch effort to get the other investors on board.

David: We are in this area where we have the ability to distribute the first VR experience or VR headset experience to millions of people who don’t live in Silicon Valley, or who aren’t hardcore gamers. And they’re spending a lot of time in our environment and they’re discovering what virtual reality is about through us. I think there’s an extraordinary marketing and leapfrog potential of being a huge VR experience distributor to people with our own brand, which is what we are doing. Trains. We’ve done pilots in trains. We had the first pilot a couple of weeks ago in France. Long distance buses, cruise ships. Jake: Self-driving cars? David: When we get there, that to me is the leap to the consumer place.  Either you think that virtual reality is going to have a hard time penetrating the general public. And in that case, that’s an extraordinary opportunity for us. Or you think that virtual reality is going to submerge the market and then in five years everyone is going to have a virtual reality headset. I don’t think so, by the way. Sheel: I don’t think so either, to be clear. Jillian: I’m so on the fence with this. Howie: Me too. Sheel: Guys make a decision. Come on. Get off the fence, Howie! Howie: I like this. There’s a lot of moving parts though. Sheel: Stop talking. Give me two words. Jillian: No idea. Howie: I really like what you’ve built. It’s a little too early for me. I’m going to pass.

So after all that, Howie passes. Jake’s next.

Jake: I don’t know which way I’m going to go. But I’ll start talking, and maybe I’ll figure it out by the time I’m done talking. So first of all I want to say that I thought your presentation was excellent. I think you know the business exceptionally well, and you answered all of our questions really, really well. I’m impressed. So thank you for that. It helps make this a harder decision. Sheel: Now you’re just stalling dude. Come on. Jake: Yeah. Here are my problems. So first, I’m not sure what you’re solving in the plane is a real problem. I think currently, for the consumer – and I think that ultimately the consumer matters the most for this business – I think the screens on the back of the planes gets them 80% of the way there. And this might be a little bit better, but I don’t know if it’s enough to really drive change. So that’s my gut reaction. And then if VR becomes huge, people might have their own headsets. I don’t know what that world looks like, but I just don’t know if this is really solving a problem. And then my other hesitation here is just that there are these other people who are handing out iPads on the plane, who already have the stuff in place, and they could do the business too if it took off. It’s a minor concern. It’s close, it’s a hard decision for me. But I think I’m going to pass. Jillian: Okay. Sheel: Jillian. Jillian: I’m going to pass. Sheel: Okay. All right.

All right. So with no explanation at all, Jillian is out.

Sheel: Thanks a lot, David. David: Thanks. Jillian: Well, you got $250 out of this. Jake: Sheel, did you pass? Sheel: Yeah, I was the first one. Jillian: And can I just say one thing – Sheel: Half an hour ago. Jillian: One small thing. When someone says, when a VC, a venture capitalist of this esteem says to you I want to put $250 behind you, the first thing that you should be saying is, thank you so much, and I didn’t hear that. And I would have liked to have heard that. Okay. So go for it. David: Thanks a lot. And I look forward to continuing our conversation. Phil: Likewise. Thank you. Jillian: And I know we’re all going to hate ourselves, and he’s going to do fantastic, and we’re going to sit here killing ourselves. But great presentation. Sheel: Thank you. Jillian: I know you’re going to succeed. Sheel: I’ll say it, I started out thinking I’m going to hate this. I didn’t hate it as much as I thought I would. Jake: Sheel, you’re so magnanimous. Jillian: Wow. Effusive, aren’t you? Jake: I saw you at YC, and I totally zoned out…

David’s expertise convinced one investor to trust him with $250k – but did he have enough to make it through the grueling due diligence process? Find out after the break.

Josh: Well, David, welcome back to The Pitch. David: Thank you. Josh: Excited to have you back on. So first of all, tell me what’s new with Skylights? David: Wow. Well, in a nutshell, we have our customers that are using our service every single day. So we have passengers that are writing to us every day. And that’s in and of itself a success. By the end of the year, if you’re flying on one of the major carriers, you will be given this possibility to use Skylights on the aircraft. Josh: That’s a bold statement. David: Yeah. Josh: If you can remember back to The Pitch. Like, what were you sensing in the room, the power dynamics between you and them, and what ultimately happened when Phil went in, and then the others waffled for a little bit. David: So I remember that there was this, I wouldn’t call it a contentious Q&A, but very clearly trying to show that despite the difficulty of the business that we had the different parts and pieces. And so I was really on the defensive during that first part. And then of course Phil came in and the questions kind of changed slightly. Phil’s approach started to be, well, okay, this is interesting. The use case is an interesting one, you have an interesting team, now let’s see if this can be a viable thing. Josh: You feel like there was a tone shift in the room? Like things switched after Phil went in? And it’s like all of a sudden the other investors were like, man, should we go in on this deal? And took you guys more seriously? David: Yep. Yeah. So suddenly, you know, the question becomes, well, are we missing out on something here? And I’m on the fence, I’m not totally convinced, what should I do? And that was interesting to watch. Josh: It was palpable in the room, and it was palpable when listening to the tape. The tension between those three investors who were on the fence, and undecided. I’ve seen a lot of these pitches, right, with these particular investors in the room, and I’ve never seen them so indecisive. They’re always decisive, quick to make a decision, and very sure either one way or another, either in or out. David: One way or the other. Okay. Josh: I mean, even Jake saying, you know, I’m not really sure but I’m just going to start talking and see what happens. He’s never said that before. Why did that happen to your pitch? David: I was discussing this with my co-founder yesterday and I was telling him, you know, you and I went into this business, into this venture that’s really complicated. It’s very complex. With every single investor that we were involved with, we’ve had to fight this hesitation throughout the entire process. Josh: Well, and it felt like you had good arguments, you came back, but ultimately what you had to fall back on was, trust me. We know what we’re doing. David: Yes. Josh: That’s a big… David: It’s a big ask.  Yep. And I think that, you know, one of the learnings from all of this was what I really need to do is… We basically decided to cut the round short and focus on increasing our sales whereby trust was no longer, would no longer be the key thing. Josh: Yeah. Speaking of learnings, do you remember the last thing Jillian said after she passed? She had one bit of advice for you? David: Yeah. Was to be thankful, to be expressive regarding Phil. Make sure that Phil knew that we were honored to have him trust us. And I think she was right on that. So I was kind of… Stunned is not the right word, but in this very kind of pressured environment. And I didn’t take the time to express that very clearly. And she was right in that. Josh: All right. So let’s talk about what happened after The Pitch with Phil. He committed to invest 250k, you guys walked out of the room, and what happened? David: So we started to engage with Phil by email. So this is where it started to sink in a little bit that this was not the usual way of proceeding that I was expecting. Because what I really was expecting was to have a second meeting. And that’s not what was happening. It was straight to the due diligence package. So I prepared what I could, sent that out ten days later, and then he had a lot of stuff to sort through as a result. At one point one of his questions was, well, just give me the rundown of your revenue over the past few months. And I thought, okay, well, what I need to do is, let’s get this rolling so that we have revenue flowing in the bank for Phil. And so I kind of put it on the backburner to have the revenue flowing in for Phil later. Josh: Like you just paused the conversation? David: Yeah. I just kind of paused the conversation thinking, okay, I’ll come back to you with revenue numbers when I have revenue numbers.

I want to cut to the chase here. Before I talked to David, I found out from Phil that he had decided not to go in on Skylights because he didn’t appreciate being put, as David said, “on the backburner.”

David: I’ll certainly contact him again with those numbers, once they… Josh: Well, you should. Because he’s a bit miffed. David: Okay. Okay. Josh: I sent him an email. And he replied, saying he exchanged a few emails with you seeking additional information, then radio silence. He says, you know, it’s not uncommon. Sometimes founders close out their rounds with other investors or simply don’t want to go through due diligence with us. But then he says, “I view it as a sign of a founder’s character, and I’m always glad to learn about this type of thing before we make an investment”. David: Yeah, I get that point of view. I mean, there’s a right and there’s a wrong way to do it, and what happened was the wrong way to do it. I regret that kind of radio silence. And I understand, yeah, I understand how he feels. Josh:  Yeah, I mean, it sounds like he was really interested in investing. Despite the challenges with revenue and issues there, it sounded like he was still hopeful for a deal to come together. David: Well, I’ll reach out to him. We’ll see. We’ll see. And if nothing else just to apologize for that radio silence.  And yeah, at least we’ll have a… Josh: Have a heart to heart. David: Yeah, exactly. Josh: Buy him a beer. David: Exactly. David: You know, it’s a very human endeavor, and it’s a human relationship. Josh: Investors are people, too? David: Investors and founders, both, yes.

I’m pretty sure this goes without saying at this point, but my takeaway is that these relationships are tenuous, and even the slightest offense can take down a deal.


And that relationship begins in the pitch. It’s like at the end of a first date where both people say, ok let’s have a second date.


Getting to that first yes is step number one, and it’s important. But it’s only the beginning. These relationships need to continue with open lines of communication from both parties.


Perhaps if David would have come back to Phil and said, “we don’t have the revenue yet, but we will in 3 months.” Maybe Phil still doesn’t invest, but it’s possible he would have appreciated the candor and followed through on his investment after all.


But we’ll never know.


Let us know what you think. You can find us on Twitter and Facebook @thepitchshow. Or send us an email at



thepitch@gimletmedia.com



And if the next time you’re on a long-haul flight they start handing out Skylights VR, let us know.


Our website is thepitch.show, you can subscribe to our brand new newsletter and get behind the scenes stuff at gimletmedia.com/newsletter


Thanks to everyone who has reviewed the show in Apple Podcasts in the last week. The reviews continue to pour in and we’re so grateful. It really makes a big difference for our show. So if you haven’t left a review yet, take a second and leave us a quick review. It makes a huge difference.


We are on the hunt for new start-ups for our next season that will be recorded this August. So if you or someone you know is building something unique, go to thepitch.show/apply – and fill out the form.


To hear scenes from next week’s episode, stay tuned til after the credits.


Our show was produced by me, Josh Muccio, Asthaa Chathurvedi and Rob Szypko. We were edited by Devon Taylor and Alex Blumberg.


Our theme music is by Breakmaster Cylinder, with original music composed by The Muse Maker, Bobby Lord, and Tyler Strickland. We were mixed by Enoch Kim with help from Matthew Boll.


Thanks to Lisa Muccio for planning the season 2 recording event last fall.


And a quick disclaimer, no offer to invest is being made to or solicited from the listening audience on today’s show.


Finally, I want to say a quick thank you to the original sponsor of season 2, the It’s Worth Doing Right family for taking a leap of faith on us, when we were just a little independent podcast.


All right. You’ve been listening to The Pitch from Gimlet Media. I’m Josh Muccio. See you next week.


Next week on the pitch:

Anthony: When you’re a volunteer football coach and you’re responsible for a hundred kids that are bashing their skulls into each other two hours a day, seven days a week, statistically you will miss something. Jillian: Just so you know. Those kids are never going to come in on their own. Sheel: I think where you do have an angle is selling to parents. Being like, hey, your kids need to get pulled. Otherwise, you’re talking permanent brain damage.

New episodes of The Pitch come out on Wednesdays, 12pm EST.


Make sure you’re subscribed wherever you get podcasts.

Industrial/Organic (S02 Ep03)

Most of us stop thinking about our food scraps once we take the trash to the curb. Not so for Amanda Weeks, who started a food waste company designed to reduce harmful greenhouse gases. Now she just needs investors to get behind her plan to save the planet.

June 28, 2017

Hosted by

Josh Muccio

Josh is a 2x founder turned podcast host and producer. He currently resides in Sarasota, FL with his wife and three kids.

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