A peek inside a venture-capital pitch meeting

By Thomas Heath

Entrepreneurs can't build anything without money. And to get it, one of their first stops is often to a venture-capital firm. I wanted to know more about "VCs," so last month I sat in on a pitch meeting at Grotech Ventures, a Fairfax County firm that has invested in more than 100 early-stage information technology start-ups over the last 25 years.

A Grotech pitch meeting works like this: About eight partners who are lawyers, MBAs and financial types sit around a conference table while an entrepreneur "pitches" the business he is starting. If Grotech likes what it hears, it might offer between $500,000 to $5 million to help a business get started or expand.

In the pitch meeting I attended, the entrepreneur was Nathan Wieler, a North Carolina-based businessman who heads a company that designs and builds modern homes and communities. In the meeting, he was pitching an online start-up he called Original Projects. Wieler wanted $500,000 in capital, known as the seed round, to expand the enterprise.

Original Projects is a Web site through which people can share information about their projects. It provides a way for someone who likes gardening to collaborate with other gardeners, and maybe exchange ideas on still more subjects, whether it's filmmaking, sailing or running a bed-and-breakfast.

"The focus is to be one of the next major destinations in social media online on the Web," said Wieler, a chemical engineering major who discovered he had the entrepreneurial bug one summer when he sold $100,000 worth of books door to door. "We will enable everyday people to share and cultivate their pursuits, their interests, their hobbies, their ideas, their passions, and allow them to connect and collaborate with others, not based on who they are, but actually around what they do and what they aspire to do."

Wieler, who is in his mid-30s, wore a white shirt, gray sweater vest and blue tie. Between sips from a bottle of Deer Park water, Wieler seemed comfortable making his 45-minute presentation, even if his delivery betrayed a touch of nervousness.

"I am super-motivated to make a lot of money on this for me and my family," Wieler told the Grotech team.

The group sat in a conference room in comfortable black leather chairs. Along one wall, on either side of two glass doors, 27 plaques hung like gold records, marking Grotech's greatest hits, such as Advertising.com, which was acquired by AOL; CDNow, an online music retailer acquired by Bertelsmann; and Digex, an Internet service provider and Web-hosting company bought by Intermedia Communications.

Wieler was barely five minutes into his pitch, which included a series of slides detailing the company's financial projections, when the questions started.

Why didn't Wieler's Zoom Culture, a precursor to YouTube, work out before closing in January 2003?

What lessons did he learn?

Wieler said Zoom Culture was ahead of its time. He said he should have kept a better balance between communicating with Zoom Culture's investors and building the company.

The entrepreneur said he also learned that to create a successful business, "we just need to do one thing really, really good." If you do that, other opportunities will play out over time.

As Wieler outlined how Original Projects would attract 10 million users by 2012, one of the VCs asked for "tangible examples" of projects that would draw people: "The ones you used didn't ring a bell for me."

Wieler explained the site was in its early stage, with only 60 projects. He anticipated 100 projects in a month, 11,000 in a year and 500,000 by 2012.

"We are not seeing what we are going to see yet," Wieler explained.

The questions kept coming: How is it different from the professional networking site LinkedIn?

Why is someone coming to this instead of a gardening site?

When Wieler began talking about how the site would make money, including advertising, transaction fees, or possibly subscription fees, the Grotech group zeroed in.

"It's hard to imagine why anybody would pay a subscription fee in today's world, where we think it's going to go the other way," said Frank Adams, the managing general partner and founder of Grotech. Referring to a choice between an advertising or subscription model, Adams said, "you've got to commit one way or the other."

After Wieler finished, the Grotech VCs had a 15-minute discussion to decide whether to invest in Original Projects.

Venture capitalists and entrepreneurs have told me there is an art to pitching your idea.

"You want a really bright person who is patient, passionate, driven and determined to pursue a big idea," said Don Rainey, a general partner at Grotech. "The thing you are looking for is someone who has a life history of overcoming obstacles."

While some members of Grotech's team liked Wieler's idea, they said he didn't articulate his vision for the company very well.

"My general reaction was: interesting idea," said Joe Zell, general partner at Grotech. But Wieler was "not a guy that gave me great confidence in this one-hour setting. It could have been he was nervous."

Rainey recently told me Wieler "has the right stuff. He is a guy who has succeeded before. He did okay. But he was dealing with something which didn't have enough hard edges. This idea was too early to get conviction."

Grotech passed, but if Original Projects grows enough to come back for another round of funding, Grotech will take a look.