Chris Pirillo had launched a few months ago a meta-search engine he named gada.be, now TagJag (see the most recent TechCrunch review here) and was wondering how he could bring scale to that business. One of the obvious solutions being external funding, he had the idea to do a VC pitch in front of the Gnomedex audience and asked VC blogger Rick Segal to lead that session. Rick in turn kindly asked buddy Brad Feld and myself to participate, and provide our candid feedback on the plan. Knowing how “candid” Rick, Brad and I are known to be, Chris’ decision to get feedback on his first ever financing pitch in public was gutsy. And the dude was clearly very nervous.
Chris did a brief demo of TagJag and explained the vision behind the product: be able to query at once a multitude of search engines in a way that is simple from a cell phone or a desktop. It also meant to be easy to use for every day users (as opposed to geeks). Finally, there was a notion to allow bloggers or site owners displaying TagJag results to get a piece of the action if the traffic they generated as monetized.
I made a few (hopefully useful) comments during the following discussion, which unfortunately was only 30 minutes long, and wanted to add a few things that I did not cover. In no particular order:
- Chris did a good job in providing a vision statement for the product – with a great deal of passion. However, he made the vision a bit confusing by mixing issues of implementation, strategy, resources and repeating how nervous he was. I explained that I prefer entrepreneurs to first give an overview of the What (what is the product/service and the value to users), the Why (why do I this and why me/my team) and the How (providing a very high level idea of an execution plan). And then dive into other considerations.
- The question at hand was whether TagJag should be funded. I pointed out – and have written many times about – the fact that there are many different ways to fund a business (cashflows from operations, cashflows from another business, personal savings and credit cards for small amounts, bank credit lines when there are revenues, and yes angel and vc financing – either as debt or equity), and there should be no reason for entrepreneurs to feel that they have to raise professional money in order to be successful.
Brad pointed out that Chris wanted to talk about funding, but did not highlight for us what he would use that funding for. Obviously staffing up, but he only had a shallow idea of his needs (he responded 6 to 10 people and $600K – which does not really compute given where Tagjag is today). When discussing funding, entrepreneurs need to be absolutely clear as to how much is sought, what the funding is going to be used for (VCs often call that “use of proceeds”) and what milestone is going to be reached by the company thanks to that funding. - Another important point addressed by Brad is the issue of overall scale, and potential outcome, of the business. If you are building a lifestyle business for yourself and a small team, don’t bother bringing in professional investors. These businesses can generally be bootstrapped with very little capital – personal or friends and family, and get to be cashflow positive pretty quickly. On the other end of the spectrum, you might want to build a business that will require millions of dollars to develop and operate – like a search engine for example, and it will be necessary to get funding. But in that case, the exit (aka “liquidity event”) will have to be commensurate to the amount raised from investors, and the risk they are taking in supporting you.
- Unlike the audience, we did not have a big hang up on the business model. There are clear precedents to monetize search, and I am much more interested in knowing how users and traffic are going to be acquired, and what sort of demographics will be targeted.
- I did not mention this but it is important to remember that the goal of a first pitch is to come back for a second, generally longer, meeting. So no need to try and cram everything in that one first pitch.
- The value of an aggregator like TagJag or (A9’s OpenSearch) is the relevance of the results it provides. The current implementation does not attempt to provide any sort of ranking or aggregation of individual results. Having TagJag deliver contextual and behavioral filters will be critical. Jake Luddington actually told me later today that these algorithms had partially been implemented.
In conclusion, our recommendation to Chris was to gather feedback from all Gnomedexers, and figure out how far he can push the develop of the idea, and the service, without any professional funding. Rick, Brad and I have committed to help him out figure out some of these issues, and some day, we’ll see whether Tagjag should get funded.
VC bloggers have done a good job demistifying the whole financing process, terms, requirements, etc. and entrepreneurs should absolutely take advantage of these. And they should definitely try to get in touch with VCs or Angels to get some feedback on their ideas or their plans. It might not work with everyone you contact all the time (professional investors tend to be extremely busy people) and it might sometime take weeks to get some feedback (this is a public apology to all the people who have emailed me in the recent weeks and with whom I have not followed up yet), but through your contacts, or at a conference, you should be able to get a few minutes of an investor’s time.
Kevin O'Keefe also covered the session: TagJag : Gnomedex wrapping up with Pirillo pitching tag search engine.
Update: here are the landing page of the podcast, and the MP3 file.
Tags: chrispirillo, tagjag, gnomedex, bradfeld, ricksegal
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