We get a TON of applications every time we put together a CapitalLounge event. While most of the applications have some degree of merit, and eventually get accepted, there are many that don’t.  Historically, we have a non-invitation rate of anywhere from 20-30%.   Despite the enormous level of detail that we’ve published as to our selection criteria and process, invariably, we get a flood of emails the week or so leading up to the event with people appealing and arguing with us (or trying to) about why their deal was rejected.

Here is a tongue-in-cheek look at some reasons why the event applications for some entrepreneurs and investors get rejected.  If you don’t find any of this at all funny, then you most likely fall into one of these categories.

Jorg...@wytehowse.guv

We can’t bloody well deliver a confirmation (or rejection) email to you if you can’t even type in your own email address properly.  Please be sure to double-check your email address before submitting a company profile or application!  There have been some really interesting looking startups that have excluded themselves because we just couldn’t reach them.

The Gettysburg Haiku Tapes

Your “pitch” comes across as a rather arcane series of mutterings that is reminiscent of an amalgam of Haiku, the Gettysburg Address, and the WaterGate Tapes.

Four score and seven
I was not a criminal
You must invest now

Seriously – here are a few gems that were rejected (no, I’m not kidding):

COMPANY works closely with our clients to ensure they are dealing with only the best.

We innovate technologies to creation for selected markets within the U.S. and abroad.

We are a leading consumer products company that is seeking angel funding.

Our firm is about MAJOR ROI while innovating the solutions that are needed.

We need angel funding to get our first customers that will be Microsoft and possibly Oracle.

We are a subscription based SaaS company that is vertically focused for maximum ROI.

We are passionate about the overall benefits of our product.

COMPANY is the innovator that will bring many industries to the next level.

Apologies to those who actually submitted these pitches – I was careful not to reveal your company name.  If you recognize any of these pitches, well … now you know at least one reason why you were rejected.  That’s progress in and of itself!

The good news is, these types of pitches are outliers – our educational efforts with PitchCamp (for example) seem to be of value to the broader community, which is cool.

The Great Zorba says you are a SaaS company, no?

If you decide that providing a “short pitch” is not worth your time and leave it blank, or you completely half-ass it, well, you aren’t likely going to get approved.  We aren’t mind readers, and we don’t have time to chase you all over the internet to try and figure out what it is you do.  Luckily for us, The Great Zorba doesn’t approve CapitalLounge applications; we do.

Meaningless Wall of Text Syndrome

We ask all entrepreneurs who have attended CapitalLounge before to provide a brief “progress report” when they apply to the CapitalLounge event.  The idea is simple.  Deals that seem to making tangible progress in between events are going to score higher and move ahead on the list.  Those that are stale, or just flopping around waiting for someone to write them a check, are going to get rejected. If your “progress report” on the application is a copy/paste text version of your business plan, or doesn’t actually mention any recent milestones for your venture, you turn our vetting process (at least in terms of looking at your deal) into a very simple one.  Fail.

According to GoDaddy, my Venture is Coming Soon!

If you have no web site, and you are using an email address of biz...@hotmail.com, you have relegated the status of your deal to a split second, one-way decision on our part.  Sorry, but in this day and age, there is no excuse.  Even a simple teaser web site goes a long way.  And get your own domain for email, for the love of Pete.

Stealth Company That Will Change the World!
If you are in stealth mode, we understand.  Sometimes you don’t want to reveal what you’re doing until you are ready.  We get it.  But if you apply as a “stealth mode” company, you have to give us something better than these for your pitch:

Early stage stealth startup.

Changing the way we work.

Early idea still.

Mulling my next trick.

While we “get” the importance of stealth mode at times, we also “get” our need to figure out what it is that you do.  Otherwise, we’ll just assume you’re a job seeker, consultant, service-provider, etc., and you get a quick trip to File 13.  And no, we aren’t going to sign an NDA in order to learn about what you do (yes, we get asked that from time to time).

Everyone Will Want to Buy a Thin Llama Wearing Raybans!

If your startup focuses on establishing a chain of weight loss clinics, Llama ranches, or Sunglass Huts, the closest you’re going to get to our event will be the coffee shop across the street.  Come on, already.  Have you not read the event details?  The blog posts?  The rants and raves on our podcast about the criteria for getting in?  If you use the words franchise, consulting, clients, strip mall (“mall” in general), or  importer, that is almost a guaranteed rejection.  Nothing wrong with those businesses, mind you.  Just not a fit for CapitalLounge.  Talk to the SBA or your bank.  They are probably going to turn you down, because that is what banks are supposed to do.  But that should be your first stop.

And for the love of Pete – don’t send an email telling us how “we just don’t get it” because we didn’t put your REI or franchise opportunity on a pedestal.  Trust me.  We do.  That is why you aren’t allowed to come.

Have you been injured on the job? Suffered a car accident?

If you are an attorney, accountant, consultant, etc. , wow … you must be completely incapable of comprehending simple English.   We realize that lots of entrepreneurs (would-be or otherwise) work for service providers.  We really do.  But when you apply to attend our event as an “entrepreneur”, and then we research you online, only to find out that you really work for a marketing consulting company, a financial services advisory firm, etc., we have to stick true to our vision and reject your application.

Additionally, we have to be respectful of our small stalwart band of sponsors who pay us money to offset our costs.  We give them exclusivity in terms of attending the event (e.g. we have a legal sponsor, and they are the only law firm in the room).  Works out well for everyone, except you.

Um.  Jimmy works for our startup.  Yeah, that’s the ticket.

If we reject someone’s application to attend, and then you apply and list that person as your “guest” – not so good.  There is a reason we try and vet the attendees for this event.  If you can’t be respectful of this, then you can’t come and play.

Confucious say “man who have bad reputation, doesn’t get to attend CapitalLounge”

If you are known around town as a slimeball, predator, shyster, trickster, slickster, spinmeister, or just someone who “loves me some me”, you can sit outside and pat yourself on the back all night long – because, well, this is America, and you can do that if you so desire. But if you’ve ever taken advantage of an entrepreneur or investor, asked people to pay to pitch, have a reputation for taking but not giving, provide introductions for a “fee”, or  served hard time because you got caught up in one of Mike Blake’s “schemes”, you aren’t getting in.

You don’t know me, but I was the guy who invested first in Google.

If you claim to be an investor of any level, but:

• no one has heard of you
• no one can vouch for you
• you can’t cite or refer to any past deals that you’ve done
• you don’t have a web site (in the case of VCs)
• trying to find you is like trying to infiltrate the Witness Protection Program
• you wear a seersucker suit, put three gallons of Vitalis on your hair every morning, and live out of a 1974 Chevy Vega

… you can sit outside and invest in the guy who is patting himself on the back, while he tries to take advantage of the entrepreneur peddling the Llama ranch PPM.  I will admit, VCs are pretty easy to vet.  If you are a VC, you have a web site, and have raised money from LPs.  If you are a “corporate venture” type – we’ve heard of your company.  If you claim to be an angel investor, well, you better come strong with your pitch and application, or be referred to us by someone – because out of the box, we just assume angels are service providers, consultants, etc.  It’s much quicker than playing the Google game for 30 minutes trying to figure you out.

Oh man, I’m so messed up.

Any combination of one or more of the above is going to be an insta-fail.  We’re happy to be proven wrong …. we just haven’t been yet.

Cheers.

CapitalLounge

Being a co-founder of StartupLounge, I’m naturally biased.  But hey, at least I’m being honest about it. :)  Our next CapitalLounge gathering is coming up next week, Wednesday, June 10th.  Should be another awesome party for entrepreneurs and investors in Atlanta.  Our old friends J-Cap and DJ from Southern Capitol Ventures (yes, an “o”, not an “a”) are making the trek down from Raleigh, NC, as will the folks from Intersouth (also in NC).  Local investors will be out in full force as well, including Noro-Moseley, Fulcrum Ventures, Kinetic Ventures, Croft & Bender Capital, Arcapita, Grey Ghost Ventures, CEO Ventures, TechOperators, and even the Weather Channel’s venture arm.  And of course, a nice smattering of local angel investors.

If you are interested, you can check it out here.   Cost is free, but there is a vetting process.

Calling All Entrepreneurs: Atlanta!

Speaking of J-Cap and DJ from SCV … they will be in town on the 10th and the 11th.  In addition to hanging out at CapitalLounge on the night of the 10th, they are holding their “Calling All Entrepreneurs” sessions here in Atlanta.  Awesome.  I wish more VCs would do this.  No pressures, no pitching.  Just getting a chance to pick the brain of an investor over coffee.  Very cool.    From Jason:

David and I will be down in Atlanta next week on June 10 and 11. We were an original sponsor of CapitalLounge and will be at that the night of June 10th.

On June 11, we will have Calling All Entrepreneurs in Atlanta from 7-10am. We will find a place close to the ATDC. Again, any entrepreneur or aspiring entrepreneur is welcome to set up a time to come meet with us for 10 minutes. We will try and pack in as many meetings as possible and the coffee is on us! Read my prior post on this so you understand the structure and background. We did  this down in Atlanta a while back and filled it up quickly.

Just email me jason AT southerncapitolventures.com to schedule a time.

CapVenture

Also, don’t forget that the ATDC’s deadline for applications for their annual CapVenture program is on June 16th (the actual sessions are later in the year).  If you aren’t familiar with CapVenture, you should be.  It is an awesome program that aims to educate and equip early-stage entrepreneurs (primarily those seeking their first round of funding).  I have personally talked to several startup CEOs that have gone through the program and they rave about it.  Definitely check it out.

Of course, there are a ton of other events going on, some formal, some informal.   Feel free to drop a note here if you know of another great startup event happening here in Atlanta in June, or tune into the Twitterverse to get plugged in.

Cheers.

As I mentioned in my last post, our next Capital Lounge event is this Wednesday, 8/27. This is going to be far and away the best event we’ve done, on so many levels. More quality deals, more investors (4 to 1 company to investor ratio), and a couple of pretty big announcements, including one in particular that, to quote Mike Blake, that will “change the face of of the Atlanta early stage capital ecosystem.”

There can be no sacrifice of the vision.

If you’ve ever planned a big event before, you obviously know all of the logistics and planning that go into it. CapitalLounge is no different. It’s a ton of work, for sure. But one thing that we do that many other groups don’t do is vet the attendees. This adds an order of magnitude to the effort required to pull off this event.

A key reason for the success of the CapitalLounge event is our vigilant effort to restrict attendance to direct capital providers and entrepreneurs with fast-growth potential. Investors and entrepreneurs are able to get maximum value from the event when they can spend their time establishing relationships with one another, rather than be distracted by other entities (hordes of service providers, job seekers, low quality deals, investor-wannabe types, etc.)

For the upcoming event, roughly one (1) out of every 4.5 applications was rejected for one reason or another. That’s a lot of filtering – and that equates to a lot of work. We have to do it this way – otherwise, we end up becoming the thing that we are trying change. There can be no sacrifice of the vision.

We get a lot of questions (especially from those whose applications are rejected) about the criteria we use, how we review applications, etc. Even though a lot of this information is automatically emailed to the applicant if their application is denied, I thought it might be instructional to provide a little more insight into how we select entrepreneurs, investors, and observers for this event.

Some General Background Info

Much like an investor is going to take just a few seconds to make a quick judgment call on whether or not they wish to look at a particular deal, we do the same. But we have to do it while drinking from the firehouse of applications that come pouring in each time we announce this event. First impressions go a long way, obviously.

95% of the applications that are approved gain that approval generally within a minute of us looking at it. The other 5% come from those that we have to research, those that appeal and change our mind, etc.

Also, because of the volume of applications we receive, coupled with the fact that this is a not-for-profit, grassroots, volunteer community effort, we can’t respond personally to each and every application that gets rejected. Sorry – we have day jobs, too. Please keep that in mind before writing us nasty-grams.

The Signup Process

Before I begin, it is important to talk about the actual signup process. For some reason, some folks seem to get confused about the process, despite it being described very clearly (and in detail) on the site. The first time you apply, it is a 3 step process – for future events you’d like to attend, it is a 1-step process.

First, you have to create a free community account. No biggie – name and email address are basically all that is required.

Second, you have to login, and create at least one active profile. A profile is way for you to model your presence within the ecosystem. Since you can have multiple profiles associated with your account, it facilitates parallel entrepreneurs that have multiple deals going at any given time, entrepreneurs who are also angel investors, etc.

A note regarding profiles is in order. What you put in your profile is important – it isn’t just fluff or crap to store in our database. Obviously, it is the first thing we look at when we are evaluating the merits of you being in the room. If you give us little information to go on, then that’s what we’ll use when we look at your deal. If you get rejected because you put some lame one-line pitch in (e.g. “We’re a software company”), don’t complain when you get denied.

Finally, once you have a profile, you can simply visit the event calendar on our site, and apply to whatever events you want (CapitalLounge, PitchCamp, etc.). Of course, for subsequent events, you can skip steps 1 and 2, since you will already have your profile in the system.

How We Evaluate Entrepreneurs

There are lots of reasons why we reject an application from an entrepreneur – more so than any other classification of attendee. Here are some of the more common ones:

The event is simply full

Due to the extreme demand for this event, coupled with the limited size of our venue, we have instituted a cap on the number of deals that we can facilitate at each events. It is entirely possible that we are simply full for the current event. The chances of this happening are much higher the closer we get to the date of the event. We typically approve applications for somewhere between 125-150 companies for each event.

Geography:

The venture must be located in the Southeast United States (preferably in Georgia) or anticipate a relocation to Georgia in the near future. While we certainly want to pull regional deal flow, deals from Georgia will take precedence over deals from other parts of the region. Again, the closer we get to the actual date of the event, the worse your chances are of getting in if you are a non-Georgia company.

Service Providers:

The primary business of the applicant must not be the provision of consulting, legal, accounting, design, marketing, recruiting or other professional services for cash. This is obvious, and a core part of our StartupLounge mantra. In fact, I’d go so far as to say we helped pioneer the “no service providers allowed” rule in Atlanta. We’re proud of it. It’s a key reason why this event rocks. It’s a key reason why a lot of other events aimed at entrepreneurs are not as successful – because those events are often overrun with service providers, and that scares off most legitimate entrepreneurs and investors.

We do realize that often times, entrepreneurs have to bootstrap their company by earning money doing whatever they can. Often, this means the entrepreneur is not only the founder and CEO of Acme Software, but also a marketing consultant for hire (or some other service profession). I will admit that these are almost always judgment calls on our part. There is no silver bullet. While we want to help every entrepreneur we can, we also have a responsibility to the larger StartupLounge community to preserve the integrity of the event by keeping service providers out. Often times, we’ll talk to the entrepreneur to make sure that they realize that they are there to represent their startup, not their services business.The few that have gone against their word won’t be coming back.

If we do approve the application of someone who also has a services business going to pay the bills, it is absolutely imperative that they represent only their startup while at our event. Representing the services business in any form at our event, be it verbally in conversation, handing out another set of business cards, following up with someone after the event and attempting to sell them services, etc. would most likely prevent the entrepreneur, their guest, and their company from attending future events, and could likely generate some ill-will out there among the StartupLounge community of entrepreneurs and investors. Our community is incredibly protective of the environment that we are trying to create at CapitalLounge, and most violations – even slight perceived ones – get back to us as organizers pretty quickly.

Non Fast-Growth Company

The primary business of the applicant has to “likely be of potential interest” to investors as a fast-growth opportunity. This type of venture will eventually employ between 20 and 500 people, have sales growth of at least 20 percent projected each year for four straight years, and target five-year revenue projections between $10 and $50 million (at least). Typical industries would include (but are not limited to) information technology, healthcare/medical devices, life sciences/biotech, pharmaceutical, nanotech, alternative energy/cleantech, and new media. Ventures within industries such as newspapers, gambling, franchises, real estate, food/spirits distribution, pornography, or other such markets are not a good fit for this event.

While we are certainly staunch advocates of small business, the CapitalLounge event is not aimed at providing the level and type of capital needed to launch small businesses that are generally not considered to be venture-capital type opportunities. These include, but are not limited to: franchises, restaurants, consulting businesses, professional services such as accounting, brick-and-mortar retail opportunities, fitness clubs, health spas, faith-related businesses, real estate development, distributorships, and certain consumer product ventures. If your application described what would be considered a “lifestyle” or services business, we would almost certainly deny your application on this basis.

We do recognize that sometimes, companies that would not initially be classified as a “fast-growth” opportunity could take off, and turn into billion dollar companies. Unfortunately, we can’t predict the future, so we have to draw a line in the sand somewhere.

Freshness of Deals

We strive very hard to keep the event “fresh” for our investor community by trying to get as many new deals in the room as possible. New deals will almost always take precedence over deals that have attended the event at least 2 or 3 times in the past.

Lack of Progress

If it is our perception that the venture has not materially progressed since the last “n” times that you attended CapitalLounge (if applicable), your application to attend will likely be refused. Examples: After attending CapitalLounge for 2 or 3 events in a row (better part of a year!), you still don’t have a web site, your product hasn’t launched yet, you have no PR stream, your expectations of investors were and continue to be out-of-synch with the current market, etc. In short, you seem to be waiting for someone to write you a check in order to further your idea.

We did a lengthy “Under the Bus” segment on this type of entrepreneur in our recent podcast with Noro-Moseley Partners.

Low Quality Deal

If your deal is perceived to be of a level of quality beneath what we consider to be the “minimum threshhold”, your application will likely get rejected. We research each new deal that is submitted prior to making a decision on them. Things that may count against you: not having a web site, having an email address from a free email provider such as Yahoo! or Hotmail, some negative information from your past that we found on Google, you have a day job as a service provider – but no web site for your new venture, you have a web site for your services company but not your new venture, etc.

Yes, this is subjective. We realize this, and it isn’t going to change – because it can’t. Think of this as an aggregate of things. If there are too many yellow flags on your deal, you will likely either get rejected outright, or go into the hold queue pending further research.

I could give you lots of examples of some of the things we’ve seen, but obviously I don’t want to embarrass anyone. Trust me, though – we’ve seen it all.

Lack of Information

If we simply cannot find enough information about your venture to make a decision, we will likely have to reject the application. For example, you have no web site (or the one you provided doesn’t work), and the one-line pitch you provided on your application is nebulous (“We’re a technology company” .. WTF?).

We simply don’t the time to fill in those kinds of blanks. You’ve got to give us *something* to work with.

Sneaking Someone In

You have specified someone to attend with you as your guest, and that person does not meet the established criteria (or does not appear to be associated with your venture). You wouldn’t believe the things we’ve seen. Thankfully, we’ve prevented a lot of them, but occasionally, someone manages to sneak in (or sneak someone else in).

How We Evaluate Investors

Track Record – Known Entities

All investor attendees must either themselves be an investor with a known track record of investing or work for a recognized private equity investment firm.

If you claim to be a venture capitalist, but we’ve never heard of you, and you have no web site – your application will most likely be rejected. VCs have web sites, and their investment histories are easily found through Google. Don’t apply telling us that you are a VC representing a $250M fund, if the only thing we’re going to learn about you via Google is that you used to play penny stocks.

If you claim to be an angel investor, and our due diligence on you does not reveal a track record of investment activity (including deal references, public records searches, references from angels we do know, Google searches, etc.) – your application will most likely be rejected.

If you are an “angel investor” who also sells insurance, you probably aren’t going to get in. We realize that a lot of angels have day jobs, too (most actually do). These are typically handled on a case-by-case basis.

If you have a known track record of angel investing, it gets a lot easier to overlook your day job.If you are already a member of certain (but not all) Angel groups (e.g. AngelLounge), this could help your cause. Being a member of an angel group that is dubious will likely hurt your chances, however.

No Brokers

Investment bankers, capital brokers/finders or other placement agents are excluded from attendance, with the exception of those entities that commit their own capital, and certain wealth managers that represent high-net-worth individuals desiring to make alternative class investments.

If an investor entity offers professional services, they must also have their own capital to commit in order to gain entrance to the event. This is handled on a case-by-case basis. While we (mostly me) do not prefer this model to a pure risk model, the entrepreneur has to decide whether or not to engage this type of investor.

Pay-to-Pitch Entities

If you offer “pay-to-pitch” events for entrepreneurs, your application will likely be rejected. We believe that access to capital providers should be as transparent as possible – we philosophically disagree with the middleman model.

How We Evaluate Observers

Observer slots are reserved for members of the media, academia, certain industry bloggers, government, certain non-profit organizations, and guests that we choose to invite at our sole and absolute discretion. If you apply for an observer slot, and you are not obviously representing one of these entities, your application will be refused.

The Appeal Process

We do have an appeal process in place for those whose applications are rejected, but feel they should still be allowed to attend. Details of this process are contained in the email itself. However, I will say this – repeatedly arguing with us if your application has been rejected is probably not going to help. We have been known to change our minds. We can (and want to be) be convinced.

Generally speaking, though – if you are rejected and you file an appeal, we’ll ask to review your executive summary, one-pager, etc. This is really the only way to really see what the business is all about. We have, in the past, initially ruled out an entrepreneur based on their one-line elevator pitch alone – because it didn’t sound like it would be a good fit for the event – only to reverse the decision after reviewing the executive summary. Several times, actually.

So if you do appeal, come strong.

Easy Ways to Get Rejected (or possibly Banned!) from CapitalLounge

• Lie to us about something
• Try to sneak in when you don’t get in on your own merit
• Try to sneak someone else in
• Treating our event as a sales platform
• Signing up for our event, being accepted, and then not showing up without either notice or explanation
• Screwing one of our investors or entrepreneurs
• Repeatedly writing us nasty grams because your application was rejected
• Make no progress in your venture in the 3 months between events
• Whine about superficial stuff
• Make NO progress… (worth repeating)

Closing

The selection process isn’t perfect, and we realize that. And we iterate it constantly. Any suggestions for improvement are obviously welcome!

Cheers.

The event formerly known as “Capital Connections”, and now simply referred to as “Capital Lounge” will be held on the evening of May 21st, 2008, from 5:30 to 9:30pm (location made available to you once you’ve been approved to attend). This should be another fantastic event, especially as we will be infusing a new wave of angel investors that are actively participating in our AngelLounge events. We’re expecting another raucous crowd.

Attendance will be capped at 250 people. We’ve historically had a backlog of people trying to get into the event, so if you are planning to attend, it would probably be best to sign up sooner rather than later. You can check out photos from past events here.

There are some changes to the event format and signup process, so be sure to read the official announcement.

We look forward to seeing you all at the event! Please continue to spread the word!

Cheers.