The Neglected 97% Entrepreneurs Boot Camp: Interview #7 – A Conundrum
What do you do when the value proposition of your breakthrough idea is not readily apparent to the average investor?
That was the conundrum Adib Nasle, founder, and CEO of Xendee faced. The company had developed a data analytics system and methodology that could demonstrate the ROI potential of integrated microgrid energy projects. Clients using the technology could assess the potential ROI value of their (or someone else’s) projects, using the data as part of due diligence, investment analysis, grant proposals and business model development.
Adib, a successful and experienced entrepreneur with multiple business degrees and more than a dozen patents in his name, knew he had something truly valuable for players in the fast-growing $40 billion dollar niche of the energy marketplace. But investors were skeptical, primarily because of the complexity of what Vendee actually did for customers, not to mention the complexity of the emerging microgrid marketplace. He needed a simple and impactful way to pitch investors.
I caught up with Adib recently and had a chance to learn more about Xendee and how Adib came to the Entrepreneur$ Boot Camp.
You developed a really elegant solution to a big challenge that microgrid project developers have, but the value proposition was unclear to the investment community?
I think the underlying complexity of how these kinds of energy projects actually come about and what makes them work financially was at the core of the challenge. Everybody more or less knows that alternative energy is on the rise. Some people know that state’s are imposing carbon footprint regulations that require more use of alternative energy. A few understand the value of localized, off-grid power solutions. But very few really understand what goes into these projects, all the variables that can make or break a project financially. Our technology can assess these projects from a financial return basis, but if you haven’t a clue about these kinds of projects or why they’ll continue to proliferate and thus create more demand for solutions like Xendee offers, then our pitch is pretty hard to digest.
You had to educate investors about the market you serve, not just about your own value proposition to that market . . .
Exactly. That makes pitching, especially when you’re trying to make a lasting impact in a short amount of time, pretty difficult.
How did you come to meet George and enter the Boot Camp?
My father-in-law was a college classmate of George’s and suggested we meet. George understood our conundrum very quickly. He said we needed a “Napoleon Pitch.” We needed to be able to do what Napoleon did when he successfully pitched the Rothschilds about why they should finance his wars.
How did you and George tackle that problem?
One thing he suggested and that we are doing is to change the name of the business to something more descriptive, in this case, Bankable Energy, with Xendee being the product name. That way investors would understand at the outset that we were in the energy business. Another thing we did was find a common analogy investors would understand. We came up with the FICO score. Projects that go through our process end up with a score that rates their risk profile. With that name and the analogy of a FICO score, it was easier to quickly get people to understand our value proposition. When they understood that there is a developing secondary market for the financial paper involved in these deals, they could clearly see the value we added and why clients would use our service.
So clients or customers could be project developers but also the potential lenders and investors that would end up holding paper?
Exactly and since our technology can profile a specific set of variables of a project that could be replicated over and over again, it can be truly valuable to developers of multiple sites and the people who might invest in multiple projects. If one project or site makes sense then investing in ten identical ones makes sense.
Did you find that people could more easily understand the value that Bankable Energy had in the marketplace after re-tooling the name, the pitch and using the analogy of a FICO score to assess project risk?
Absolutely. And that gave me a lot more confidence pitching.
Have you pitched successfully using the new pitch?
Yes, but not with investors. One of the things George and I looked at together was the potential we had to build the business through contracts, raising our valuation in the process, putting together a consistent set of “good news” stories, then going out for a major capital infusion. That way we could preserve more equity. But the process I went through was immensely helpful in pitching clients. And, now I’ve got a pitch that is impactful and informative in the first couple of minutes. When I do approach sophisticated investors I’m confident I can communicate our value proposition in a way that will be compelling and leave them wanting to know more.
So, you went through the Boot Camp to pre-pave the road to funding so to speak, so that when it was time, you’d already be well-prepared?
Yes. I’d raised capital before, but that was a decade ago. Things change. Markets change. Expectations change. I wanted to be sure I was up to speed on what today’s investor wants. Working with George was amazing, because he really “opened up the books” so to speak, letting me in on the secrets of the investment community by letting me walk in their shoes.
Can you say more about that?
Sure. George has this great capacity to be in the world of the entrepreneur and of the investor. It’s a very creative process you go through and very rigorous. Everything we worked on together George set up to constantly make me understand how the investor would view it. He taught me to think like they think. I learned a great deal about why information needed to be presented in a specific way, why my financials needed to be written a certain way, what questions investors were going ask — and what was their purpose in asking.
What would you share with entrepreneurs considering the Boot Camp?
I think George is uniquely capable of helping an entrepreneur tailor their message for specific types of investors, by understanding their pain points and helping to create a message that addresses those in a powerful way. That is so valuable because your pitch really has to connect there at their pain points and addresses those successfully.
The Boot Camp is rigorous but it’s really fun too! George was very accommodating to my crazy travel schedule but expected me to be prepared and present when we spent time together. I think George’s background as a portfolio risk manager gives him a unique vantage point about what leads to success or failure in a business. So, he can point out your weak spots and help you strengthen them. The experience you’ll get working with George is a window into the investor’s world and their mind at a level that most entrepreneurs probably never have experienced.
Key Takeaway: Complexity can be a killer when pitching to investors. Finding ways to simplify the complexity without losing the information and intelligence of your idea or business model can make the difference between a ‘yes’ and a ‘no.’ Investors have pain points — fears of lost time, money and reputation — just like entrepreneurs have. Understanding their pain points and successfully addressing them in your pitch is a key to building rapport and trust. To really do that, you need to work with a mentor who has been an investor and dealt with those pain points, so that he or she can help you understand and overcome them.