Tough Love for a Web Services Company

Our columnist offers a no-holds-barred critique of a startup's financing pitch. Her advice? Stay focused and get advisers on board quickly

by Christine Comaford

In February, 2006, George and Carol Anne Tran became concerned about the declining quality of U.S. public education. Year after year, they argue, money is being taken away from budgets while education standards slip further and further behind the rest of the world. To help make a difference, the Trans decided to build an online engine to fuel social change through entrepreneurship. The result is their Web services company DingoDaddy.com.

This week, I'm critiquing the financing pitch that they submitted to me. Below you'll find their pitch, followed by my assessment of each of its 10 sections, which range from describing the "pain" their business will try to remedy to its business model to key milestones.

While many of us think the challenges that apply to our specific businesses are highly unique, I think you'll agree that countless similarities exist across businesses when it comes to the pitching process.

Section I of George and Carol Anne Tran's DingoDaddy.com Financing Pitch (in which they describe the "pain" their business will seek to remedy)

1. Nonprofit organizations (NPOs) are constantly seeking funding to support their organizations, and have little control over the amount they receive using traditional fundraising models.

2. Mass-media marketing effectiveness is on the decline. Typically, a 3% response rate from direct mail is an acceptable benchmark. However, this means that 97% of the money is wasted on customers who are either uninterested or not ready to purchase their products.

3. Consumers don't like watching advertising or receiving junk mail, but are always looking for new ways to save money on products and services they want to purchase.

My Critique of Section I: The "Pain"

Great. The market pain is spread across three sectors: nonprofits, for-profits (you should state this more clearly in item No. 2), and consumers. Thus they'll all be possible targets to help you in reducing that pain. The more sectors that experience the pain your company is seeking to remove, the more likely your company will succeed.

Section II: The Solution

Our solution addresses all three of the above "pains" by providing NPOs an online-classifieds and Request for Proposal (RFP) service that they can offer to their supporters through a 50/50 co-venturing arrangement.

DingoDaddy.com features a unique reverse-auction RFP Web site in which consumers can list what they want to buy or services they want to have performed, and have vendors submit bids for their business locally and globally.

By offering a service where customers voluntarily raise their hands and ask vendors to solicit them for products and services, DingoDaddy.com is providing a valuable lead-generation service to businesses. Through our service, businesses are now able to contact customers who are ready and are interested in purchasing from these businesses.

Here's how our service works. For example, we are partnered with The Arc of Lane County, an NPO in Eugene, Ore. They send a notice to their support base (consumers) via direct mail or e-mail about our service. When a supporter goes through arclane.dingodaddy.com and posts an ad, we will pay The Arc of Lane County $1. When a commercial customer sees an RFP ad posted and wants to contact the consumer to submit a bid, they pay DingoDaddy a $19.95 to $49.95 membership fee. For that, they are able to submit an unlimited number of RFPs to customers. That membership fee is split 50/50 with The Arc of Lane County residually.

My Critique of Section II: The Solution

I would rewrite this section to be more hard-hitting. You previously stated three sectors in which pain exists—now reiterate these three sectors in the same order while providing the solution to each sector's pain. Please choose common terms for consumer/customer and business/commercial customer—it's a bit confusing as is. Also, I am assuming the revenue share for the nonprofit is evergreen.