If you’ve ever watched Shark Tank, you’ve seen what happens on stage at a pitch contest.
A hungry entrepreneur with five minutes to make or break their fate urges an audience of investors to believe in their business enough to bet millions of dollars on it.
As a slew of regional pitch contests draws nearer, some Wilmington founders have already applied to pit themselves against one another for a chance to tell their story on stage. They’ll be the first to tell you the contests are grueling – so why do they keep entering?
Startup founders are on the hunt for capital. Pitch competitions and venture challenges are often the most accessible ways to gain an audience with interested investors. But pitching a high-risk investment is not a simple task.
NC BioTech and the CED Venture Connect are two chances for entrepreneurs to gain an audience with investors in the early months of 2024.
Rachelle McCray, CEO of Wilmington-based startup Wisely, applies to many pitch competitions across the country to find capital for her business. She recently participated in a pitch competition in New York, which involved an intensive 10-week preparation beforehand. She was chosen as one of 20 companies in the world to pitch her business, hoping to win the top grant of $1 million.
Although she didn’t walk away with the grand prize, she said the process was still worth it due to the networking and visibility the competition gave her company.
“It takes a lot of grit. You have to have determination, and although Wisely didn’t win this year, we have every intention of going back next year,” she said.
This is the grind of a founder in the early stages of financing their company. It takes an average of 40 pitches to raise a half-million-dollar seed round, said Jay Bigelow, head of entrepreneurship at CED. Bigelow’s Raleigh-based organization organizes CED Venture Connect.
That number could be closer to 100, said Will Baird, founder and CEO of Wilmington biotech startup Boreas Monitoring Solutions.
An event like NC Biotech’s Venture Challenge does name a winner, along with some runners-up, all of whom get a cash prize.
Baird is no stranger to the pitch competition. He won the NC IDEA SEED grant in 2023, taking home $50,000. He also won $10,000 from the Big Launch Challenge in the fall.
“Maybe someone won’t give you money the first time, but maybe the next five, six times,” he said.
He received support through the Wilmington startup ecosystem when going through the NC IDEA SEED Grant application process early last year. Jim Roberts, of the Network for Entrepreneurs in Wilmington, and David Reeser, of Wilmington biotech startup OpiAID, who’s won the SEED Grant himself, helped Baird during the process.
Baird applied for the grant in 2022 and was passed over, he said. NC IDEA deemed his business too young, as it still needed a completed product. His now completed and patented device, used to monitor cryogenically frozen reproductive cells, has garnered more trust from investors, he said.
Reeser said he didn’t win the NC IDEA SEED Grant the first two times he entered.
So far, all of Baird’s funding has been through angel investors, grants and nondilutive funding. He said he sees 2024 as a better year for venture capital now that he has a marketable product and has not applied for CED Venture Connect or the NC Biotech Venture Challenge.
Angel investors and grants are advantageous for startups because it is money the founder does not have to pay back later. However, according to Roberts, having a company wholly backed by grants is not conducive to eventually acquiring venture capital.
“Investors don’t like companies that just get grants,” Roberts said. “They have a bad reputation of being more of a science project than something that’s marketable.”
The Silicon Valley Bank failure in the spring of last year reminded investors of the risk involved in tech startup financing, Bigelow said. Suddenly, their focus shifted from potential growth to profitability. He said fewer deals had been made by the end of 2023.
That’s not to say there wasn’t any venture activity in Wilmington last year. Some startups got funding, including supply chain management software startup Ohanafy, which raised $2.8 million in June with partial investment from Cape Fear Ventures.
Pitch competitions and chances to connect with investors allow entrepreneurs to gain reps in pitching their vision, Bigelow said, even when venture capital is sparse. He said it forces entrepreneurs to focus on their mission and why their business will succeed, making a better founder.
“The most important is just to figure out how to communicate your story,” he said, “what your plan is, what your strategy is and how you’re going to execute it.”