Ask Slashdot: How Do You Sell an Algorithm To Venture Capitalists?

dryriver writes "Dear Slashdotters, We are a two man crew who have spent almost three years developing a video processing algorithm that 'upgrades' the visual quality of digital video footage. We take video footage that is "of average quality" — think an amateur shooting on a cheap digital camcorder or on a smartphone camera — and use various mathematical tricks we have developed to make the footage look better — optically sharper, better lit, more vivid colours, improved contrast, enhanced sense of three-dimensionality and of 'being-there realism.' In about a month, we will be presenting our algorithm to some venture capitalists. We have the obligatory before-and-after video demos prepared for this, of course. But there will also be a short PowerPoint presentation where we explain our tech in some detail. Now here is our main question: What, in your opinion, should we — or indeed should we NOT — put in the PowerPoint presentation to impress a Venture Capitalist? Should we talk about how we developed the algorithm at all — what kind of R&D and testing was involved? Should we try to walk the VCs through how our algorithm works under the hood — simplified a bit for a 'non-engineer' audience of course? Or should we stick to talking about market potential, marketing strategy & money-related stuff only? If you were in our shoes — presenting a digital video-quality improvement technology to professional VCs — what would and would you not put in your PowerPoint? Any advice on this from Slashdotters with some experience would be most welcome!"

Answer: You Don't.

[goruka]

You don't sell technology to venture capitalists, you sell a business plan with well done research and projections.
Or, alternatively, you should start by licensing the technology to those interested first (figure out who) and create a steady income from there.
Or create a product that end users might find useful directly, like an iOS app.
One example of successful business model based on an algorithm is elastique [zplane.de], which is used in pretty much all major audio and DJ apps.
Hope this info is useful!

Re:That all depends

[AmiMoJo]

You raise a good point. Be sure to cover all the patents you have on your algorithms. Anyone investing will want to know that they won't be copied the moment they are demonstrated publicly.

You did patent it, right? It isn't obvious or just a combination of existing ideas, right?

Where is version 2 and 3 ?

[DCFC]

If you can explain it in ways they can understand then its probably not worth much and if you do explain it they can share it with others.
You're really lucky you have an algo where they can see the effect, leave it like that.

They want a cash flow over time, which means:

1: Patent protection

2: A version 2,3,4,5, read up on Dolby Studios, they started decades ago doing the same thing but for hissy audio tape, still going N versions later on totally different media.

3: Get the word "mobile" in this. VCs are obsessed with mobile currently, I assume this will make phone pictures better ?

4: They want an exit strategy, is this going to be sold to join people's patent armouries or a firm they can float ?

5. Have you talked to Google, this sound like just what they might want for YouTube and to stop others getting it.

Different strategy

[Ion Berkley]

Here's my take. As others have stated VC's are in this for money, thus you show them the business case and that incudes explaining the barrier to entry - why another 2 bright guys, suitably funded couldn't easily reproduce your efforts. Now my real advice is this: VC's are not interested in small play's, they want to put a significant chunk of money in, and take a large multiple on that back. What that means is they are interested in large $$ opportunities that may take some time to come to fruition ...and that involves plenty things that can go wrong along the way leaving you with nothing to show for it. You are 2 guys, you already have something you think is very impressive to show, you don't really need lots of capital to continue development, it's really just your time. Go shop this to the incumbents in the applicable spaces looking for an immediate sale, Adobe/Apple in authoring S/W, google/vimeo on the backend, go-pro/contour/canon/nikon etc etc on the consumer H/W side. What you are looking for is enough money for the 2 of you to have a nice 7 figure bank balance..which means sell it, go work for the buyer for a while, take the money now whilst there is no obvious competition or the market changes and minimize the risk. Don't hold out to be a bizzilionaire, the chances not matter how good it is are vanishingly small.

Crowdsource it

[olafura]

Just a thought if a lot of people are going to benefit from your algorithm then you could think about having a kickstarter campain to open source the code. With the amount you are looking to get from the VC's. Maybe with stretch goals of a iPad and Android version. You'll get money up front and might also be able to license it to somebody that doesn't like either (lgpl or gpl) depending on the strategy you choose. You could try having the opportunity of corporate sponsorship and trying to contact Google they are probably going to love having something that makes Youtube videos look better. It would trow some money your way because we need more funding of R&D through crowdsourcing. And remember to have some accessories for people like T-shirts.

Re:Tell them

[Gorobei]

Hell, just whip up a website that lets users upload a video and get a link back to the improved version of video (use cloud compute for the first few months if needed.)

Get some word of mouth (look at Youtube videos that could benefit - mail the uploaders.) If people actually use it, you can and will get buzz fast on the tech sites.

If you have growing users/day, the VC pitch will be much easier.

Re:Tell them

[grcumb]

how it will make them money.

... And then play a single 'Enhance... enhance... enhance... print that!' scene from CSI and say, 'We do that.'