So I took an NFT business to a Small Business Administration Event….
The importance of engaging small businesses in a Decentralized World
As a founder you are constantly thinking about sources of funding for your business, especially early on. Revenues often take time to offset costs in technology, and expanding fast takes a precedent as competition hone in on your once novel idea. As a web3 founder I had seen the checks firms like A16Z and various protocols were writing and had applied for any that I could think of in order to get the golden stamp of approval and some runway for my company Educoinapp. It was with this in mind and many rejections later, that I found myself at the Small Business Association of Maryland’s annual business plan competition in Salisbury, Maryland.
While you may judge, I know I did at first, it should be noted that of those invited over 1/3 generally receive some portion of non-dilutive grant funding from the pot of over $100,000. For a founder just trying to make payroll this was not something you turn down. So we packed up our laptops and headed east in anticipation of this event. What follows is an account of the day and what I learned at this event.
Set-up and Pitch Preparation
From the beginning I knew something might be a little off with this competition. The website to apply seemed to be written in a custom format pre-Wordpress and asked for a detailed business plan per the Small Business Administration standards that would make most web-3 white-papers look like sci-fi by comparison.
Going into pitch practice I learned that my company pitch would need to be done in under 1 minute and that no visuals were allowed, with the focus being on a five minute Q&A after the pitch. Additionally we were expected to have a booth which displayed our product during the entire day of the event. While the pitch was nothing new, occupying a physical space was. Our mobile design team sprung into action making visuals and we quickly printed off some fliers explaining the basics of NFTs and our business model with a scannable QR code to boot. We were set, or so we thought.
Meeting the Judges
Upon arriving my partner and I immediately noticed that this was not like the other pitches we had done. Across from us laid a rubber hand for stroke victims to utilize during hand washing and to our right a cleaning service which partnered with local prisons for workforce placement. While both were wonderful businesses, these were not likely “unicorns” in the making. As the day went on we would see a mix of mobile apps and other NFT projects roll in, but this was certainly a minority in a room of largely conventional service and physical product businesses.
As the judging began various professors and advisors paid us a visit, and it became clear that we may have missed the mark. While we focused on the core aspects of our business (class listings for highly sought job skills and workforce development and placement), many found it overwhelming and hard to track a business so engrained in technology and current trends. The judges were generally older in age and it showed when it came to the technical evaluation of our product. Jargon was an immediate turn off, and those that did know what an NFT thought more of Beeple than Vitalik. The pitch did not go much better. Questions around “decentralizing education” gave major concern to university employees in attendance, and ideas around isolating the most critical skills and stripping away the rest didn’t go much better. But we remained hopeful, after all we had to be better than the cleaning service right?
Results and Takeaways
Wrong. We received no grant funding and while we did make some promising connections, there was no sugar coating that us and the other technologists in the room were not what this group was looking to sponsor and fund. On the long drive home I wondered if this day on the eastern shore had been a waste or where I went wrong. Refusing to admit defeat or not see the value in any obstacle I made the following conclusions around my time at the Shore Hatchery Pitch Competition:
Good businesses can be explained in a minute.
While the elevator pitch format was nothing new to me, it always does amaze me how over time my pitch seems to change. Problem, solution, traction, etc. there are tons of ways to format a good pitch and decide what to include, what’s important is that you know your business and audience well enough to unpack it in a way that is compelling and makes sense. Working in web-3 you see pitches that promise the world and others that require a PhD to understand. I always wonder if you cut the fat and got most companies down to their minute pitch if the hype in web3 would be what it is today.
A decentralized server which uses game theory to cover costs is compelling (unless you live in Eastern Maryland), but many web-3 businesses are not. For the most part the core service or product in most web-3 businesses don’t perform a valuable function. Looking at web2 many of the best applications were merely interfaces to a great business, such as creating a network of on-demand cab drivers. The 1 minute pitch is an over simplification, but it is not a bad way to get passed the BS and see if what you are buying is really a business at its core.
Web-3 is not an every man’s internet.
While I have seen rural farms in Oklahoma embrace blockchain technology, the reality is that for much of America the concept of a blockchain is still extremely confusing and archaic. Going to this event even the crowds of younger entrepreneurs struggled to grasp the technology behind our business or why they needed an NFT to apply for a job. While we may think we can build web3 with Redditors alone, the reality is that Apple and Facebook are built on everyday people and businesses engaging and using their product for everyday tasks. Figuring out how to reach mass appeal remains in my mind the biggest hurdle to web3 reaching its consensus valuation.
Is conventional funding dead?
After multiple weeks of learning and refining my business plan to match the stringent 40 page requirements of the SBA I contemplated the current and future state of business and funding. While I understand the role of banks is to keep their members money safe while earning interest via loans, the process felt excessive and restrictive in the types of businesses it aimed to support. After spending days on grants and traditional business school type planning I began to understand the appeal of cutting corners and using crowd funding, angel investing, and DAO methods to raise capital more quickly and without all the projections and explanation. While diligence is important, and does make a founder reflect at a certain point you are just getting deeper and deeper into a story you are crafting about a future you are predicting. It sounds like a science, but in my mind if it takes 25 pages to explain it is either a public company or a long winded promise of future execution based on current traction.
So is funding the first thing to go in web3? Probably not. While the conventional route was not for us, for many businesses it is. The process of getting your numbers together and making a plan is still important, and not every company can code their way to growth or promise 100x returns. The fact of the matter is we are a high risk business in an extremely volatile market, and most do not want to stomach the risk to invest in a company like ours.
So why were we invited to this event? I have no idea. From what I can tell they either wanted to say they invited us to check a box or did not read my application. Those that did read our business plan at the event seemed to have absolutely no idea what I was talking about, and that’s ok. The SBA exists to support local entrepreneurs in reliable ventures and that ain’t web3, at least not yet.
As always thanks for reading and to learn more about my venture visit Educoinapp.com.
