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VC firm's business-pitch bake-off pays off

An online competition to root out entrepreneurial ideas brings surprising results for venture capitalist Tim Draper.

Venture capitalist Tim Draper is always on the prowl for investment deals, but his investment approach recently took a new turn--and yielded surprising results.

Draper, managing director of Draper Fisher Jurvetson, held a contest for entrepreneurs, enabling them to pitch him on their "billion-dollar idea." More than 110 entries were submitted to Draper's AlwaysOn blog, from which 10 winners were selected earlier this month. Last week, those entrepreneurs each pitched Draper in a one-on-one, 10-minute videoconferencing session.

"I'm amazed. I was just expecting I'd have an interesting afternoon. But we got five ideas that we'll take a closer look at," said Draper, who noted he was surprised to find more than just one idea worth pursuing.

Draper, who fielded the presentations from his office in Redwood City, Calif., asked those five entrepreneurs to submit their written business plans for review by his partners.

Although this cattle-call approach is unusual among venture capitalists, it did provide entrepreneurs with more-direct access to those who fund deals, and, in turn, gave Draper a pool of business pitches culled from around the world without ever having to leave his desk.

Craig Elias, founder of InnerSell in Canada, captured strong interest from Draper. InnerSell signs up online sales referral agents, who provide sales leads to suppliers that subscribe to its service. For example, if an agent's company cannot provide a product or service to a potential customer, that sales agent can tap into InnerSell's list of vendors and forward the lead on. If a sale is made, InnerSell keeps 30 percent of the vendor's commission and the remainder goes to the agent.

"It's different from social networking. If you pass along a sales tip to a friend or someone else, you don't get paid. But if you sign up with InnerSell, that tip may turn into money," Elias said.

Canadian start-up OnMark also attracted Draper's attention. OnMark, a management buyout of a work product of ASG Software Solutions, is developing a way to display search results as category listings. Its chartlike display, for example, may feature luxury automobile dealerships in San Francisco, but also include luxury car repair listings and accessory stores in the area, according to Kyle Peterson, founder of the company.

Wireless wanna-bes
Emanuele Todini, founder of Wireless Networks Italy, pitched his idea of a virtual network to capitalize on excess broadband capacity. Although Todini did not have his business model "nailed down," Draper said he was interested in the idea.

"He has no business model, but I know exactly what we'd do with him," Draper said. "That's what we did with Hotmail. They came to us with free e-mail and no business plan."

TotalMass, based in West Sacramento, Calif., will also be sending its business plan to Draper Fisher Jurvetson. The company develops wireless applications and services.

"These guys used too much lingo (in their presentation), but we're still interested. Usually when someone is totally passionate about their idea, they're not as hip," Draper said.

Draper's list of contest winners went beyond technology specialists. The venture capitalist plans to forward a business plan from Luv, Lu to another partner at the firm, who looks at investments into companies that develop and market adult-oriented products.

While the videoconferencing of the pitches at times encountered jerky images and audio that ranked on par with a bad cell phone connection, Draper said the experience was better than a teleconference.

"You can see them. You can see what makes them laugh. You can see their passion for their idea?You can't see their passion on a piece of paper, or in a teleconference," said Draper, noting that enthusiasm is an important component to evaluate before investing in an entrepreneur.

Although the videoconference pitches saved Draper time, he noted the main advantage was that it increased investment opportunities for his firm. He was able to hear business pitches from entrepreneurs all over the world without leaving the office. The 10 contestants logged in from as far away as Italy and Argentina.

Draper, who noted that the contest idea began after an angry reader of his blog characterized venture capitalists as a clubby group when choosing investments to fund, said his firm will likely hold similar contests every quarter via videoconferencing.

"After I saw those comments on my blog, I said, 'Dear so and so, you made a very good point, and, as a result, we'll try something new,'" Draper said.