Jonathan Harooni, 23, and David Matalon, 22, two bright and eager New York guys, are looking for some cash. And they are hoping against hope that the Internet gravy train has not passed them by. Ideally, they’d like $3 million, but they will settle for $800,000.
Believe it or not, twentysomething dreamers like Messrs. Harooni and Matalon are still to be found amidst the wreckage of the dot-com flameout. Their company is called Offyx: It is 14 months old, it has 10 employees, and it outsources the information-technology needs of small and midsized companies. They have a Web site, too–Offyx.com.
They have not burned through all their cash yet–$500,000 remains in the bank–but the clock is ticking. They are booking $25,000 a month in revenues now, and they need the cash to ramp up their marketing effort and to hire a full-fledged sales force.
But times being what they are, Messrs. Harooni and Matalon have been finding it a bit difficult getting face time with venture capitalists. And these days, no face time means no cash, and no cash means bye-bye to their youthful and still-stubborn dream of an Internet pot of gold.
“I’m not going to lie,” says Mr. Harooni. “I’m motivated by money, and I am in this business to make money.” The time had come for desperate measures.
So there they were, on a Wednesday afternoon at Baruch College, signed up for a speed-pitching workshop–a decidedly weird one-hour event where 40 or so pre-selected entrepreneurs get five minutes to make their pitch to a panel of mostly New York-based venture-capital investors. Call it the Gong Show of the Internet age: An entrepreneur gets five minutes of face time with a V.C. investor; once those five minutes are up, a bell rings and off he goes to the next investor. The V.C. guys listen to the spiels and maybe, just maybe, come in with some money.
All of this takes place in a drab conference room with ugly carpets and bad acoustics–an enormous distance, psychically and otherwise, from the leisurely two-hour meetings over lunch with the folks at Flatiron Partners. Those days are over. What better proof than Flatiron Partners’ decision in May to abandon their high-rent Silicon Alley office space overlooking the very same three-sided building for which they were named, to instead share midtown office space with their main backers, J.P. Morgan Chase?
That is why Messrs. Harooni and Matalon have ponied up $1,000 (included in the price: a videotaped prep session with a C.E.O. coach) to the people at Mindshare Ventures, the event sponsor, for the opportunity to spin their pared-down tale.
Waiting outside the conference room, the two pals now have to choose who will be the pitch man. According to the rules, only one person per company is allowed in the conference room.
“Do you want to flip a coin?” asks Mr. Harooni of his co-chief. He is dressed for success in a pinstriped suit, and his long hair is slicked back to his shoulders. His grin is cocky; Mr. Harooni seems accustomed to playing the odds–a carryover, perhaps, from his days as an interest-rate swaps-trader and Nasdaq market-maker at Goldman Sachs.
Mr. Matalon, dour and heavyset, with tufts of hair poking out from his shirt, has more of the dot-com look to him. He wears no tie, just slacks and a jacket. He agrees to the coin toss.
“Heads you win, tails I win,” says Mr. Harooni as he flips the quarter up in the air. Heads it is: Mr. Matalon will do the pitching. As the parade of entrepreneurs marches into the pitch room, Mr. Harooni takes his partner aside. “Now, listen, David, don’t be arrogant,” he warns. “And if anyone asks you about the youth thing, be upfront and deal with it.” Mr. Matalon nods as he scans over his list of bullet points.
Mr. Matalon and Mr. Harooni, both of whom hail from Great Neck, Long Island, met as fratmates at New York University. Mr. Harooni was the brains–he later transferred to Columbia, which he breezed through (with a 3.9 G.P.A. in economics) while also holding down a number of Wall Street jobs. Mr. Matalon styles himself as more of an entrepreneur and kept office hours while in high school, teaching kids and parents how to use their computers. In March 2000, just as the Nasdaq went pop, they got Offyx off the ground.
Inside the pitch room is a long row of V.C.’s, each one sitting inside a cubicle behind a desk with an empty chair before them. Affixed to their shirts are green name tags adorned with a ribbon. Mr. Matalon makes for an open chair and starts in on his pitch. “So I’m Dave Matalon, co-C.E.O. of Offyx. We provide outsourcing for the I.T. departments of small companies. Our message to clients: Get on the Internet, we will take care of all your I.T. needs. We are real niche players. My partner and I, Jon, started the company 14 months ago. Jon has the banking background, Goldman Sachs. I am a start-up guy, focusing on technology.” Mr. Matalon’s face is flushed from the exertion of it all; his hands wave wildly in the air. One wonders if the C.E.O. coach would approve.
The two investors seem bored, their eyes flitting about the crowded room. “Hello … are you there?” prods Mr. Matalon. A bit embarrassed, the V.C. guys snap back to attention. “So we have a million dollars in financing–half a million from I.B.M. and Cisco in equipment financing–we launched sales two months ago, and we are looking for $3 million, 800,000 of which we are looking for today–tranches or bridge loans or cash advances. The money will be used for sales ….”
Suddenly a bell rings, followed by a voice belting out over the low rumble of V.C.-entrepreneur chatter. “O.K., time is up, everybody rotate. Say goodbye. Move over now. It’s a grr-reat day to get funded.” Running up and down the back of the room with a cordless mike in his hand is Rick Friedman of Mindshare Ventures, an early-stage private-equity investor, conference organizer, and the sponsor and originator of the event. With his out-of-season tan, two-day-old stubble and the mike in his hand, Mr. Friedman’s look is more Pat Sajak than John Doerr. Indeed, one of his claims to fame is his role as the originator of Dance Fever , that late 1970′s disco-dance television show.
Today, though, his job is to keep people moving–hence the bell and the microphone.
Cut off in mid-sentence, Mr. Matalon moves over to the next cubicle, and on to another pitch and another glassy-eyed investor. “We are looking to reach a million in sales, we want $800,000 today …. ” Ten pitches and a little more than an hour later, he is finished and, stumbling out of the room, he is met by an anxious Mr. Harooni.
“So did you get any money?” Mr. Harooni asks.
“I don’t know … we’ll see.” Mr. Matalon lets out a long whoosh of a sigh. “It’s crazy–you only have five minutes, fucking bells ringing in your ears, this guy is screaming at you and there is all that noise. I don’t know; I’ve got no faces. But at least I got some business cards. We’ll start calling them tomorrow.”
Just then, one of the V.C. investors walks by. Mr. Matalon grabs him. “So did you get through it?” he asks. A blank look from the investor. Then it comes to him: That’s right, the twentysomething computer geek. “Yeah, I remember you guys,” he says slowly.
So how did they do? “It was fine, perfectly fine. You guys did well. Overall, I wasn’t confused.” Thank goodness for small favors.
It was time for drinks in an adjoining room. As the beer and wine flowed, entrepreneurs did what they could to corner the men and women with the money. Messrs. Harooni and Matalon, however, were doing their schmoozing with the bartender. But The Observer was curious. Would the kids make off with some cash? “I think it’s a fairly promising model,” said Bill Schmitz of Safeguard Scientifics, who had heard Mr. Matalon’s pitch. “But it’s not for us. Microsoft may compromise it a bit, too. God bless them, though, if they can make a go of it.”
Within 48 hours, four of the V.C.’s had called the boys from Great Neck to set up longer meetings–ones where the gong, if there is one, will presumably be silent.