Toronto tech company Flixel just raised a $2.2-million seed round, and the company says the key to success was producing an eight-minute documentary-style video about their company story.
“We’d tried to raise $1.5-million last October and then quit in February with just half that goal,” says Philippe LeBlanc, CEO and co-founder of Flixel, which makes software that allows graphic artists to add motion to still photographs, creating eye-catching images that can be used by advertisers.
“In June we went back to new investors with this video to tell the story and within a month we were able to raise more money than what we had intended,” says Mr. LeBlanc. The seed round was led by Extreme Venture Partners, a Toronto-based venture capital firm.
In it, co-founder Mark Homza tells how he was forced to leave Flixel because they ran out of money to pay him. He then flew to L.A. and arranged to get the photos on America’s Top Model. Following the trip in 2013, host Tyra Banks became an investor.
“We had to show part of the drama we went through — so it’s not just an infomercial for Flixel,” says Mr. LeBlanc. “The idea is hopefully you root for the team and are emotionally engaged so you want to fight for the team, which you do by putting in investment dollars.”
Video, often used in crowdfunding campaigns, is a tool to get initial investor attention, says Sean Wise, professor of entrepreneurship at Ryerson University.
“We’ve traded our 45-page business plan for the elevator pitch, a YouTube video and a business model canvas,” Wise says.
LeBlanc says the video replaced the pitch deck, the power point slides normally shown to investors to drum up interest.
“I’d read an article on how when a pitch deck made the rounds, investors look at it for less than four minutes,” says Mr. LeBlanc. “Even though the video’s longer, if the story’s well told, they’re going to engage and spend eight minutes of their time.”
But Steven Gedeon, director of Ryerson’s Entrepreneur Institute, says investors get sent videos all the time — and he doubts that a video alone would convince potential investors of anything.
“When I look at their video, they make a lot of fantastic claims but it’s just a story. As an investor I’d want to see the numbers, to know that they have traction” Mr. Gedeon says. “Anyone who would watch this video and invest on it alone is an idiot.”
Michael Chasalow, director of the University of Southern California law school’s small business clinic, says professional investors don’t invest based on charity and emotion — they need to see the “potential for explosive growth.”
“I don’t know that I would say ‘everybody should make a YouTube video and that’s a way to get money,” Mr. Chasalow says. “There’s a lot of noise out there and I’d say that sometimes the conventional path is not best way to get noticed by investors, but if I’m getting sent 10 or 15 videos, am I going to watch them all?”
In Flixel’s case, if the video did make a difference, it might have been because they’re making a visual product, Mr. Chasalow says.
“The video shows their connection to America’s Next Top Model, and I have to say those earrings that are moving look really cool,” Chasalow says. “It may be that it gives somebody a different vision of the business and it’s a way to humanize the people involved.”