Gumball Capital

Gumball Capital recently competed in the JP Morgan Good Venture Competition as finalists for a grand prize of $25,000. There were seven finalists selected from a group of around 125 applicants, so right from the start we felt incredibly privileged. Not only did we get to fly out to New York City for the final competition, but all of the expenses were paid for by JP Morgan (which is great, especially regarding the down economy). As a group, it was myself, Salina, Erin, and Jeff who put together the proposal and were the lucky ones to fly out. Overall, the point of this blog post is to lay out what we did to prepare, how the actual event transpired, and finally what lessons learned we would like to share.

How did we prepare?

The competition was set up as a 30 minute pitch. 20 minutes for presenting, and 10 minutes for Q&A. Our slideshow had to be 10 slides long, and had to include a number of things like background, target market, financials, how we would use the $25,000, and why we matched JP Morgan’s investment philosophy. Over the course of three weeks, we prepared our own sections, created text for our slideshow, met early, often, and even more often as the competition came closer. We practiced in full suits, in front of anyone who would listen, and asked friends with specific skill sets to critique certain aspects of our pitch. The night before we flew out, we all pretty much pulled all-nighters putting some final polish on our presentation and then got into the taxi to the airport at 4:30 a.m. Thursday morning. After we arrived in NYC around 3:00, we got some food, practiced our pitches some more, ate some delicious New York pizza, and caught some sleep before the big day.

What happened at the event?

The morning of the event, we walked over to one of JP Morgan’s buildings (apparently they own quite a bit of downtown real estate). When we arrived, we were essentially escorted to the floor that the event would take place, and received our introduction that said when we would be presenting, when we would be touring some of JP Morgan’s facilities, and when we would be able to sit down with a recruiter and ask questions. We ended up being the third group to present and didn’t have our other activities until later in the day, so we spent the time practicing once more before our pitch.

The actual pitch that we gave was absolutely amazing. Everyone did a great job, remembered all of the points they wanted to convey, and we hoped that we had inspired all of the judges. The surprising aspect is that we had prepared to be asked some really hard, in-depth questions about our financials, assumptions, and why we did what we did. None of those questions existed. I think the hardest question we received was “Why do you use Kiva? What metrics are you using to measure the impact of this method?” I believe the reason why it was so hard is because we didn’t expect it at all. To me, it seems like asking the question, “Why do you bank with Wells Fargo instead of starting your own bank?” It’s simply an easy way for us to scale our impact. We could spend the $800+ per ticket to fly out to sub-saharan Africa, make the loans ourselves, and then stay and see if we can help in some way, or we can take the $2400+ and loan it through Kiva and impact potentially 96 entrepreneurs just on what we save in plane fare. And this is assuming we could set up the same infrastructure and effectiveness that Kiva has done… Overall, it seemed like an odd question and definitely one to think about for future competitions.

What were the results and lessoned learned?

Long story short, we didn’t win. Another group, which had a great idea to build houses and schools in El Salvador won. We as a team were fortunate enough to hear their presentation, and as I assume with all people that don’t win, they believe they have a better presentation. While we don’t think this is the case with us (we really feel we would put the money to better use from a return on investment and impact standpoint), we do have our theories as to why this is the case. Below is JP Morgan’s official judging criteria (based on a follow up email).

• Sustainability: Top presentations concretely demonstrated that their organization’s mission, and more specifically the project/element where the funding was going, was sustainable and would be able to continue to sustain and support itself even after the potential funding from J.P. Morgan had been used.
• Personal commitment: Teams that were actively involved with the organizations they were pitching impressed the judges and received higher scores than those that had not engaged directly with the non-profit. The level of engagement varied but examples included: trips to visit the impacted region/population, starting a chapter at your school/university to help support the cause, serving as an intern for the organization, etc.
• Financial analysis: One of the most important criteria that the judges used to evaluate all of the presentations focused on the depth of the financial analysis presented by each team. The judges were looking to evaluate the following: how the funds from J.P. Morgan would be spent, how additional funds would be raised to sustain the project/mission, the specific ways the funds would benefit the region/organization/population, and where in the non-profit lifecycle the funds would be used.

Was our pitch sustainable? Yes, the Gumball Challenge loans student teams $27, which then turns into some kind of return, which then allows us to make the same loan of $27 to a different other team next year and also put the profits into the Gumball Fund, which is a pool of money that gets loaned out to entrepreneurs, paid back, and reloaned out again. Essentially, both sides of our model continuously recycle funds, which is great!

Was there personal commitment? Absolutely. Gumball Capital is an organization that exists from at least 6,000 quality, unpaid working hours. Everything that we have, from our promo videos and graphics to website and marketing materials are all student produced. Personal dedication? Check!

Was their financial analysis? More than anyone else we saw. Most groups went to the point of explaining the budget and how the $25,000 was used, but didn’t go to the point of explaining the return on investment, social value created, or anything of that nature. For a pitch to investment bankers, it seems to me that this would be one of the most important things to focus on. As such, it surprised me that there wasn’t more of what we did.

So why didn’t we win? This is a completely personal, subjective, and obviously biased analysis of the situation, but I think it was two things. Can what we do be explained in a newspaper headline (how simple is the idea to communicate)? The winners had “JP Morgan provides $25,000 to fund El Salvador buildings and school.” Gumball Capital had, “JP Morgan provides $25,000 and turns it into $1,050,000 in economic and social value.” While it sounds impressive in its own right, it isn’t concrete or emotional (which leads to my second point). While we are incredibly passionate about what we do at Gumball Capital, we had a hard time explaining the emotional draw. Poor people in El Salvador is more tangible than making loans through someone else’s platform to poor people.

Conclusion

The JP Morgan Good Venture competition was a great opportunity and one worth repeating. Knowing what we know now, though, we would adjust our pitch to be explain our emotional story throughout our pitch. Not everyone can nor should go to the developing world and work hands-on to help eradicate poverty. While it appears beneficial on the surface, it is not an effective usage of resources. Nearly 2 billion people still live on less than $2 per day, and it’s estimated 1.5 billion people could still benefit from microfinance related services. The average loan is still quite small for these people, and when we need to explain how best to reach out, I feel it’s important to leverage the existing microfinance infrastructure (Kiva, for example), rather than spend the $800+ to fly people out there who may not even be able to provide enough value to make up for the opportunity cost in loans that they can no longer provide. It’s an important question worthy of much research and debate, but one that gets to the heart of the issue: how can we end the devastating cycle of poverty for all people of the world?