I recently attended the final round of pitches for twelve early stage, local tech startups, and was privileged to witness a new generation of exciting and energetic entrepreneurs.
While everyone there had already been through a few selection rounds involving applications, business plans and interviews, this was the first time there was real face time with all stakeholders.
The thing I was most impressed by, however, was how well the investors managed the process (to extract the information they needed to make their decision). I actually learned a lot from the way the investors guided the startups through the pitching process, and I thought I would share a list of three of the more important things that rubbed off on me.
1. 30 second elevator pitch
I found that when meeting potential investors face to face, the most important thing to get right is the 30 second elevator pitch.
Investors are busy people. They have heard hundreds, if not thousands of ideas, and don't want to get bogged down in minute details and complex explanations (at least to start with).
Here's what they want to know:
- Who you are
- Your idea (it should take no more than a sentence or two)
- What you need
The most important part of the elevator pitch is point 2. You have to distil your idea down to one or two sentences, and that may not be easy, depending on what your niche is. Bottom line: if you can't instantly stand out as a proposition with real potential you are going to struggle.
In fact, some of the better pitches I heard didn't even take 30 seconds, yet gave the impression that those people understood what they were doing.
A slick elevator pitch is not just about getting an idea across, it's about selling yourself as someone to do business with.
2. Differential analysis
With a great elevator pitch under your belt, it is likely that, at some point, an investor is going to want to explore your proposal in more detail. No matter how new or brilliant you think your idea is, many of these investors will not instantly share your enthusiasm.
If you haven't done a proper analysis of the competition in order to see exactly what it is that sets you apart, you might even find that you actually learn about someone else already doing what you do... from the investor.
That's not a good result.
Don't go anywhere near an investor until you can explain, in plain English, what distinguishes what you do from everything else out there.
Having said that, investors also understand that not every new venture can be a game changer. If you aren't reinventing the wheel then make sure you can provide a compelling reason(s) why you will find a market.
This leads neatly to the next point...
A good idea isn't enough to convince investors to part with cash. You have to pair that idea with a definable market, and show how it will generate revenue.
This is where we come to the crunch.
Investors want to know that somewhere down the line (and generally not that far) there will be a stream of revenue that can be grown.
One of the things I noticed about many of the technical startup pitches I listened to was that they had a clever idea, which could be implemented, but little idea about how to get people to pay for it. Many ideas were "neat", possibly something I would use, but not something I would pay for. And that's not good enough.
There has to be one or more compelling ways to make money from the business.
Overall, what investors want are people who can demonstrate that they understand their offering, and have the vision and drive to take it forward.
What else would you say is vital for pitching investors in the seed round? Share your tips and experiences in the comments.