With nearly 40% of venture backed businesses failing, according to the National Venture Capital Association, preparation is key to defying these intimidating odds.
While many businesses focus on the pitch, it’s really the preparation that can help reassure potential investors and increase your odds of getting a capital infusion, says Bernard Perrine, CEO and co-founder of HipLogiq. The Dallas-based technology firm recently closed a deal for $5 million in Series A funding from Carriage House Partners, a Connecticut-based private investment company.
Perrine provides these quick tips on how a start-up should prepare for the pitch process.
Know Your Audience: Due diligence is important when seeking out venture backing. Even if the business offering is brilliant, investors want to know, “do you fit into our portfolio?” says Perrine. “All VCs have industries they focus on; if you’re a tech start-up, you’ll die a fast death if you present to a VC that focuses on oil and gas.” Researching prospective firms and key verticals or industries each firm invests in will be crucial in nailing down the appropriate organization to pitch.
Create An Offering That Fills A Void: It’s not enough to have a “cool” product, says Perrine. Once the novelty wears off, are you pitching a solution that your potential customer will find it difficult to operate without? “Products must solve a true problem,” he adds. “Venture capitalists are looking for substance.” Understanding how your offering will be utilized will help drive pricing models and annual revenue projections, as you determine how quickly the business will grow and potential revenue streams.
Articulate Market Trends: While investors may gloss over macro statistics about the particular industry your offering fits in, articulating market trends, outlook, and your positioning within the space will assist in determining short-term and long-term risks and returns. It’s important to know “what’s the speed of the market?” says Perrine. “The faster you’re out there, the faster VCs make a return on investment – which is why they’re in the game in the first place.” On the same note, evaluating the competition‟s core competencies and your differentiators will be crucial. “Market research will give you solid numbers to help you competently and credibly communicate the opportunities and hurdles.”
Take the First Gamble: While some investors may want in on the ground floor of an idea or concept, Perrine suggests building a “minimally viable product” (MVP), before even pitching your business. In other words, “build, and then continue to enhance your product,” says Perrine. “If you can enhance and sell your MVP, that helps investors when evaluating your company.” A MVP, or the most basic version of your offering, also helps start-ups get a sense of customer‟s core needs and features that can be improved or discarded. This also proves to investors that you’ve made some investment in the business.
Manage the Pitch Process: While shows like Shark Tank depict a lightening round style pitch process, the actual pitch process can last upwards of six months, as you go through multiple meetings, explains Perrine. Your initial presentation should be more conversational unlike an elevator pitch. It’s ok to ask potential investors if they have any questions as you walk through your initial presentation or if they understand the stats and key points being presented. Asking for feedback during or at the conclusion of your pitch will help strengthen your presentation for future meetings.
Let’s connect! Find us on LinkedIn and get the discussion started. How are you and your peers preparing for your pitch?