Starting Up: Learning to Pitch

Starting Up: Learning to Pitch

By DIANA RANSOM

From smSmallBiz.com

Ken Gaebler knows that winning investor money is all in the pitch.

A serial entrepreneur, Gaebler has raised $24 million
for seven companies since 1995. Now, he sits on the other side of the
conference-room table, as president of private-equity firm Gaebler
Ventures in Chicago — and routinely watches newbie entrepreneurs
present their ideas in a bid for funding.

"The younger you are and the less of a track record
you’ve established, the tougher it is to raise funding," says Gaebler,
who’s seen business owners with great concepts lose out because
presentations are weak or incomplete. That’s why people with no
experience really "have to package themselves up better," he says.

The best presentations come from entrepreneurs who
have thoroughly prepared for that big meeting or chance encounter — and
are expecting the difficult questions. And whether you’re speaking to a
room full of venture capitalists or a lone angel investor, it’s
critical to have a compact description of your great idea, business
investors and consultants say.

The Elevator Pitch

If you find yourself schmoozing with an angel — that
is, an affluent individual willing to invest in your start-up — at a
cocktail party or, in fact, in an elevator, be ready with both the long
and short of your business idea.

However, during chance encounters, it’s best to keep
it short, says Bill Reichert, managing director for Garage Technology
Ventures, a seed-stage and early-stage venture capital firm based in
Palo Alto, Calif. "As an entrepreneur, you have 15 to 30 seconds to get
the investor to invest another 30 seconds in you," he says.

Bear in mind, a successful pitch is not about
explaining your business in all of its brilliant detail. But rather,
"it’s about convincing the investor to go the next step," Reichert
says. Be as clear and concise as possible and make doubly sure you skip
the hyperbolic language. "The last thing a business investor wants to
hear again is: ‘We’re going to be the next Google,’" he says.

Deliver your pitch much like a reporter tells a news
story, says Glenn Okun, a clinical professor of management and
entrepreneurship at New York University’s Stern School of Business.
Lead in with a catchy opening line and then answer the following
questions: What is my value proposition? Where does my competitive
advantage exist? Why is there a competitive advantage? Who are the
critical members of my team? And lastly, when will product development
end and cash flow break even?

By answering these questions in the beginning, "you
set the stage for any additional dialogue with prospective investors,"
Okun says.

Know Your Investor

While the pitch is critical to all investors — not
just venture-capital firms and angels — it’s smart to cater to your
crowd. For example, many "venture capitalists are looking for huge
returns," says Gaebler. In that situation, it makes sense to spend a
little more time on the benefits and values of your business — and
highlight financial projections. Make sure your presentation is
relevant to your audience, otherwise "you’re wasting your time," he
says.
Also, make sure your investor pitch is different from your customer
pitch. "It’s best to start from scratch," says Reichert. That way, you
won’t confuse what you promise to deliver or get hung up on other
ill-fitting details.

As your idea is being weighed, be sure to do some
evaluating of your own, recommends Gaebler.  Of the various types of
investors out there, some of them may be willing to help manage a
fledgling firm or hold strategic partnerships that might prove fruitful.

In Your Arsenal

If your chance encounter with an investor leads to a
more formal meeting, you’ll want to be properly equipped. Most business
consultants recommend having a business plan complete with a compelling
executive summary — usually one to two pages — and realistic as well
as credible financial projections.

If your business concept includes something tangible,
such as a product or a web site, work up a prototype that makes an
impact, suggests Donald F. Kuratko, executive director of the Johnson
Center for Entrepreneurship & Innovation at Indiana University. "In
a formal setting, a prop is really important," he says.

It also helps to have some customers already lined up.
When Yan Pritzker, founder of Chicago-based Planypus, a soon-to-launch
online platform that lets partners create web sites based around social
events, received a batch of private-equity financing at the end of
August, the 25-year-old made sure to have a few customers in the
pipeline. "It is much easier to get [investors] to put their money in
when they see that there are people about to pay for the product," he
says.

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