Founding a start up is not cheap! Unless you are privately wealthy or possess the means to bootstrap your business with very little capital, chances are you will be seeking funding in the near future. Contrary to the popular idea of writing a killer business plan and sending it out to a hundred investors in hopes that one will get back to you, you must also perfect your in-person pitch so that you’re prepared when you actually meet a VC. Following are 7 tips for perfecting your start up pitch and acquiring the funding you need.
The Elevator Pitch
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The quickest, most basic litmus test for your start up pitch is called the “elevator pitch.” An elevator pitch is a very concise explanation of what your business does that can be given in under 30 seconds (about the time it takes to tell someone you meet in an elevator), yet is powerful enough to arouse interest. The idea of the elevator pitch is that, while your start up is likely the single biggest thing on your mind, many busy professionals are thinking about 10-15 different things when you approach them. The elevator pitch is designed to grab the interest of these people without asking them to sit through long, drawn-out explanation.
Inc Magazine recommends designing an “X meets Y” pitch, which means to compare your business or product to widely known concepts that everyone can relate to. “Say you were starting a social-networking site for pet adoption,” they explain. “It may be pitched as Facebook for cats, dogs, and the humans who’d like to adopt them.”
The Live Presentation: Identifying The Problem
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Beyond the problem itself, you must identify who exactly has the problem. These people comprise your target market and will define almost every aspect of your product development and marketing strategy. If 20-30 year old programmers have the problem, your entire approach to creating and marketing your product will be different than if 40-50 year old truck drivers have it.
Go even deeper and try to quantify your market for the investor - roughly how many people comprise this group? Is the problem global, national, or local? etc. You can determine this through basic demographic research — use consensus studies to find the number of people that meet your specification. Alternatively, you can use Google’s search volume tool to find how many people are actually searching for solutions to your problem each month.
The Live Presentation: How You Solve It Better (Or Differently) Than Anyone Else
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Finally, (and most importantly), you must discuss how your company plans to solve this problem. Simply solving it won’t be enough to truly impress an investor, because if the idea is a good one, there are probably already a host of products trying to solve the same problem. To really grab the interest of an investor, you must acknowledge your competition and and explain how your product will stand out from the rest, solving the problem more thoroughly, faster, differently, or for less money than everyone else.
Few people have ever made it big by “trying to be the same as Big Successful Company X.” Saying you want to solve the problem “just like Google,” will cause the investor to lose interest in no time. Instead, you must find some way to creatively distance yourself from the competition and beat them at their own game, either by targeting a more specific niche than them (known as hyper-niching), or improving on the solutions they’ve put forth.
Vitamin Vs. Aspirin
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There is an analogy that applies when thinking about the problem your business solves - the Vitamin vs. Aspirin comparison. In business, a Vitamin is a product that would be nice to have because it makes life easier/better in some regard, but is not urgently required or desperately sought. An Aspirin, on the other hand, is a product that solves a painful, urgent need in the market place that people who have the problem will fall over themselves to get (much like you wouldn’t think twice about taking an Aspirin if you had a headache). You want to have an Aspirin, it’s easier to sell and there is clear, urgent demand for it.
Think of a successful start up like Flickr — they recognized the problem that there was no place online where photographers could both share their photos and network with other fans of photography. This was an urgent need for photographers who wanted to share their work with friends and family and meet like minded artists/models in their field. When Flickr solved it, the business rushed (not trickled) in.
Your Team
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An idea is nothing without a great team behind it to effectively build it, manage it, and sell it at a profit. When pitching your start up, it is crucial to mention the qualifications of each member of your team. If your lead developer has won any awards, or has employment experience with a positive reference doing similar work, make it known. If your marketing head graduated with a degree in marketing, point it out.
You might even consider getting your business plan and team qualifications reviewed by an influential and well-known professional in your field and have that person put his confidence to paper as a recommendation of your potential. In the end, you need to make the investor believe in the power of your entire business, not just in your idea. Ideas do not create and sell themselves, skilled people do — and without a solid team in place it can be hard to convince an investor that you are the people for the job.
Prepare A Live Demonstration
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Words and figures are powerful, but nothing can convince someone of the viability of a product like a live demonstration. When an investor can physically interact with your product and experience its power and potential as you explain its components and market appeal, the vision becomes real to their brain. It’s like the test drive of a new car — research and customer reviews may have been enough to bring you to the dealership, but actually driving the car and experiencing what it will be like to own it is what ultimately sells you.
Remember that you don’t have to obsess over making the product visually perfect and feature-rich for the demonstration. In fact, the product does not even need to be 100% done and ready for market when you demonstrate it, but the essential components of the idea should be in place. Before you do your live demonstration, be sure to practice and work out any major bugs. There is nothing more embarrassing than having your product malfunction and crash in the middle of an investor demonstration.
Additional Resources: To learn about more business topics, like business analytics and sales force automation, to improve your start-up pitch visit Omniture.com.