Today there are various methods and platforms to help you fund your start-up, but the best help you can receive is advice on how to prepare your proposal and how to avoid the errors most startups make before and during investor meetings. These tips come from Rick Frasch who specializes in start-up ventures. If you are thinking of starting a business, these guidelines may very well help you acquire the capital you need. Here are four tips to help you prepare a seamless presentation.
The Elevator Pitch
We’ve all heard of the elevator pitch. The trick is perfecting it. An elevator pitch should be short and to the point but should clearly show your knowledge of the subject and highlight your idea’s strengths. Make your pitch long enough to pique further interest but not too long that your idea will be forgettable. This is not something that you can just practice the night before. It must be practiced and become second nature.
The Presentation
Now that you’ve given your elevator pitch, you can go into further detail but keep in mind that our attention spans tend to be shorter than ever, especially when money is on the line. Investors, in particular, are evaluating a lot of proposals so you have to make yours count. Depending on your scheduled meeting, you should aim for a fifteen-minute presentation making sure to cover your main points at the beginning. You may be able to add another 15 minutes for a Q&A but be prepared for the possibility of an investor leaving early. Your PowerPoint should not have very many slides. After all, you want the investor to listen to you rather than read the five bullet points on the board. The idea here is quality over quantity.
The Exit Strategy
Draw up an estimate of the costs and the period needed to release it into the market making sure to include all of the costs associated with the product and how it can be capitalized. This creates a safety net for the investor to be able to cease the project if necessary and mitigate losses as much as possible. If your proposal is not a clear moneymaker, you are not likely to receive an offer.
The Summary
The potential investor has to buy into what you are selling them and be able to understand your proposal. Make sure your summary includes the following: The problem/need
Your solution
Potential market share
Competitive advantage of your company
Who is on your team
How the investors will make a profit
Now that your presentation is good to go, here are four common pitfalls to avoid before and during your meeting and alternative options you can take.
Sending Unsolicited Proposals
No investor wants to open their inbox and find an unwanted proposal. It is more than likely to end up being deleted. Unsolicited snail mail proposals have the same result. Investors want something someone else wants, so be selective and do your research before sending proposals. If you find it hard to get responses, remember that a referral can go a long way.
Over-estimating Product Value
This may be one thing that the adage “The early bird gets the worm” does not apply to. In the early stages, it’s difficult to determine the value of your product, so don’t assign a price to something that you cannot justify and is not developed. Let the investor bring up valuation and pricing and go from there.
Non-Disclosure Agreement
Asking for one in the beginning stages is not always a good idea as it may scare investors away. Remember this: unless your idea is the next latest and greatest thing, investors are not signing the agreement and possibly part of their life away. One reason it is not likely: it could lead to a lawsuit, and no one wants to deal with a lawsuit.
Being Closed-off to Advice
If you can’t listen to others, you cannot learn from them. Venture capitalists have more experience than most on structuring a business. It would be in your best interests to consider their advice and see a glimpse of how they think. If you automatically resist their ideas, it may turn off the investors and show them that you are not open to negotiation.
Aside from specializing in start-up ventures, “Rick Frasch has significant legal and business experience in contracts, financings, institutional lending, international business transactions (with an emphasis on China), venture capital, and mergers and acquisitions.” If you would like to read more noteworthy articles by Rick Frasch, visit www.allbusiness.com/author/rick-frasch.
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