Entrepreneurial Advice, Motivation & Startup Strategies

I have previously discussed what I consider to be the four cornerstones of elevator pitching, to reiterate the idea is to overview your concept, your market and the need you satisfy, your businesses revenue model and how you plan on executing the business plan.

OK that takes care of your initial elevator pitch but when you do get a “sit down” face to face with your target angel you will need to further substantiate what you have presented in your elevator pitch.

Hopefully your pitch has baited the big fish angel, now you need to hook them with an entertaining story of how you came about your business idea or how your team came together. This is a great way of capturing the attention of the angel and excellent for building rapport as, being angels, they no doubt can relate to your experiences with their own.

What doesn’t kill you makes you stronger

It can also pay dividends to talk about previous faliures (if you’re anything like me, you’ve had many), as bizarre as this may sound it proves your strength of character and again, the angel will no doubt relate.

Your ultimate goal is to keep the angels attention focused, a good way of doing this is to quickly gloss over the superfluous aspects of your business and present deeper insights in to the meat of your business and it’s plans for investment allocation.

The Google & Facebook Killer

This brings me neatly on to my next point, leave hype for the marketing. Never exaggerate or big up your product. Angels are shrewd entrepreneurs in their own right and can spot over exaggeration a mile off. Overemphasising is another potential pitfall, angels want to see any barriers to entry and IP advantages but they don’t need to know the ins and outs, at least not until due diligence stages.

It is important to end the meeting leaving a powerful impression. If you end the meeting with passion and confidence it will solidify the positive impression then angel has of you and the perception that you will look after their money and deliver an excellent ROI.

The process of attracting interest from investors shares a lot of synergies with the advertising industry. Casting my mind back to college and those lengthy lectures on advertising theory, an acronym springs to mind. The AIDA principle.

AIDA stands for: Attract - Interest - Desire - Action

Attract

Attract the attention of your audience. In the advertising sense this is the main attention grabbing headline or hero shot which draws the eye and encourages the audience to want to find out more. In pitching for investment this relates to the initial description of the concept.

Interest

Stimulate the interest of your audience. When creating an advert you would stimulate interest by providing some information about the product or service which the audience will be able to associate with. Providing a description of your target market should have the effect of stimulating interest from potential investors.

Desire

Promote desire in your audience. Your advert has already garnered some interest in the product or service it is now time to promote desire. In the advert you may well promote a lifestyle which is appealing to the target market, or offer a financial incentive. Promoting desire in potential investors can be achieved by having a clear revenue model and understanding of the scope of the market and your products huge growth potential.

Action

Encourage action. An advert should always encourage action from the audience, this is often achieved by the use of a time sensitive offer or limited availability, or merely just asking that the audience take action. When it comes to encouraging action from potential investors, displaying passion and enthusiasm in your venture and displaying the clear strengths of your team will make you very appealing. Potential investors won’t want to lose out to another investor which will be a very strong motivator for them to get in touch.

Summary

A lot can be learned by applying advertising theory to the process of pitching for investment. If your Elevator Pitch takes the investor through the journey of attraction, interest, desire and action you stand a very good chance of them contacting you to find out more.

So what information should your elevator pitch (initial case for investment) contain? Here is a brief overview of what Edge Venture consider to be the key phases of the elevator pitch. This should help you structure your pitch so that your target investor understands your business and it’s potential.

Step 1 - Concept

This is quite simply what your business does. It pays to kick off with a succinct one sentence description of your business which will make it immediately apparent what your business is about. You can do this by linking it to something that the investor can relate to, so as to align the investors frame of reference. For example with Edge Venture we could say “Dragons Den Online” which in three words has conveyed to the audience what the business does.

A good rule of thumb is to create an impactfull one-liner that could be understood by either an 8 year old or an 80 year old. In doing so you can be confident that the investor will immediately grasp the concept.

Step 2 - Market

This is often an under-utilised aspect of the elevator pitch. Often it is glossed over and focused placed on other areas of the business. It is very important that you both understand your target market and express that understanding to your audience. A potential investor is going to want to appreciate the scope and size of the target market and expressing this knowledge in the Elevator Pitch is going to give the investor much needed confidence.

Step 3 - Model

This is obviously how your business will make money. We believe that it is best to leave specific financial detail out of the elevator pitch, financial projections should be left to further discussions later down the line. For now you only need to focus on the revenue models and the various income channels your business will have.

Step 4 - Execution

This step is arguable the most important. You need to convey to the investor that you and your team are ideally suited to make your business a success. You should focus on how the skills of your team will mean you can capitalise on the potential. If you are lacking in any one area it pays to explain any strategic alliances or support you have in the business, or with regard to Angels, what you believe they could “bring to the party”, beyond the capital injection.

Edge Venture are here to help

In future posts we will be discussing each phase in more detail and giving your more in-depth insights and advice to help you prepare an attention grabbing, investment getting elevator pitch.

It is common knowledge that traditional VCs don’t get out of bed for less than a million in investment. However there is a new breed of VC considering relatively small investments of the usual Angel variety.

With the increasingly lowering of barriers to entry and relative ease of bringing a business to mass exposure, the whole VC industry is rethinking their approach to investment. Of course there will still be market for high level investments for the big gun VCs but we all know the real money is made in getting in early with startups and small businesses with high growth potential.

Leading the way for small, early stage venturing is YCombinator, a VC backed initiative which supports early stage technology companies with resources and initial development funding. Another very exciting VC development is that of SoftTech VC who have raised a $12m fund purely to invest in early stage startups. Another notable VC investing in early seed stage startups is Charles River Ventures with their CRV QuickStart programme.

I think this move towards smaller VC funding is very encouraging and will mean that a lot more startups get that early stage seed funding they need to get their ideas off the ground. Of course until the rest of the VC industry re clarifies it’s expectations there are still plenty of Angel Investors out there looking to invest in your seed stage business.

I recently watched an interesting interview which I thought I would share. The interview discusses how Walid Al Saqqaf and Sokratis Papafloratos went about securing $1 million for a London based startup, trustedplaces.com.

I am actually a member of Trustedplaces, the website allows you to recommend restaurants to others and build up a social network of like minded restaurant goers. The site isn’t specifically focused on restaurant reviews but it would appear that is the direction the users are taking the site.

The interview covers some interesting points about raising angel money and how they went about raising $1m in 83 days. Some of the more interesting responses were to the questions What are investors looking for? When is the right time to raise money? and Do you still feel in control?

Definately inspirational stuff, it’s great to hear about fellow Londoner’s making a dent in the social space.

Catch the interview here on intruders.tv