Saturday, October 22, 2011

Pitching to Angel Investors: building a solid management team

The key to the management team is experience in the area of the new business. First time CEOs need to have substantial operating experience. In addition to the CEO most startups have two other executives on board. Depending on the business, they could be financial, operational, manufacturing, scientific, technical, or other. Again, industry-specific expertise needs to be highlighted. Startups without a full management team could create an “Advisory Board” staffed with non-paid volunteers who provide advice. Typically, they have substantial industry experience and can augment the management team.

Pitching to Angel Investors: Defining the Target Market
In an earlier post, we talked about framing a compelling customer problem for a potential investor--but to truly get their attention, your target market must be sizable. In other words, there needs to be a lot of customers with that problem that are ready to pay for your solution!

I usually break the “target market” category into three pieces: Available, Serviceable and Beachhead.

The Available Market is typically anyone who could potentially purchase the company’s product or service. Look for numbers in the billions to truly be compelling.

The Serviceable Market is the sub-segment that would most likely be a strong candidate to purchase the company’s product or service. This number is usually in the millions of dollars.

And finally, there’s the Beachhead market, which is the first set of customers the company will pursue. The company should list beachhead customers that are in the pipeline which shows market validation.

Conveying these three items in your business plan and pitch presentation will show an investor that the market cap is sizable, that there are may companies willing to buy your product, and you have a solid go-to-market strategy.

Best Regards,
Hall T.

Wednesday, October 19, 2011

Pitching To Angel Investors: Focus on the core product or service

Entrepreneurs are always excited about their marketplace solutions and want to talk about it to anyone that will listen. That enthusiasm is critical to start a business because that passion is the only thing that will truly carry them through the process (It’s certainly not the money--trust me!)

Sometimes, however, that enthusiasm causes entrepreneurs to lose focus about what they are conveying as part of their product offerings.

For example, you might have ancillary services or spinoff products that are part of the plan. But cluttering the business plan with numerous potential options for the company will appear diffuse and fragmented to an investor.

It’s better to focus on the core product or service. An investor looks for purpose and clarity of focus in start ups and even early stage companies

This also solves the problem for entrepreneurs who are concerned about protecting their intellectual property. You don’t have to describe the “secret sauce” behind their product--simply focus on the benefits the product or service offers.

At this early stage, there’s no need for a non-disclosure agreement, so put that away. Most investors won’t sign one at this stage anyway, and it will only turn them off. Only in later stages will the investor need to learn more about the IP, and they will be glad to sign it at the due diligence stage.

Best regards,
Hall T.

Monday, October 17, 2011

Pitching to Angel Investors: What problem do you solve?

Pitching to Angel Investors: What problem do you solve?

When seeking funding from an angel investor or other sources of venture capital, the first element they’re going to look for in the executive summary of your business plan or your pitch presentation is the solution to a customer problem. In other words, what problem does your product or service solve for the customer that is unique?

To ensure that you’re going to get the attention of an investor, make sure you address the following in your plan and pitch presentation:

1. Be Specific and comprehensive at the same time. It’s important to give enough detail so the investor understands what you’re doing without giving too much information about the inner workings of the application or service offering. In some cases, it is helpful to express the company’s product/service in a few words such as “We make radiation-hardened memories.” This helps the investor in on understand the company’s offering.

2. Develop an actual elevator pitch. You’ve got one minute to convey how compelling your offering is to an investor. Go! Can you do it?

3. Your problem should be large and compelling - the problem you’re solving should be large and compelling enough that people not only want a solution, but need one and are willing to pay for it.

4. Use numbers to describe the problem. The numbers you present can the problem more compelling to an investor. For example, how many people suffer from a disease or condition that you potentially solve? How much money is wasted on inefficient solutions or methods?

5. Talk about the business solution and not the technology. This is one of the biggest mistakes that entrepreneurs make over and over in their pitch presentations and in their business plans. In short, investors care less about your technology and more about how you’re going to make money. Focusing on that is paramount to getting follow up meetings--you can focus on the technology at the due diligence stage.

6. Tell a story. Talking about the problem you solve in a story format that’s easy to understand can help you present your case in the most understandable fashion.

Best Regards,
Hall T.