innovation: Article- What Entrepreneurs Need to Know About...

This is the first of a series on helping the entrepreneur put his or her best foot forward during the process of securing funding. The articles are researched and written by Eric Billingsley.

So you’re an entrepreneur who has developed the latest and greatest technology. You want to start a business and the only thing standing in your way is money. And then it happens. By chance you’ve stepped in line at the local coffee shop, or into an elevator in a high-rise, next to a well-known venture capitalist.
“This is it,” you think excitedly. “The startup money is alive and well and standing right next to me.”

You proceed to introduce yourself and attempt to capture the VC’s attention. And then you try to explain your business idea by rattling off a list of technology terms barely understood to Einstein. After the monologue, the VC politely says, “This is my floor,” and vanishes.

Have you made an impression? Oh, yes. An impression that’s going to lead to the VC wanting to learn more about your idea and eventually to landing the much needed capital to start your business? Not likely. In that brief amount of time you may have described an interesting technology but probably have provided no clues as to how it will make money, which is what usually concentrates the mind of the momentarily captive investor.

Enter what’s known as the elevator pitch.

Your first and most important objective as an entrepreneur is to learn how to make a powerful and captivating first impression. This requires honing a business idea into a clear pitch that can be given in 30 seconds or less, which is not easy. In that brief amount of time, you need to communicate the value you bring to the table including: who you are, how your technology or business idea will solve a given problem, the market potential and your plan to make it all happen. Whew!

Here are a few points to consider when developing and delivering your pitch:

1. Who are you?
In the mind of an investor you and your business idea are vehicles that will earn a tidy return on investment in the shortest amount of time possible. The investor wants to know how you can make money, not (at least not immediately) your long list of skills or personality likes and dislikes. Your opener needs to not only catch the investor’s attention but also communicate the purpose of your business. He might also like to know if you are a serious, committed, passionate person. In several sentences, tell the listener your name and/or name of the company and what it is you plan to accomplish. For example, founders of a company named DuraPower opened with the following statements during an elevator pitch competition at Wake Forest University in North Carolina: “Good afternoon, my name is ________ and this is my partner_______. We’ve launched a company that can provide you with an 8-times return on a $500,000 investment within five years.” Who wouldn’t want to stay tuned?

2.What is your business idea and/or technology?
Clearly and succinctly describe your technology and how your idea solves a particular pain in the marketplace. Remember that investors are not usually technologists and are likely to be turned off if they are assaulted with your jargon. Avoid vague (and downright silly) statements like, “My technology will save the world and make lots of money.” Instead, stick to what’s important to the investor. In the case of DuraPower, company founders said they had developed a propane-based fuel cell application to help outdoor enthusiasts take electronics off the grid for extended periods. The DuraPower Expedition produces 12 volts of electricity from a small Coleman propane tank, enough to run a laptop computer for 60 hours on a single tank.

3. What is the market potential of your technology?
This is the biggie, because seasoned investors will never open their pocket books without a clearly defined market to purchase your product. Do the research and determine the size of your technology’s market. Is it a $100K or a $5 billion per year industry and how fast is it growing? Then address how your idea will stand out and successfully compete against other companies selling into the same market. DuraPower founders said their product serves the outdoor enthusiast market, which is 28 million strong in America. They will specifically target expedition hunters, adventure campers and ice anglers. The DuraPower Expedition is unique because it is a fuel cell that is 10 times lighter than a comparable battery and more rugged and reliable than a solar panel.

4. Do you have a plan?
Most people, including investors and potential clients, like to have a road map when venturing into uncharted territory. Some important bits of information to impart along these lines might include: having obtained a patent and/or license for the technology; having secured a seasoned management and marketing team; existing funding; and an outline of the channels of distribution for your product. For example, DuraPower said in its pitch that it has a working prototype and investors will receive an internal rate of return of at least 50 percent and several exit options. Company founders closed the pitch by giving a brief summary of their backgrounds as scientists and entrepreneurs.

DuraPower founders Nick Cucinelli and Adam Borden of the University of Michigan went on to win the annual elevator pitch competition and the chance to present their business idea in detail to a number of venture capital firms. Remember that the point is to clearly and concisely communicate value to your audience.
So you’ve developed a 30-second pitch for your company. Now what? The answer is practice, practice, practice. Your presentation ought to be smooth, lively and fascinating. You probably ought to memorize it but don’t deliver it as if you had memorized it. Be natural.

Alas, you are not going to land financing in a minute or less. You are simply generating excitement in the mind of a potential investor or customer. This excitement is what gives you the best shot at spurring conversation in the moment and being called in at a later date to explain your technology or business in detail.

Grab your significant other, business colleague or a mirror and go over this pitch until it is second nature. Also attend business networking gatherings and practice pitching other entrepreneurs. Watch and note their reactions. Ask them if they can accurately describe what you’ve just said. This will help you to feel comfortable talking about your business idea in a variety of environments, and thus fine-tune the pitch. This is critical because savvy business people can spot a canned statement a mile away. And beyond having a well thought out business idea, investors and potential clients want to get a good feeling from you as an individual.

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