For years start-ups have been sending investors and other potential funding sources their business plans. With more and more start-ups pitching these days, and funders having less and less time to review them all, a new trend is emerging about how to approach funders. It’s the one-page pitch. Get to the point immediately. Here are some basic questions the answers to which should be included:
· What’s the problem?
· How are you solving it?
· Who’s your customer?
· How will your solution make money (your business model)?
· What stage is your company in right now?
· How much money are you looking for?
· What are you going to do with the funds?
· What’s the payback horizon and how much return will the funder get on their investment?
What’s really good about the one-page pitch is that it can be a significant way to force you to clarify, condense and articulate your ideas.
John Ason, an angel investor, often speaks about the one-page pitch: he has approximately 1-3 minutes to look at your idea. And it had all better be on that one page. And not single spaced with no white space on the page. If it’s not visually inviting, he won’t read it. John always offers very pointed and amusing illustrations of how he wants to invest. When asked what John looks for in a management team, his answer includes passion but he also says the combined age of the two principals should not be more than his age. Another, related to return on investment, is that the payout should not extend past his lifetime – his event horizon (as is that of many investors) is a 10x earnings return on his investment in a reasonable time frame (usually less than five years).
To learn more about John, how he works, what he looks for when investing, what he’s invested in etc.
Check out Martin Zwilling’s post on pitching angel investors – BTW these points hold true for VC and other pitches as well.
Here’s a first time funder’s story
Every entrepreneur should, and usually does, know every detail about their business. This is necessary to run a good business. However, when it comes time to communicate that information to your existing customers, potential customers, investors, etc. all this information becomes a problem. It’s the ultimate example of TMI.
So the first thing you need to do is get out of your head and into the head of the customer or audience you are going to be communicating with. What do THEY want to know? The next thing is to keep the customer’s point of view and look back into your head and sift through the mental inventory you see there and pull out only what you need. If this sounds difficult, that’s because it is. That’s one reason why marketers exist. Not only can they go through your head and pull out what’s important, they make the final product look really good, and thus, make you look good. Aruna Inalsingh discusses this in her blog
But I don’t think it works in all situations (there was a period in my career where I wrote 2 word headlines on all my ads for about two years. I always won awards, but that’s a very hard thing to do).
Evaluate your situation, your audience, and your own ability to communicate before you try these out. And it always helps to try out new ideas on a colleague or someone who doesn’t know the assignment. If they get it, great, if not, it will be reflected all over their face. This is great feedback.
If you can’t create these communications items on your own, then seek outside help.
If I build it they will come.
This is the title of the first chapter in my book, “Lies Startups Tell Themselves to Avoid Marketing.” The chapter basically deals with the idea that if you aren’t sitting around waiting for the latest “thing” (fashion, technology, gismo, app etc) to walk through your door and land in your lap, then chances are about 100% that no one else is either.
Here’s a variation on this theme that’s dedicated to fundraising and a key aspect to fundraising that a lot of entrepreneurs and startup businesses fail to recognize. Or if they recognize it, the concept is so foreign to them that they can’t even get their minds around it. And that’s the issue of scaling. When you build your business and business plan, if you are planning to raise money, then building it is not enough. The money won’t come. Why not? Because most startups and entrepreneurs don’t recognize the value of scaling their company –the value to them but more importantly the value to the investor.
Often the first question an investor will ask is ‘how fast can I get a return on my investment?’ And they don’t mean dollar-for-dollar. They mean $10 for every dollar. If you don’t show them plans to scale the company, then you can’t answer that question. If you can’t give a map (or better yet a spread sheet showing the exact details like timeframe, expenses, projections to profitability, personnel and equipment being brought on), then you’re probably in a lot of trouble. If I’m investing in your company, why would I want to give you money unless I’m going to see the company grow (“scale”) and give me multiple times back my investment. If you’re a one or two person shop determined to keep it that way, then that just isn’t going to happen. Those kind of companies are called “lifestyle” companies, where the entrepreneur is making a success just for themselves. Big difference (see http://thinktraffic.net/startup-vs-lifestyle-business) . You may get investors, but it’s that much more difficult. You are more likely going to be eligible for a bank loan than investment.
Some issues around scaling, such as when is the right time to scale and do you scale out or deep are discussed by Geri Stengel in her Ventureneer blog (http://ventureneer.com/vblog/business-plan-nonprofit-growth-planning-scale). Don’t let the fact that Geri deals with non-profits scare you off – these tips work for profit companies as well. Other tips can be found on CNN’s blog “Pop Quiz: Is Your Business Scalable?” (http://www.inc.com/karl-and-bill/pop-quiz-is-your-business-scalable.html) .
Important tip to remember: “If I scale it, they WILL come.”
Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.