It takes a wide-ranging skill set to be a successful entrepreneur. Your product has to be good, has to fill a niche, address a problem.
Many entrepreneurs may have those boxes checked but fall short when it comes to selling the vision to an investor. It may be the greatest thing since sliced bread, but without backing it will remain an unfunded figment of a dreamer’s imagination.
What can entrepreneurs do to successfully sell an idea? CNBC.com asked a number of investors and inventors to define the elements of a perfect pitch.
The responses, which went far beyond “convey perseverance” or “wear a tie,” may seem counter-intuitive in some cases. But they all derive from lessons learned through experience, so anyone who’s designed the perfect widget should read ahead to learn a thing or two.
1. Know your audience
“When a customer walks into a store to buy a drill, they don’t want a drill, they want a hole,” said Chris Murray, founder of Varda Kreuz Training. “Investors don’t want to hear about what you’ve got so much as what it will do for them. Focus your pitch on interesting the investor.”
Sharí Alexander, founder of the consulting firm Observe Connect Influence, agreed. Successful entrepreneurs research potential investors and tailor pitches to them, she said.
“Do as much research as possible on your potential investors,” she said. “Learn their trigger points. What gets them excited? What do they do in their free time? Finding an alignment between your business and their positive triggers will perk up their ears and be more attentive to your pitch.”
2. Do your homework
To utterly convince any potential investor that you know what you’re doing, you have to know what you’re going to say and how you’re going to say it, according to former “Shark Tank” contestant and BareEASE inventor Edna Ma.
“Practice, practice, practice your pitch before making it to investors,” she said. “Practice with yourself in your car or in front of a mirror. Practice in front of friends, family and people who will give you real feedback. Remember, you only get one chance to get it right. Don’t squander this opportunity.”
3. What problem are you trying to solve?
Jeanine Swatton is a tech entrepreneur from the San Francisco Bay Area whose most current project is an app called FrameMonkey. She has worked with her fair share of tech start-ups and venture capitalists, and her advice for entrepreneurs is summed up in a single question.
“Answer the question during the pitch, ‘What problem are you trying to solve?’ ” she said. “It is amazing how entrepreneurs come up with a ‘cool idea,’ but they do not tell us what the pain point is —other than the fact that they think it’s cool.”
4. Tell a story
Every entrepreneur should know the numbers behind the product backward and forward. But when pitching it, that stream of data is more likely to alienate than inspire investors, said Eric Bergman, author of “Five Steps to Conquer ‘Death by PowerPoint.’ ”
So put away the slides and tell a story.
“There is a reason PowerPoint isn’t used on programs like ‘Shark Tank’—nobody would watch,” Bergman said. “An investor, a customer or an employee must be able to tell your story to others.”
5. Demonstrate your passion
A 2003 study conducted by the department of neuroradiology at the University of Tübingen in Germany reinforced the idea that smiles are contagious. The same can be said for passion—an essential ingredient of any pitch.
“You must effectively communicate genuine passion and real expertise,” said Bruce Bachenheimer, director of the Entrepreneurship Lab at Pace University. “Investors know that even truly great business ideas are incredibly hard to successfully execute, so you better convince them you are committed and know what you’re doing if you want their money.”
KISS isn’t just the 1970s shock rock band that made face paint, platform boots and two-chord party anthems popular. It’s also an acronym for “keep it simple, stupid,” a relevant bit of advice for those looking for money.
“Less is always more,” said Jessica Zelfand Munroe, founder of Supplet.com, a gift resource for expectant mothers. “Verbose presentations will not impress investors and will most likely turn them off. Inspire confidence in your investors by being short and sweet.”
7. Talk up the team
Gary Holdren, CEO of Garland Capital Group, said that emphasizing the great team that you have to deliver your great product can give investors the push they need to pull out a checkbook.
“As an investor, I look for entrepreneurs to emphasize their team as much as the idea itself,” he said. “Business models and go-to-market strategies may change, but I want to know that the team has what it takes to deliver, and that should come across in a pitch meeting.”
8. Act naturally
Jerry Jao, CEO of the marketing firm Retention Science, had some simple advice for entrepreneurs seeking funding from investors: Be yourself.
“You need to relax so you can demonstrate just how knowledgeable you are about the problem you are solving and how excited you are about your solutions,” he said. “Investors are trained to see through an entrepreneur’s ‘smoke and mirrors,’ and they are good judges of character.
“An advisor once recommended I pitch differently in an investor meeting because I ‘look young’ and ‘my enthusiasm makes me seem desperate.’ I tried to switch it up a bit, and it just did not feel right. I realized that I only want to partner with an investor who appreciates me the way I am.”
9. Have a backup
As former Secretary of Defense Donald Rumsfeld saidin 2003, “stuff happens.” Even the best-executed effort can be derailed by unforeseen factors.
Nat Wasserstein is chief restructuring officer at the crisis management firm Lindenwood Associates. He’s also an investor, and he wants to see that an entrepreneur has a strategy if things get ugly.
“An entrepreneur needs to understand and have an action plan for the downside case,” Wasserstein said. “A downside case is not just a must-have scenario. It must translate into how the investment would likely be recovered if the venture failed at various stages of development.”
10. Make it snappy
Investors want to hear you and get a 3-D view of your product. But not every story needs to be an epic trilogy full of light sabers or Hobbits. Ted Jenkin, founder of the Oxygen Financial, said that time is not on your side when you’re pitching, so get to the point.
“I own three businesses and often advise others on how to get money for their new venture,” he said. “You must realize that you have less than two minutes in general to be able to get the core message across to your future lenders. Make sure your pitch is succinct and thorough at the same time.”
Courtesy of USA Today