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Starting Up: Learning to Pitch
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October 8, 2007
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KEN GAEBLER KNOWS that winning investor money is all in the pitch.
A serial entrepreneur, Gaebler has raised $24 million for seven companies since 1995. Now, he sits on the other side of the conference-room table, as president of private-equity firm Gaebler Ventures in Chicago — and routinely watches newbie entrepreneurs present their ideas in a bid for funding.
"The younger you are and the less of a track record you've established, the tougher it is to raise funding," says Gaebler, who's seen business owners with great concepts lose out because presentations are weak or incomplete. That's why people with no experience really "have to package themselves up better," he says.
The best presentations come from entrepreneurs who have thoroughly prepared for that big meeting or chance encounter — and are expecting the difficult questions. And whether you're speaking to a room full of venture capitalists or a lone angel investor, it's critical to have a compact description of your great idea, business investors and consultants say.
However, during chance encounters, it's best to keep it short, says Bill Reichert, managing director for Garage Technology Ventures, a seed-stage and early-stage venture capital firm based in Palo Alto, Calif. "As an entrepreneur, you have 15 to 30 seconds to get the investor to invest another 30 seconds in you," he says.
Bear in mind, a successful pitch is not about explaining your business in all of its brilliant detail. But rather, "it's about convincing the investor to go the next step," Reichert says. Be as clear and concise as possible and make doubly sure you skip the hyperbolic language. "The last thing a business investor wants to hear again is: ‘We're going to be the next Google,'" he says.
Deliver your pitch much like a reporter tells a news story, says Glenn Okun, a clinical professor of management and entrepreneurship at New York University's Stern School of Business. Lead in with a catchy opening line and then answer the following questions: What is my value proposition? Where does my competitive advantage exist? Why is there a competitive advantage? Who are the critical members of my team? And lastly, when will product development end and cash flow break even?
By answering these questions in the beginning, "you set the stage for any additional dialogue with prospective investors," Okun says.
Also, make sure your investor pitch is different from your customer pitch. "It's best to start from scratch," says Reichert. That way, you won't confuse what you promise to deliver or get hung up on other ill-fitting details.
As your idea is being weighed, be sure to do some evaluating of your own, recommends Gaebler. Of the various types of investors out there, some of them may be willing to help manage a fledgling firm or hold strategic partnerships that might prove fruitful.
If your business concept includes something tangible, such as a product or a web site, work up a prototype that makes an impact, suggests Donald F. Kuratko, executive director of the Johnson Center for Entrepreneurship & Innovation at Indiana University. "In a formal setting, a prop is really important," he says.
It also helps to have some customers already lined up. When Yan Pritzker, founder of Chicago-based Planypus, a soon-to-launch online platform that lets partners create web sites based around social events, received a batch of private-equity financing at the end of August, the 25-year-old made sure to have a few customers in the pipeline. "It is much easier to get [investors] to put their money in when they see that there are people about to pay for the product," he says.
A serial entrepreneur, Gaebler has raised $24 million for seven companies since 1995. Now, he sits on the other side of the conference-room table, as president of private-equity firm Gaebler Ventures in Chicago — and routinely watches newbie entrepreneurs present their ideas in a bid for funding.
"The younger you are and the less of a track record you've established, the tougher it is to raise funding," says Gaebler, who's seen business owners with great concepts lose out because presentations are weak or incomplete. That's why people with no experience really "have to package themselves up better," he says.
The best presentations come from entrepreneurs who have thoroughly prepared for that big meeting or chance encounter — and are expecting the difficult questions. And whether you're speaking to a room full of venture capitalists or a lone angel investor, it's critical to have a compact description of your great idea, business investors and consultants say.
The Elevator Pitch
Planypus founder Yan Pritzker flying high pre-cash infusion at Mount Shasta, Calif.
However, during chance encounters, it's best to keep it short, says Bill Reichert, managing director for Garage Technology Ventures, a seed-stage and early-stage venture capital firm based in Palo Alto, Calif. "As an entrepreneur, you have 15 to 30 seconds to get the investor to invest another 30 seconds in you," he says.
Bear in mind, a successful pitch is not about explaining your business in all of its brilliant detail. But rather, "it's about convincing the investor to go the next step," Reichert says. Be as clear and concise as possible and make doubly sure you skip the hyperbolic language. "The last thing a business investor wants to hear again is: ‘We're going to be the next Google,'" he says.
Deliver your pitch much like a reporter tells a news story, says Glenn Okun, a clinical professor of management and entrepreneurship at New York University's Stern School of Business. Lead in with a catchy opening line and then answer the following questions: What is my value proposition? Where does my competitive advantage exist? Why is there a competitive advantage? Who are the critical members of my team? And lastly, when will product development end and cash flow break even?
By answering these questions in the beginning, "you set the stage for any additional dialogue with prospective investors," Okun says.
Know Your Investor
While the pitch is critical to all investors — not just venture-capital firms and angels — it's smart to cater to your crowd. For example, many "venture capitalists are looking for huge returns," says Gaebler. In that situation, it makes sense to spend a little more time on the benefits and values of your business — and highlight financial projections. Make sure your presentation is relevant to your audience, otherwise "you're wasting your time," he says.Also, make sure your investor pitch is different from your customer pitch. "It's best to start from scratch," says Reichert. That way, you won't confuse what you promise to deliver or get hung up on other ill-fitting details.
As your idea is being weighed, be sure to do some evaluating of your own, recommends Gaebler. Of the various types of investors out there, some of them may be willing to help manage a fledgling firm or hold strategic partnerships that might prove fruitful.
In Your Arsenal
If your chance encounter with an investor leads to a more formal meeting, you'll want to be properly equipped. Most business consultants recommend having a business plan complete with a compelling executive summary — usually one to two pages — and realistic as well as credible financial projections.If your business concept includes something tangible, such as a product or a web site, work up a prototype that makes an impact, suggests Donald F. Kuratko, executive director of the Johnson Center for Entrepreneurship & Innovation at Indiana University. "In a formal setting, a prop is really important," he says.
It also helps to have some customers already lined up. When Yan Pritzker, founder of Chicago-based Planypus, a soon-to-launch online platform that lets partners create web sites based around social events, received a batch of private-equity financing at the end of August, the 25-year-old made sure to have a few customers in the pipeline. "It is much easier to get [investors] to put their money in when they see that there are people about to pay for the product," he says.
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