Chief Executive Officer
Connecticut’s recently launched $5 million global pitch competition for fintech and digital health companies, VentureClash, has drawn an incredible response from companies globally. So I thought it would be an opportune time to take another look at what makes a pitch attractive to investors.
At Connecticut Innovations, we go into every pitch meeting hoping to see: (1) an excellent management team backed by a solid advisory board/board of directors, (2) a significant innovation with a large potential market (evidenced by strong customer interest) and (3) proprietary technology. Here are a few quick tips that we hope will help you and your team attract venture capital.
Tip #1: Perfect the basics.
Have a unique selling point that can be marketed widely and directly to investor groups. Convey your message quickly and clearly. It is essential the team be able to articulate its value proposition to investors in one sentence. We also look for the following:
- Emphasize how your business proposition will make money for your financial backers. Show understanding of customer needs, and highlight the strengths of the team.
- Demonstrate expertise and financial knowledge of your market. Present rich data and metrics about the state of your industry, comps and why now is the right time to invest (remember that investing too early costs many an investor great sums of capital).
- Be prepared to show the future value of the company through scalability based on technology or other IP.
Tip #2: Consider your reputation (or, why you should focus on your board).
Having a strong advisory board or board of directors is critical because it gives a sense of security to potential investors. Having a C-level executive on the board shows that business leaders have done their due diligence and your company is worth a look.
Present advisers and board members that have the background and experience to help your team be successful. Whether through introductions, past successes or reputation for excellence, these people give confidence to investors that the future of your company is bright. Especially if you are a first-time entrepreneur, having people on your team who have tasted success from prior startups is a great way to address the inexperienced management team concern most VCs share.
Tip #3: Show that you don’t need the money.
One clever way to attract investor attention is to demonstrate that you will achieve your goals without additional investment. While this may seem counterintuitive to the process (you are asking for money, after all), investors are further intrigued if you can show an ability to cover costs and run your growing business smoothly without the support.
Paradoxically, also be prepared to answer how big and fast you could grow if raising money were not an issue.
Tip #4: Explore alternative funding sources.
To build credibility with well-established investors, you could also consider nontraditional sources of funding. Friends and family, crowd-funding, SBIRs, second mortgages and bootstrapping the company to support growth all show potential investors that you are willing to do whatever it takes to make your enterprise a success.
Bonus tip: Stay optimistic.
There is plenty of money out there for good deals. If you truly believe in your company’s mission, others will too, and you will find capital.
Double bonus tip (we’re generous that way): What to do when offered a deal
If you use these tips to secure funding, I don’t want to leave you hanging when you do get a deal. So make sure you plan for a successful outcome. The Alternative Board, a board and advisory organization, recently released its quarterly survey results, which focused on how business owners acquired funding and how they would do it differently if they were given a second chance. Some statistics of interest for startups:
- The most important lessons entrepreneurs learned from securing external funding are: borrow at the right time (34 percent), from the right source (34 percent), at the right amount (19 percent), with the right adviser at your side (13 percent).
- Looking back, business owners indicated that they should have raised more (29 percent) rather than less (11 percent). So don’t be overly concerned with dilution; instead, focus on growing the pie. In Connecticut, we often see companies raising small rounds instead of going for the $5 million-plus round that would allow the company to quickly scale and win market share. If you have the chance, go big.
Best wishes, and please stay in touch,