Photo: baslow via flickr
This post was originally published at Open Forum. We are currently in the midst of the entrepreneurial age. Competition is fierce as everyone is out pitching ideas and trying to get their startups off the ground.
“It’s going to take twice as long, and it’s going to be four times harder than you ever thought,” Ron Fleming, co-head of emerging companies at Pillsbury Winthrop Shaw Pitman, says at Business Insider’s Startup 2012 conference.
To help founders make their startup dreams a reality, we compiled some insights from investors and founders who have “been there and done that.” Here’s what they told us:
1. Always present your idea like it’s a newspaper headline. Bob Rice, managing partner at Tangent Capital and contributor on Bloomberg’s Buzzword of the Day, which is part of Money Moves, suggests that you figure out the most important part of your story, before you go and tell the whole thing.
Investors might not have a lot of time to listen to everything you say. “You need to be able to get your point across within a minute, while you’ve got someone’s attention, before they start to wander,” says Rice. “Present it like a headline in a newspaper.”
2. Don’t over-complicate the pitch. Your presentations should be informative, but simple and exciting. You have to convey what your company is about and effectively explain why people are going to love it, despite there being other similar businesses.
“You kind of really have to dumb things down for VCs, so point to examples of similar businesses that were really successful. This helps take away as much risk from the idea as possible,” says Scott Hintz, cofounder of travel organiser Tripit.
3. Investors are going to attack all of your assumptions. Before you go into that room to pitch your idea, you need to figure out what investors are going to attack you on.
“Every entity has weaknesses and you have to be able to say ‘Hey, we’re weak in these three areas’ because investors are always looking for a reason not to invest.” suggest Allen “A.J.” Steigman, founder of Soletron.
Bloomberg’s Rice agrees, “It’s highly unlikely that no one else has thought of this idea. If I ask you how your company is different than so-and-so’s and you give me a blank look, I’m going to think ‘Oh, man’. Instead, you should say something like, ‘Well, no one else is doing it like we are, but the closest competitions are X, Y and Z,'” he says.
4. Don’t accept every investor meeting offered. When you need the money, you will likely accept every meeting offered, but you shouldn’t, advises Alexis Tryon, founder and CEO of art rental service Artsicle. These meetings take up a lot of time and if your team is small, it can take away from actually working on the product or bringing in customers.
Tryon knows this first-hand. “I met with really late-stage funds. I met with some private equity funds. I met with all sorts of people who were never going to give us funding,” Tryon says. “About halfway through, I got really strict and I only took meetings with people who I was very confident could get us funding.”
5. Decide whether or not you need to fundraise at all. Angel investor Jim Estill first started his own business selling technology parts out of the trunk of his car with a $200,000 investment from his father. He never received money from investors, and fifteen years later, Estill was bringing in $68 million in sales when he decided to take the company public.
“Being public allowed me to borrow more from the bank and allowed me more leverage. It’s strange but people were always like ‘Oh, you’re more legitimate now because you’re public.’ That said, I wouldn’t recommend it to everyone.”
“For many of the companies I see, it’s a disaster to have investors. You’re using up equity, you’ve been diluted down and now you only own 10 per cent of the company.” says Estill.
Estill suggests that R&D companies raise money because they have to hire engineers and designers. “It also makes sense for a company like RIMM to raise money; and companies that need to gain a massive audience quickly—such as Facebook or Twitter—before anyone else comes in steals their market.”
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