Wednesday 17 January 2018

How to pitch your idea to venture capitalists

Busines Q&A

QFinance Minister Michael Noonan has said the economy will grow by 4pc this year and by 3.75pc every year until 2020, in his Spring Statement. Because of this expected growth, I have developed a business idea to the point it needs money. How do I pitch my idea to venture capitalists?

AFor companies seeking growth capital, well-delivered pitches to Venture Capital investors can be crucial to their success in securing the investment they need.

First-time entrepreneurs are typically not well-versed at pitching their ideas to Venture Capitalist investors and are often so close to their business that they struggle to see them objectively, through the eyes of potential investors.

My advice to entrepreneurs is to firstly put themselves in the investors' position and address the questions investors will be seeking answers to.

To begin, entrepreneurs should articulate the problem they are addressing and their specific value proposition clearly, showing evidence of domain expertise.

In today's highly competitive business environment, it's important to focus on key areas such as product differentiation and defensibility in the market, competitive advantage and to show how and why your offering can beat the competition.

Another basic piece of advice is that entrepreneurs should always speak in a language that investors will understand and resist the temptation to overload them with data.

During their pitch, you should strive to tell the story of your company and bring across your passion and vision for the business. Ideally a pitch should include a demo of the actual product or service.

Pitches should also provide a clear description of the business model and establish the exact point in the supply chain that the product or service fits. For example, is it appropriate that those who may use the product or service will buy from a start-up - and, if they will, what is the route to get to market successfully?

Entrepreneurs need to know their business plans inside-out. They must be clear on how much funding they require to get them to the next stage of value creating milestones.

Being transparent with investors is also key, as Venture Capitalist investors appreciate honesty from the outset. RDA Accountants have first-hand experience of the challenges and opportunities early-stage companies face. Presenting your business strengths is expected, but pointing out weaknesses and problems and then presenting your planned solutions adds credibility.

It is also important for entrepreneurs to target investors with a strong track record and ensure that your funding needs are in line with the investors' respective strategies

You must also be clear about the value, beyond the growth capital, that your prospective investor will add to their business.

There is no one single correct way to pitch to a Venture Capitalist. All entrepreneurs have unique skills and talents to offer - and some verbalise well, while others write well or have particular strengths with numbers. Venture Capitalists appreciate that it takes different kinds of minds and a healthy mix of strengths and talents to make a world-class team.

With this in mind, my best advice to any entrepreneur seeking investment is to be honest and be yourself - but do not to forget to fine tune and practice your pitch.

Wexford People

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