2015 has clearly been the year of the entrepreneur. With over $5 billion worth of investments in 2015 and three to four startups emerging every day, India has paved its way to secure the third position in the world in terms of the number of startups, 4200 and counting, a growth of 40%, by the end of 2015. However, with a large number of youngsters jumping onto the start-up bandwagon today, it is essential for them to know the basics behind creating a great start-up pitch. The race to seek funding is never-ending with entrepreneurs looking to raise moneys for their ideas in every possible way. Yet, while some start-ups see the light to success; some may not. Here are some tips to keep in mind while pitching to investors for funding:
Highlight your unique selling point
Entrepreneurs who pitch their “ideas” as a different yet niche business have a better chance at raising funding rather than someone who is trying to build an existing business model differently. Additionally, if businesses have a higher competitive advantage, they are much more likely to succeed.
As investors, we are constantly looking for young entrepreneurs who are able to benchmark their initiative with competitors in the same space. Entrepreneurs who are able to do this and understand that they are playing against a superior competitor gives them a differential advantage that investors look for in startups. A
nother aspect that is quite important for any start-up is the team. Each member should be strong in their domain thus forming a strong core team. A good team gives faith to investors that they can execute.
Another common factor that is quite unavoidable in today’s startup scenario is cash burning. Staying economical in a business is not only highly beneficial to succeed but also helps you stay focussed on spending on what is critical.
Tell a really good story
Always make your business model so attractive that no buyer can refuse a chance of a stake in the company. Estimates of a company’s worth often comes down to the perception of how you pitch to your investor. Here’s where your passion for the company needs to come across!
Get multiple buyers in the game
It is not wrong to meet multiple investors from different companies. Not only does this help you to get various expert opinions on your pitch, but also helps you to constantly refine your pitch. Your goal is to get some heat on a deal, and to generate leverage so you can get the valuation you are seeking. There are two scenarios during this phase:
- Price Taker: if you have just one investor interested, he or she sets the price- you are a price taker.
- Price Maker: If you have multiple investors interested, then your leverage increases tenfold, and you become a price maker.
So when is the right time to raise this start-up capital?
Ideally, when your startup is gaining momentum and when bootstrapped funding is slowing running out. Momentum can mean new product launches, new customers or partners, increased market penetration, hiring of well-respected executives or advisors, strong financial growth and crossing significant operational milestones. So all you young entrepreneurs, maybe the right time to seek funding is now!
[About the author : K.A. Srinivas is Chief Financial Officer, Ventureast]