Watch: Why You Must Know Your Value and Generate Investor Enthusiasm
On the new streaming show Entrepreneur Elevator Pitch, founders step into the Entrepreneur Elevator and have just 60 seconds to present their idea, product or business to a panel of investors. Whether an entrepreneur gets invited into the boardroom or sent back to the ground floor depends on what our experts think in that first minute. Here, we break down the lessons aspiring business owners can take away from each episode's pitches.
Any new business owner hits roadblocks on the path to success. Those missteps often occur during pitch meetings. By watching Entrepreneur's new online series Elevator Pitch, founders can save themselves time and frustration by learning from the mistakes of others.
The latest episode of Elevator Pitch features a set of entrepreneurs who have standout ideas. But, their success -- or lack thereof -- is proof that having a good product is only the beginning. You have to know your worth and generate some investor enthusiasm. Here are a few takeaways from episode nine.
Excitement should enter into the picture somewhere.
Some ideas are custom-made for the pitch, generating an instant reaction. That was the case with Runway Heels, pitched by founder Melody Avecila. With just a push of a button, Avecila's shoes go from heels to flats, clearly targeting the modern professional woman. Although the team was intrigued by the idea almost immediately, they had to turn it down in the end. The shoe design hadn't really been refined yet and needed more research and development before deserving investment.
The next product didn't have the excitement factor, and that ultimately doomed it to no investment. Veggidome seems solid enough. It's a product that keeps vegetables fresh and visible under a small dome, without having to be refrigerated. As the founders explained, having vegetables in plain view makes it more likely they'll be eaten, helping families stay healthy. The founders knew their target market and even had a successful Indiegogo campaign, but investors just couldn't get enthusiastic about vegetables. Perhaps the lesson with these two products is that if you want investment, you need a bit of excitement and some kind of a track record, not one or the other.
Don't give your company away.
Many entrepreneurs fail in the boardroom because they hold on too tightly to their equity. However, Kate O'Malley, creator of the "I'm Hot You're Not" blanket, had the opposite problem. She almost gave 90 percent of it away. After intriguing the investors with her dual-insulation non-electric blanket, O'Malley told the investors she had already secured a patent for the product. Even with a patent in place, however, the blanket had stalled and she needed help getting it to market.
The investors saw they could help O'Malley with this. They saw potential in the product with couples who love sports, especially if each side could be branded with the team one half of the pair supports. Instead of putting money into the product, the investors offered to take a portion of the company in order to help her land the licensing deal she needed. O'Malley offered 90 percent of her company to the investors in exchange for their help, but they declined, saying they didn't want to take practically her entire company. They were honest enough to let her know that they wouldn't be putting enough work in to justify taking that much equity. Instead, they offered to help her in exchange for 50 percent equity. O'Malley took the deal and now has a team of advisors to help her grow the company.
If you want money, don't forget to ask for it.
Next up, Hagen Lee and Douglas Rose approached the investors with an intriguing airline travel product geared toward non-U.S. markets. The founders created an app called reTrip, which offers a secondary market platform for travelers who have nonrefundable airline tickets. Using this platform, consumers in markets where transfers are allowed can resell their tickets to others. The investors were interested, calling it StubHub for travel.
Like others who have approached the team on Elevator Pitch, Lee and Rose were perhaps more interested in mentorship than money. They very quickly made a handshake deal to give up 20 percent equity in exchange for advice (no money). But, within seconds, they asked to rescind the offer, saying they couldn't give up that much of the company.
This made things awkward for a moment, as the pair made the mistake of trying to please too early in the negotiation process. However, the entrepreneurs recovered and eventually offered 5 percent, which the investors bargained up to 8 percent, working hard to convince the pair that their advice (again, no money) would be well worth it. Regardless, by knowing in advance how much you want to give up and what you want in exchange, you can avoid making a similar mistake. Also, make sure to get some actual investment money, which these founders didn't get, and expressed regret over.
Mistakes are part of growing a new business, but shows like Elevator Pitch can help you keep those mistakes to a minimum. You can also learn from the many success stories on the show, with the lessons possibly making the difference between landing your funding or languishing in obscurity.