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.
Building a new business is a constant learning process, as entrepreneurs attempt to create a credible product while also attracting customers and managing revenue. Investment money can be a big help in pushing a startup to the next level, but approaching investors too soon can be a mistake.
In the tenth episode of Entrepreneur Elevator Pitch, we meet four founders at various stages of launching a business. From the reaction of the investors, we learn that when it comes to attracting funding, timing is everything. Here are three valuable things business owners can learn about pitching investors from this episode.
Ask for money when you're making money.
Weatherproof floor mats are nothing new, but Jonathan Lee, founder of AutoPreme, has found a way to make them both functional and stylish. By the time Lee approached Elevator Pitch's investors, he had put significant work into building a strong customer base for his company, which started in a dorm room. He came to the board at the right time, with more than $150,000 in sales, $82,000 of which was through a crowdfunding platform, clearly demonstrating demand for his product.
Perhaps most impressive about Lee's pitch, however, was his revelation that he has successfully partnered with 15 dealerships in Southern California. Although the investors expressed skepticism about Lee's $4-million valuation, his current monthly earnings from those dealerships helped the investors see the potential. Lee eventually settled for a $1.5-million valuation and gave the board 20 percent.
Don't pitch too early.
Unlike Lee, Lauren Tracy of Blue Fever approached the investors at an early stage, before she'd finished building an impressive audience. With only 1,200 members using the platform, even Tracy knows there is significant work to be done to build that audience. But, she impressed the investors with her mission, which is to bring female-headlined movies and TV shows to a millennial audience. This group of viewers is underserved, the investors acknowledged, and they wanted to encourage the spirit behind what the founder is trying to do.
Working in Tracy's favor was the fact that one of the investors was former YouTube executive Eva Ho, now a general partner at Fika Ventures. The rest of the board deferred to her expertise, ready to sign on if she was behind the venture. Unfortunately for Tracy, her small customer base was a concern to Ho, who pointed out that Tracy hadn't yet proven the company's earning potential. They declined, encouraging her to continue to work hard to build her audience.
Make it personal.
Although Marty McDonough, CEO of Shadow Draw, seemed nervous, the investors could have overlooked that had his pitch been solid. He offered no financial information about his app, which lets artists of all experience levels learn to draw. But, perhaps most disconcerting to investors was the fact that there was nothing personal about his pitch. If McDonough had provided information about what led him to develop the app in the first place, he may have been able to make a connection with the panel. Their decision to decline based solely on the 60-second pitch demonstrates the importance of building personal information into a pitch, since professionals generally invest as much in company founders as the product they're selling.
Jill Bigelow of Mama Strut kicked off her pitch with a personal story that captured the panel's attention. The former athlete noticed after childbirth that there was no brace to help heal the pain and swelling that occurs as a result. She developed her own, capturing thousands of customers and more than 1,000 recommending physicians. The investors were especially intrigued by the fact that Bigelow's product is covered by insurance, offsetting the cost to most of the customers who would be using it. However, although the team bonded with Bigelow and was impressed with her success so far, they ultimately felt they lacked the expertise to help her. They recommended she search for a medical device investor, as well as use crowdfunding to get the money she needs to grow.
Gathering the money to move your business to the next level can be tricky, but take advantage of timing. Do you truly need the money? If you don't, maybe you shouldn't waste the investors' time (yet). Regardless, with the right pitch and plenty of hard work on the front end, you can feel more confident pitching investors to get the funding you need.