What Should Entrepreneurs Pitch, Products or Ideas?
Pitching an idea before actually producing a product can turn out to be advantageous to an entrepreneur
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Money begets money. Fundraising is one of the majorly faced challenges seen among the entrepreneurs today. Drafting a fundraising pitch demands research. The best way is to hear actual experiences from professionals who have passed the entire excruciating experience of raising funds. Remember, there is never a perfect pitch. The learning curve can be steep.
There are a few distinct differences between talking to investors about a product versus a million-dollar idea. Entrepreneurs face a hard time deciding what works best - whether to pitch the concept or an actual prototype? They face the question of how much to invest in initial development before showcasing it to the world. Should they create a working prototype (and maybe even generate sales) or pitch the idea for the product and see if there is enough interest to proceed further (idea validation)? In short, should they pitch just a storyline for a film or write an entire screenplay. Let us evaluate the pros, cons and risks of each to derive a better strategy.
Pitching an idea
If your products or prototypes are really good, they will strongly speak for themselves. However, if your product is still in the ideation stage, your pitch needs to tell an even stronger story.
Pitching an idea before actually producing a product can turn out to be advantageous to an entrepreneur – the seller, because of the possibility of early feedback from a seasoned investor – the buyer. By using this approach, if the buyer feels that the idea is worthless, an entrepreneur can save on time and resources spent on developing the prototype or product. However, the idea validation must happen from multiple seasoned buyers before arriving at a decision. Another advantage is the seller does not incur a capital investment, which strengthens their bargaining position. All the financial projections and budgeted costs are focused on turning your idea into a real, tangible business: sourcing, hiring and producing or developing the product.
However, disclosing an idea at its nascent stage imposes a greater risk of infringement. Even the intellectual property protection is not perfect. In addition, the threat of selling the idea to the buyer's rival reduces the current buyer's interest. This threat is more immediate because the buyer's rival could take it to market faster.
Selling an idea works better when you have the right team besides you. Trust emanates trust. Your team has placed their trust in your idea and will join you in your journey towards success. This, in turn, helps establish a trust with investors.
Here are a few essential points while pitching an idea:
The problem statement/pain area you're trying to solve and the need you are trying to address. Also, include greater impacts these problems will bring for not solving them
R&D opportunities and patent potential your product has
Prepare yourself, not just your idea. Remember, People, invest in people not in companies. They will want to see that whether you are confident and thoughtful. Are you capable enough to sustain the business through its conception of growth?
Don't beat about the bush. Nobody has the time or the attention span. Can you, in less than five minutes, explain your idea, the return on investment and the growth strategy?
Research about the investor and do it hard.
Your plans to protecting your intellectual property
Pitching a product
Pitching a product to the investors is relatively easier. At this stage, you have come a bit far and converted your idea into a prototype without bringing on outside investment. It clearly shows your passion and faith in your own idea and that what you're doing is worthwhile. A willingness to take on that risk of emptying your savings account is the ultimate proof that you believe in your product, and now it's all about helping others see your vision.
The product pitch largely focuses on potential buyers or market opportunities. Who will use your product, why, and how much will they be willing to pay for the same? Unlike idea pitching, at this point, you should be more talking about your target customers, target geographies as well as go-to-market (GTM) strategy. Marketing and sales will be at the forefront to increase product awareness and convert customers.
The essentials are very similar when it comes to planning a sales or investor pitch for the product.
Plan a live demo focusing on your investor audience. Your product will speak for itself
Build rapport with investors, explain them the value you intend to deliver and give them strong reasons on why they should invest
Be transparent and honest in showing the quality of your product or offering. Explain things you want to improve
Is your product ready to be sold in the market or is it just a prototype that needs further work? - Be clear about the current state of your product
All your financial projections and revenue model should focus on customer acquisition and how you intend to grow your business
If things started to move as planned, how have you planned to fulfil demand generated
Explain your plans for strengthening your production or hiring enough staff to support demand
While you are pitching, irrespective of whether it's your idea or product, you must be comfortable and confident with it. Most of the beginners get nervous. They fail to handle rejections. Do whatever it takes to get yourself in the perfect emotional state while delivering your perfect pitch. Remember, whether you find yourself in front of a handful people in a boardroom or a massive audience of the regional television show; whether you are having five minutes or an hour to pitch, it all boils down on your pitch quality.