Watch: Why You Must Be Prepared to Confront Your Product's Flaws Before Pitching This week's episode of "Entrepreneur Elevator Pitch" highlights why doing your homework is critical for your pitch.
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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.
At some point in most small businesses' growth, additional funding becomes necessary. One of the top ways for these companies to get funding is through one of the many investors interested in putting their money into promising new ventures. With so many startups now vying for investment dollars, it can be difficult to stand out.
That's where shows like Entrepreneur's Elevator Pitch can help. Each week, the online series features several small-business owners who try to win investors through a 60-second elevator pitch. If they succeed, they're invited in to further explain their product. Here are three things we learned from episode seven of the series.
Work with investors who will protect you.
Alex Shadrow, founder of online clothing marketplace UNItiques, successfully pitched her online marketplace, which allows millennial-age women to sell clothes from their own closet. Her business model instantly caught the interest of the investors, who were impressed by the concept. Once inside the boardroom, Shadrow further demonstrated her knowledge of the value of her business by describing her unique software, which can identify buyer preferences, generating data that she can then sell to retailers. The fact that UNItiques is working on licensing its API made it even more interesting to the panel.
Before they agreed to buy in, though, the investors stressed the importance of protecting the brand's equity. Shadrow displayed perhaps a bit of naivete when she tried to assure investors their contribution wouldn't be watered down by later investment. The panel pointed out right away that she was most likely wrong about that and emphasized she should be on guard for this issue. In addition to purchasing a stake in her business, the investors promised to serve in an advisory role to help protect her stake as she worked to perfect and license her technology.
Be ready to confront your product's flaws from the start.
Both Steve Ward of Authenticating.com and Lauren Sturdivant of Case Status gave pitches that didn't account for their products' flaws. Ward's software startup offers criminal background checks for only a dollar, potentially making it easier for businesses and customers to avoid fraud. However, the panel knew enough about background checks to know that a dollar was well below the standard fee for such a search, calling into question how the platform could ever make money.
Sturdivant's Case Status had an appealing concept, but fell short in impressing the investors. Case Status promises to update clients on the status of their cases in real time, saving attorneys the time they'd spend answering phone calls and emails. However, the team pointed out that many clients wouldn't understand what they were reading and would pick up the phone to ask questions anyway.
In both cases, entrepreneurs may have had answers to these objections, but they never got the chance to clarify. This highlights the importance of truly knowing your use case, seeing the flaws in your product or service, and addressing them early. What's more, if you can predict these objections, you can build them into your pitch early on, too. If you do that, you'll be more likely to intrigue investors enough to actually get a meeting.
Know if the investors are the right ones for you.
Ben Forman, co-founder of ZBoard, had a flashy but substantive pitch for his hands-free electric skateboard. He developed the board along with his engineer friends in college, going on to sell 4,000 units for more than $4 million in sales. He came to the panel asking for $300,000 to fund his business in order to maintain a better balance of inventory and cash flow. Throughout his pitch, Forman made it clear that he not only knew his business inside and out, but he also had a thorough understanding of the market and what he could achieve through an Indiegogo campaign.
In the end, though, Forman failed to land an investment solely because the panel felt the product was a bit too far outside of their wheelhouse. He was, quite simply, standing in front of the wrong people. But, there was a silver lining to this rejection. Two of the investors were willing to continue a dialogue after the meeting in order to help Forman locate the right partners to help him reach his business goals.
This episode of Elevator Pitch showed the value of research prior to an investor meeting. In addition to identifying possible objections and building them into the pitch, entrepreneurs can also gain an advantage by ensuring ahead of time that they're actually meeting with the right investors. This will help save time and increase the odds that a pitch will be successful on the first try.