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Tips for Presenting Your Funding Request to Angels and Venture Capital Firms |
Venture capital firms and angel investor groups receive hundreds of proposals each month which makes the finding of funding a competitive process during which entrepreneurs strive for investor attention. This competitive process is most apparent at venture fairs and expos where vc firms and angel investors hear entrepreneur presentations over a one or two day period and choose to invite only a select few for a follow up meeting. As such the entrepreneur needs to take advantage of this opportunity for visibility and accessibility to investors offered at these gatherings by providing a concise message about their venture known as “the pitch”.A common mistake made by an entrepreneur in pitching their company is presenting their message from their own point of view as entrepreneur and not from the view point of the investor. The entrepreneur sometimes speaks in terms of vision and dreams, product features and market share, while the investor evaluates opportunities in terms of return on investment and re-payment of investment principal. Here are the key elements of what a good presentation should cover when addressing an investor that will make a pitch stand out:
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First, state what market problem is being solved or the pain being addressed by your venture’s product or service and what the size of the market there is for a business based on this need
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Use five year revenue projections that are based on building the company from the ground up reflecting how a realistic number of customer contracts over that period of time will be secured to show that the venture will have high enough growth business to repay an investment
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Indicate if your venture has achieved “proof of concept” such as a first customer or beta prototype
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Detail the backgrounds of the venture’s management teams’ experience that is relevant to the industry and the stage of growth of the company and how any gaps in experience will be filled as the company grows or is funded. Note any prior entrepreneurial experience in the team.
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State how much you are seeking and for what purpose
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Explain how much has been invested to date by the founding entrepreneur (and family and friends), what has been accomplished with those funds and how and why the investor’s money will be well spent to now accelerate growth
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Show how the investment will yield the return on investment multiple that is associated with higher risk start up and early stage funding
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Project an exit strategy for the investor who usually requires repayment of their investment within a five to seven year period of time and how it will occur such as by the company’s acquisition or through an initial public offering
The “pitching” entrepreneur’s goal is to make the decision to invest a compelling one. Once interest has been gained, the angel or vc will most likely request your business plan, product details, and financials for review and then schedule a face to face discussion. A truly lucky entrepreneur has on occasion been asked for their term sheet at the fair and right there be asked what percentage of the business they will give up in return for a check—on the spot. Understanding the term sheet is just one more item required in advance of entering the funding process!
If you are an entrepreneur considering outside investment for your business, visit NJEntrepreneur.com/fund (“Capital Connections”) and use our online service for investment connections
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