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Crafting the Pitch: 5 MORE Tips on how to impress the Discerning Investor

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Tip 1: Openly Address Risks

 

As anyone who has seen the timeless flick, The Princess Bride, knows just when something seems entirely inconceivable!–it will occur and make you the fool. Be cognizant of any inherent risks to your products implementation, its demand in the market, and acquiring the funding which you will require to operate smoothly in the future. Even if you expertly outline both internal and external risk factors, there will undoubtedly be questions, so ruminate on this beforehand.

 

  • Risks pertaining to financing permeate the prototypical early-stage company: is your burn rate sustainable and is your runway long enough to begin generating cash flow? Will you be able to elicit enough interest for subsequent funding if you cant hit your financial projections? Is your sales cycle conducive to long-term solvency as you scale?

  • Can you hire the right talent to initiate your go-to-market strategy? Can you pivot if consumer demand is underwhelming?

  • So many questions…answer them thoughtfully and display your near-sociopathic meticulousness.like someone who reads the financial statement footnotes to Apples annual report.

Tip 2: Have a Deep Understanding of Your Competition

 

Competition is a risk factor that deserves its own bucket because it must be discussed during your pitch if you want to be taken seriously. Of all the potential threats to success, competition is the most difficult to quantify as it can arise at any point, so make it a point to discuss your comprehensive knowledge of the competitive landscape.

 

  • One of the most prevalent risks downplayed during presentations is that of market competition because of a fierce belief in the efficacy of ones own product–this is a behavioral bias. As I mentioned in a prior post, conviction implies self-confidence but instead of conceding to irrational exuberance (i.e. assuming you have a monopoly), utilize this entrepreneurial rigor to think critically about channels of competition.  

  • Of course your company will be presented as the key influencer in your chart of market competition–but why exactly?

  • Briefly mentioning five-ten competitors, their market share, strengths and weaknesses, distinguishing features, etc. is always appreciated.

 

Tip 3: Barriers to Entry and Competitive Advantage

 

Barriers-to-Entry is another underappreciated talking point and one which is critical to divulge during your pitch. If its Warren Buffetts favorite parameter for investment due diligence, you should probably mention it when discussing the defensibility of your business.  

 

  • Expand on your sustainable competitive advantage–investors want to know why you can combat the Amazon effect, for instance (the seemingly universal phenomenon of sales appropriated from brick-and-mortar retailers by the online marketplace behemoth due to attractive pricing and ease of use.)

  • What people often forget to consider when forecasting their addressable market is the microeconomic principle of economies of scale, or being able to use the enormous advantages of cutting average cost per unit of output as you scale up your operation and spread fixed costs over more units. In laymans terms, this simply means survival of the fittest in a capitalistic economy, as the big players can use their scale to undercut you and profit off of your inelastic pricing model. If possible, clarify how your barriers-to-entry will address this fun-sponge principle.

  • Other things to mention: are there high switching costs for competitors? Is there a long and costly sales cycle? Are you a first mover in the industry?

  • All of these factors can be used to your advantage as you pinpoint the moat youve built around your business model.

 

Tip 4: Legal Protection of Product

 

Do you have any patents protecting your Intellectual Property or products? When it comes to imitable products–especially in the biotech and software space–patent and IP protection is your lifeblood. Piggybacking on my previous pop culture reference, recall Mr. Ts I pity the fool. Dont be the fool who elicits Mr. Ts pity by leaving your precious product dangling in front of the hordes of voracious entrepreneurs ready and willing to perform legalized theft.

 

  • Protection of IP is essential yet often entrepreneurs do not place enough emphasis on the legal walls built around their proprietary technology. The worst answer to this question is: Its too late for me to file a patent application.

  • The current U.S. rule generally provides applicants with a one-year grace period to create a application after disclosure of said invention. Another issue which may be critiqued is the viability of your patent–is it too narrow in scope? Will competitors be able to work around it?

 

Tip 5: Expose Your Inner Thespian

 

This point is less science and more of a high art which you can refine with time and practice. Paradoxically, overacting can be equally, if not worse than keeping your eyes glued to the slide deck if you come off as overbearing.  

 

  • You might be a genius and your product might be the next Facebook but if you cant convey this with controlled bravado in the short time you have in front of investors, you will be ushered to the door empty-handed.

  • Find that perfect medium between the I can sell you this hideous neon green Mustang instead of the Minivan you came to purchase self-assuredness of a used car salesman and the I know literally everything about the genus of the African Rhinoceros Beetle but am afraid of human interaction intellect of the introverted entomologist.

  • If possible, make sure the person or people making the presentation are both sociable and fully-versed in your product; having one or the other will be ineffective. Relax and let that je ne sais quoi draw in the capital.

 

Stay tuned for more tips, tools, and terminology!

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