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© 2009 60 Second Online University, a division of BKV, Inc.
By Karen Rands, Founder, Kugarand Holdings
This question comes up often. Entrepreneurs see companies that never pull the trigger because they constantly feel that they aren’t ready for investors. Entrepreneurs also see companies jump the gun and blow their shot with investors because they don’t have their act together enough. So how should an entrepreneur go about pitching to investors?
1) Form Relationships
First time entrepreneurs must realize that a large portion of the money that is put into start up and early stage companies is done so because a relationship was formed. A trust was forged between the investor and the entrepreneurs. It is true that as a company creates momentum and creates a buzz within the investor community, “strangers” will be investing because they know someone who has also invested.
2) Have Your Pitch Ready
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If you enjoyed this article, you might also be interested in this helpful information: Seminars: Using Social Media to Grow Your Sales and Revenue How to use YouTube, LInkedIn, Facebook and Twtitter to Grow Your Sales and Revenue Articles: |
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So, even at the seed stage, a company should have an elevator pitch ready (visit www.blogtalkradio.com/karen-rands and listen to the 3/21 broadcast). When the entrepreneur meets potential investors, they can plant the seed in the investor to either 1) go ahead and take the chance on the starting of this company, or 2) stay in touch and invest later when the company is beginning to accomplish its milestones.
3) Be Prepared with Your Message
Preparation comes in multiple forms:
1. Messaging: Can entrepreneurs articulate the value proposition to their target market and to the investor on how they will get a “pay raise” by choosing to put their money in an entrepreneur’s company?
2. Structure: Do entrepreneurs know how much they are looking for and what part of the company they will give up for that? Is the amount based on solid data, so as to reasonably establish the value of the stock?
3. Offering: Whether taking $100,000 or $1,000,000, there are documents that must be signed, and entrepreneurs must establish a legal protocol for collecting the money. That Protocol includes 1) documents to validate that the investor has enough wealth to make the investment, and 2) legal documents that state the risks associated with the investment that are signed by the investor. For smaller amounts, the documentation can be done with subscription agreements and stock holder agreements. As the amount of money sought increases, so does the complexity, and therefore investment documentations would require a Private Placement Memorandum.
4. Budgeting: It costs time and money to raise money. Entrepreneurs must plan accordingly. It is very difficult to raise a lot of money and run an entrepreneur’s company, so they need to consider either hiring someone to run the company or to run an entrepreneur’s investor campaign. There are the costs associated with going to different conferences... if entrepreneurs are still figuring out entrepreneurs messaging, stick to a networking expo. Here, entrepreneurs pay to present to a group of investors. But they should do so only after the entrepreneur has all of the financial and investor docs completed.
4) Attend an Expo
At an expo, the goal is to plant a seed with investors so they know entrepreneurs and entrepreneurs know them. Entrepreneurs can follow up meetings and get the 2-hour listening ear. When entrepreneurs present to a group of investors - and entrepreneurs will pay anywhere from $2000 to $4000 for that opportunity - it is important to understand the entrepreneurs are the entertainment for those investors. So entertain and then “ask for the order”…which is a meeting to further discuss investment in the entrepreneur’s opportunity. Best of luck!
About the Author:
LAUNCHfn offers an independent review of an entrepreneur’s business plan and capitalization strategy that will save CEOs time and money as they enter the capital markets. Also, find out what motivates investors with the free mini-course “Investor Funding Secrets” and learn how to meet with investors and qualify for capital from our thousands of investors and lending sources at http://launchfn.com.
Karen Rands, known inside IBM as "the Deal Maker,” left IBM in 2001 to catch the dot.com wave of a terrific start up and began her REAL education on the venture capital formation market. She launched Kugarand Holdings in August of 2001 initially as a finder for Venture Capital firms. Kugarand Holdings evolved into a full service provider for start up and early stage companies seeking venture capital that may come in the way of debt or equity.
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