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So you’ve had the next big idea, or your startup’s been going along quietly for a little while. Now you’re ready to take it out into the big bad world. If you find yourself asking “Umm…what next?” you’re not alone.
If you’re in an emerging market like South Africa, knowing what to do next is getting easier, but it’s still not as easy as it might be in a more traditional market.
Sure there are a growing number of angel investors, venture capitalists, incubators and accelerators, but if you want to get their interest you really have to stand out. The way to do that is to constantly interrogate what you’re offering.
Here are a few questions you should be asking yourself before you pitch your baby.
1. Where do you fit?
The first question you have to ask yourself as an entrepreneur is where you fit into the system. If you don’t know your niche and who your potential competitors are, you don’t really know what your business is really about. Pitch to someone with industry knowledge without being able to answer that question and they’ll shoot you down in seconds.
2. What value do I bring to the equity?
You might be well versed in what your business’ equity is, but what about your own equity? You have to constantly ask yourself what you can bring to your business. The same is true for your partners. Everybody involved in the business has to bring value to it. If you’re unsure that someone’s bringing something worthwhile, ask them. If their answer stinks of bullshit, get rid of them.
3. Do I need an accelerator or an incubator?
So you feel like you’re ready to tell someone about your business, but you think you could still use a little refinement. That’s where accelerators and incubators come in.
Well both have value and your choice will depend largely at what stage your business is at.
If you walk into an incubator (obviously you can’t just walk in, you have to be offered a place) you can be confident that you’ll be there for a long time. They look for stable ventures, existing financials. At the very least, you’ll have to pay rent and maybe mentorship fees. Essentially they want to see you come out as a viable business, not least because it helps their reputation and will bring them more business.
Accelerators meanwhile are more interested in businesses in the ideas phase. They’re looking for innovative and disruptive ideas. Their goal is to get those businesses pitch ready with a little bit of seed capital.
They also tend to prefer teams to one man bands. That means they can help people build their corporate hierarchies and know their roles within a company for instance. The accelerator programme usually ends in a demo day to VCs.
What it boils down to is this: incubators are (largely) about mentorship, accelerators are about coaching. Mentorship speaks to management. Leadership comes through coaching.
4. What am I really pitching for?
“If you think capital’s the only thing your business is missing”, says Marc Elias, the CEO of newly founded accelerator Seed Engine, “you’ve business has got big problems”.
You need partners who will invest in you and your business. If you’re just looking for money, get a loan.
5. When do I give up on contacting people?
Never. “We’re the most difficult people on earth to get hold of,” says Elias. You have to be persistent. Accelerators, Incubators, Angel Investors, and VCs all have a ton of people begging for their money and their time. Persistence means you’re more likely to stand out and be remembered.
6. What about an NDA?
This is your “big idea”, you want to make sure that anyone you tell about it doesn’t steal it right? Suddenly a non-disclosure agreement (NDA) seems tempting.
But an NDA can highlight a weakness in your idea says Elias. “Your secret is in our interest to keep quiet”.
You could also be closing doors by insisting on an NDA. Invenfin’s Alex Fraser puts it like this: “I’ve spoken to about 30 tyre recycling businesses over the last year or so. If I’d signed an NDA with one of them, I’d have been in breach of contract by speaking to the other 29.”
7. Who should I be pitching to?
Just as you have to understand the startup space you’re in, so you have to understand the VC space you’re pitching to.
Remember, VCs and Angel investors are entrepreneurs too. They’re all trying to stand out. Understand who they are, understand what their mandate is and you’ll understand which ones you should be pitching to.
Some VCs operating in a niche, bio-tech for instance, may suit you more than general ones.
8. Can I convey the gist of my pitch in one sentence?
A good idea is a simple idea. If you can condense your idea down to one sentence, you’re on the right track. The old cliché of the elevator pitch exists for a reason.
If you’re afraid of heights, think about how you’d fit the essence of your pitch into a tweet.