In the new streaming show Entrepreneur Elevator Pitch, the founders enter Entrepreneur Elevator and have only 60 seconds to present their idea, product or business to an investor panel. Whether an entrepreneur is invited to the boardroom or brought back to the ground floor depends on what our experts think in that first minute. Here we’ll break down the lessons that predominant business owners can take away from the field of each episode.
There are many reasons why entrepreneurs seek funding for their business. They may be willing to increase production and lack the resources to do so. They may need capital to invest to get word out about the new product they have developed. They often need access to many valuable resources that investors have at their disposal.
For many company founders, however, investors bring a much more important asset to the startup. Most investors are experienced professionals who can bring experience and insight into a particular business. In the sixth episode of the Entrepreneur’s new streaming series Elevator Pitch, we meet a group of founders who desperately needed this kind of expert guidance. Here are three important lessons entrepreneurs can learn from the episode.
Investors are consultants.
The first in the episode were Jared and Karina Rabin, the team of husbands and wives behind Hang-O-Matic, a popular image-hanging tool. At first, the two pulled out the “bait and switch” concern. They spent most of the presentation discussing their already successful product, and then suddenly discovered that they wanted to invest in a newer tool. Know that in these situations, investors will usually want a piece of an original, successful product before they think about anything else. They will probably send you the packaging otherwise.
So investors agreed to let the Rabbis into the meeting room, but if the investment was not specific to the original tool, they were not interested. Finally, the couple has already made it clear that they have more than enough earnings to fund the planned new product.
Fortunately, Jared and Karina quickly discovered that their primary interest was to find a business partner who could advise them as they moved their business forward. This means that they were perfectly fine with the investors who participated in the original product, not just the new one. Investors were immediately interested, agreeing to serve as a team of advisors in exchange for a stake in the company. This suited the couple perfectly, who after years of working nights and weekends were exhausted to create their own business. The success of this step clearly shows that investors can be very valuable advisors in their portfolios. Be open to the idea that this too could be just the relationship you need.
Conduct market tests first.
Dawn Maslar, author of “Chase Men Women, Women Choose,” approached the board with a product called “Loyalty Test”. After taking a man’s saliva sample, she said, the test can reveal if the man is committed to the woman he is currently with. The panel felt a little insecure about Maslar’s product, but they were curious enough to invite her into the hall anyway to hear more.
When he entered the meeting room, Maslar failed to win over investors. Their biggest complaint was that they simply weren’t convinced there was real customer demand for her test. With a sales history or proven market research, she may have been able to discuss this objection. She didn’t have that, though. Everything she actually had her own opinion. The decision of investors to give up showed the importance of the existence of market data before contacting investors.