Peter and I seem to be on a funding streak lately with our recent posts, probably because so many people are asking for advice on how to fund their businesses in these difficult times. In the past week alone, I've been contacted by four entrepreneurs looking for money from me or my network. To a person, they all approached the issue in the wrong way.
One entrepreneur pulled out a printed slide deck (the McKinsey & Co approach) and proceeded to walk me through his business; one started by saying "I've got an idea for a social media site, but I need funding to build it," (wow, another social media site). Worse yet, one person I had never met before simply asked me to introduce her to my money people out of the goodness of my heart. Of course, she couldn't really tell me what the business was without my signing an NDA, which I never do (but that's another post for a later time). The bottom line is I'm was turned off within the first 60 seconds by all of them.
What could they have done differently? I represent a lot of investors when I say this. You'll get a lot farther down the path toward credibility if you don't tell me about your business, but rather let me experience it. Let me play with a prototype of your product; let me experience your demo site by actually using it. If you're starting the next themed nightclub, let me see a rendering of what it looks like. If you're offering a service, walk me through the experience your first customer had when you actually delivered the service for the first time. If I can experience your business in some physical form, then I know you've put some serious thought and some of your own money into it--you've scored a base hit.
Let me tell you about some entrepreneurs who did it right. Jeff Avallon, John Goscha, and Morgen Newman discovered their opportunity, found their first customer, and secured their initial funding from their school, Babson College in Wellesley, MA. They were thinking out of the box about walls as collaboration tools when the idea hit them. Certainly existing walls are a lot cheaper to write on than the expensive white boards that adorn the walls of most schools and company conference rooms. But, there had to be way to easily erase what you had written. Over the next five years they developed a dry-erase paint for walls. Here's the strategy they used that eventually put IdeaPaint into 10,000 locations around the world.
- When they needed the last bit of funding to finish product development, they found two professors, a member of the board of the college, and a parent of one of their friends--people who believed in them.
- When they pitched the business, they let people experience using the product.
- They explained their exact need for money--how it would be spent and where it would take the company.
- They made sure they delivered on all their milestones so that they would enhance their chances for additional funding when they needed it.
- When they had a completed product, they showed it to everyone at Babson who might be a potential customer or user. This helped them design the business.
- When they were ready to launch, Babson became the first customer and a strong testimonial they could use to seek additional customers.
Remember, money people hear a lot of pitches. They don't hear a lot of EFFECTIVE pitches. Make your pitch real by letting your potential investor experience the benefits of what you're offering. I guarantee you'll stand out from the crowd.