Things to Consider Before Presenting Your Idea to Investors

What to consider before presenting your idea to investors

Entrepreneurs often focus on finding investors for their businesses and determining the type of investor, such as angel investors or venture capitalists, best suited to their endeavor. However, finding investors is only half the battle. 

Consider the following crucial elements you must firmly grasp ― and be able to convey ― before stepping into your investor meeting. 

1. Consider your path to market before presenting to investors.

How do you visualize introducing your product or invention to the market? Your path to market can take several forms, including the following:

• Licensing and technology transfer
• Contract manufacturing
• Starting a business   

Here’s more about each path to market: 

Licensing and technology transfer

Inventors often opt for licensing deals or technology transfers. They don’t want to sell a product; instead, they want their invention to thrive with outside involvement. 

Licensing deals can be complex to understand and execute because there isn’t a direct process or path. When trying to get a product licensed, you must dedicate sufficient time to the following: 

• Finding the right potential buyers
• Researching intellectual property matters
• Perfecting a licensing agreement
• Consulting professionals for help and guidance.

Technology transfer is another popular path-to-market option; it enables quick monetization and frees inventors to concentrate on new projects. 

Contract manufacturing 

Product creation can be challenging for inventors and entrepreneurs because accessing specific parts and equipment can be near-impossible. Contract manufacturing can help. 

Contract manufacturing firms will produce a specific quantity of your product for a set fee. Contract manufacturing may make sense for startups and solopreneurs who must amass product inventory. It also allows them to entrust the entire creation process to one entity without spending money on manufacturing equipment. 

Contract manufacturers vary by industry, so it’s crucial to research the right partner for your invention. 

Starting a business

Some inventors want to start a business to sell their products. Setting up a company requires a significant investment of time and money. However, if your product is promising and fulfills the needs of a target audience, it’s worthwhile to seek funding and create a business framework to present to investors. 

As an inventor, if you believe in yourself and think you have the expertise and experience necessary to start and run a company, this could be the right approach.

2. Consider your idea’s feasibility before presenting it to investors. 

Your idea must translate to a feasible product and investors must be on board with your vision. 

Three steps can help you determine product feasibility: 

1. Create a prototype. 
2. Define your target market. 
3. Research the industry. 

Create a prototype

When developing a unique product, prototype creation and testing are crucial. A prototype can inform your marketing strategy and licensing approach and help you determine if your idea works. To get started with your prototype, sketch a drawing of how you envision your product’s appearance. Next, create product markups. You can create prototypes from objects around your house or use a third-party manufacturer or 3D printer.  

Ask yourself these questions: 

• Does the prototype work as expected? 
• Are the product’s components or raw materials affordable and easily accessible? 
• How easy is the product to produce? 
• Does it require any specialized equipment or expertise that is expensive or in short supply? 
• Are there any aspects of it that need to be reworked?
• Has this idea been implemented or invented already? If so, what was the outcome? 

Define and learn about your target market

Your product is only feasible if it has a market. Before meeting with investors, you should identify your target market and understand them thoroughly, including their demographics and psychographics. 

When you know your target audience, conduct beta testing or focus group research to get feedback from likely purchasers and improve your offering. The following questions are helpful: 

• Do they understand your idea’s features, benefits and value? 
• Is the product easy to use? 
• Can they afford your product? Is it a bargain, splurge or somewhere in between?
• How much would they be willing to pay for it? 
• How will they use your product or idea? 
• How often are they likely to purchase it?
• How does it compare to available competitive or substitute products?
• Do they envision themselves buying the product when it’s available? 
• Are there any other features they would like to see included? 

Research the industry

Detailed market research will reveal if your idea already exists in the market and help you understand potential sales channels and competitors. Your market research plan should help you project the number of people likely to purchase your invention, determine overall market size and pinpoint what opportunities exist in the industry. 

You must know and understand your industry competitors so you can differentiate your product. 

Research the competition’s strengths, weaknesses, strategies and price points. This information will help you fine-tune your target market and set the best possible selling price. 

3. Consider the quality of your presentation.

Your presentation must be captivating and include the information your investors need. Focus on the following criteria: 

• A strong value proposition
• A high-quality presentation deck
• A solid business plan

Strong value proposition

Your value proposition should articulate the problem your product addresses, how it solves it and why people would buy your product instead of a competitor. Your value proposition should address the following: 

• Who are your customers?
• What need does your invention address?
• What’s your invention’s name?
• What’s the product category?
• Why will they buy your product?
• What is the current primary alternative to your product?
• What’s the primary differentiation?

Business plan

Investors want to see a solid business plan that summarizes your strategies and plans to make the business succeed. The business plan shows that you’re serious about the idea and understand the key performance criteria that impact a business. It should include:

• An industry analysis
• Evaluation of the market and competition
• Product and service offerings
• Marketing and sales strategies 
• A discussion of the founder and executive team’s qualifications
• Financial projections (if possible)
• Financial requirements  

Although a business plan takes time to build, it can be crucial in today’s competitive business climate. 

Signs that you’re not ready to pitch investors

Consider the following to gauge if you’re ready to pitch to investors or if you need more time to percolate your idea. Approaching investors when you’re ready will help you get the funds you need and avoid a bad product launch. But meeting with them too soon can derail your dreams.

1. Your idea is not fully formed. 

When presenting to investors, you must be able to answer all their questions quickly and confidently. That means that your idea must be extremely well thought out. You must be able to explain its features, benefits, exactly how it works, your production plan and your market analysis. 

If there is anything you’re unsure about, you must research that element thoroughly and at least be able to explain details, options, pros and cons.   

2. Your team is not complete.

One of a new venture’s biggest selling points is its executive team. Investors want to have confidence that the business’s founder and C-suite executives have the knowledge, experience and drive to make the business successful. 

You don’t have to have every employee chosen and vetted. Still, at a minimum, you should have a chief marketing officer, someone with deep technical or operational experience and a vice president of sales to lead your sales team. If you and your co-founders have some of the necessary knowledge and background, you may only need to get one or two additional people on board.

3. You don’t know how to scale your business.

Every investor will want to know your plans for scaling your business. Early investors are taking a big risk by investing in your startup, so they want to feel confident there’s a big payoff coming. For example, they’d rather invest in a restaurant concept that can be franchised nationwide than a single-location local eatery.  

To scale your business, you must consider standardizing your processes, using technology to aggregate tasks and lining up suppliers that can handle much larger orders as you grow. You also must consider protecting your intellectual property so copycat businesses don’t crop up.

4. Your product doesn’t have a clear competitive advantage.

If you’re entering a crowded market with a slightly different version of something that’s already there, it will be very challenging to convince customers to switch from their current supplier to buy from you. The difference in your product must be compelling. 

If it is just the cost basis, you’re setting yourself up for better-funded competitors to compete on price, which will probably end badly for you. Marketing alone is also not a strong differentiator because your marketing strategy can be easily copied.

5. You haven’t done any market research.

Market research is a critical part of your path to market and feasibility preparatory steps. Customer and competitive research is crucial to discover if there will be a demand for your product in the first place. Market research will help you determine what other trends or forces will impact your demand and the supply of talent or raw materials. By doing exhaustive research, you will know what you can expect once you enter the market and you can communicate this to investors, giving you a better chance of getting a “yes” when you ask for an investment.

6. You haven’t run the numbers.

Investors are interested in ideas, but their real interest is in the bottom line. Is this investment likely to make money for them or waste it? How long will it take to give them a profit and allow them an exit? How vulnerable is the company to changes that will affect its profit margin? Will they invest now only to be asked for more money down the road when the company runs into a cash flow problem? 

All of these questions and more can be answered in pro forma financial statements, including:

• A pro forma income statement with sales projections and estimated expenses
• A pro forma balance sheet where they can see the company’s projected assets and liabilities
• A pro forma cash flow projection that will show how much investment is needed and when

7. Your presentation isn’t tight.

A single investor presentation could secure the cash you need to grow your venture, so doing everything in your power to get it right is critical. Ensure your presentation deck is attractive, easy to read and compelling. If creating slide decks is not your strong suit, consider hiring a freelancer to do it for you. 

Each slide should follow the 5/5/5 rule: 

• No more than five words per line of text
• No more than five lines of text per slide
• No more than five text-heavy slides in a row

The vast majority of the information conveyed should be verbal. The slide deck is best used to present graphs, numbers and images, with text that reinforces your primary ideas. Because most of the information will be spoken, you will need to rehearse your presentation until you can give it flawlessly. 

Additionally, you must be prepared to answer investor questions. Your preparatory research and business plan should provide your foundation, but it’s a good idea to review all the information to refresh your memory. Having answers readily available will show investors that you are professional, knowledgeable and thorough.