Did you invent something? Do you have a terrific idea for a new product? You may think it’s time to present your idea to an investor and launch your business.
However, don’t rush the process. Successful investor presentations require exhaustive preparation and organization. You must ensure your idea is fully formed and sound and that you address the specific proposal aspects investors want clarified. For example, you must have a firm grasp on your potential users, target market, competitors and suppliers and be able to express how you see your offering’s short-term and long-term future. You must also understand exactly what type of investor partnership you’re seeking.
We’ll outline crucial considerations to think through before presenting your idea to investors and share telltale signs you’re not quite ready for this step.
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.
How do you visualize introducing your product or invention to the market? Your path to market can take several forms, including the following:
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:
Technology transfer is another popular path-to-market option; it enables quick monetization and frees inventors to concentrate on new projects.
Small business grants for inventors can streamline the product creation process and ease stress. The Small Business Innovation Research and Small Business Technology Transfer programs are great places to start.
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.
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:
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:
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:
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.
Your presentation must be captivating and include the information your investors need. Focus on the following criteria:
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:
To get an idea of how strong value propositions are presented, visit crowdfunding platforms like Kickstarter, Indiegogo and GoFundMe. You’ll be able to see how other inventors and entrepreneurs formulate their value propositions and see how funders respond to each pitch.
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:
Although a business plan takes time to build, it can be crucial in today’s competitive business climate.
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.
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.
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.
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.
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.
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.
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 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:
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.