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Attracting Investors

How to Sell Your Ideas

Former Chrysler chairman Lee Iacocca once noted, “You can have brilliant ideas; but if you can’t get them across, your ideas won’t get you anywhere.”

Greg Fisher

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What to say…

The Content

As part of my research, I examined more than 80 pitches by entrepreneurs seeking funding from outside resource providers. In examining these pitches, I noticed that external stakeholders pay attention to specific types of signals in the content of an entrepreneur’s pitch. I categorised the signals in the entrepreneurial pitches into five broad categories and discovered that they were strongly related to success in accessing outside resources.

The pitches embedded with rich signals from all five signaling categories were much more likely to garner the interest of outside resource providers compared to the pitches where the entrepreneurs failed to provide content related to one or more of the signaling categories. Therefore these signaling categories provide useful insight into the type of content that should be included when trying to sell a new idea. The types of signals that were important for selling new ideas were: familiarity signals, distinctiveness signals, connectedness signals, credibility signals and viability signals.

Below I will explain each signaling category and describe how signals from that category can be incorporated into a pitch for a new idea. The examples listed below are all actual examples from my research although all names of people and businesses have been changed.

Familiarity signals serve to make an idea recognisable and understandable to an audience. People hate to feel disconnected and unfamiliar with what they are being told; therefore they try to connect new ideas to things that they know. The more that you can help them make these connections; the more likely they are to find favour with what you are saying. Signaling familiarity can come from claiming membership of a familiar category, using a well-known model to describe the idea you are selling, or describing recognisable structures and processes underlying the idea.

Examples of sentences that convey familiarity:

Musk will be a player in the independent music distribution niche within the global music industry. Musk is ebay for independent musicians; it creates a platform for buyers and sellers of independent music. The business will use the well-established ‘freemium’ model to attract users to the site after which they will have the opportunity to buy enhanced, value added services.

Distinctiveness signals serve to highlight the uniqueness of an idea. They differentiate an idea, making it noticeable and competitive. If people develop the perception that an idea is too similar to many other ideas they have seen, they will immediately discount it as just another ‘me too’ concept. One needs to signal that there are dimensions on which the idea is distinctly different from other concepts out there. This can come from describing distinctive resources or competencies attached to the idea, describing the idea as first in a particular market space or claiming that the ideas will create a position of leadership in a particular domain.

Examples of sentences that convey distinctiveness:

Datz has a patented algorithm for searching datasets that enables users to quickly find unique datasets on the platform. This increases speed and ease of use for users looking for data, making it the fastest tool for searching proprietary datasets… the company will be first to market with Java enabled search for large datasets. This will allow users to accurately search large datasets in multiple formats to find variables of interest… the patented search technology and highly qualified Java developers will make the company the leader in the person to person dataset exchange market.

Connectedness signals serve to highlight that the people behind an idea have relationships with other important people and organisations. Because new ideas are uncertain and unproven, the support of well-known individuals and organisations can make a huge difference to the perception that others develop about the idea. One can incorporate connectedness signals by providing testimonials or signals of support from well-known people or organisations.

Examples of sentences that convey connectedness:

We have shared this idea with Dr Howard Genville, the head of R&D at Innovent Labs, and not only did he say that “it’s a practical solution to a massive problem” but he has agreed to serve on our board of advisors and give us access to his team of scientists for free consultations.

Credibility signals serve to make the new business idea and the people behind the idea believable by engendering trustworthiness and expertise. Credibility comes from highlighting success in the track record of the team behind the idea, making specific reference to the education credentials of the people behind the idea, signaling that the people behind the idea have a strong commitment to the idea and highlighting the interest of others in the idea.

Examples of sentences that convey credibility:

The project will break even in month eight and after month 12 the net margins will be 25% to 35% consistently.  The designs for the project are completed and approved;
all we need is funding to get this concept going.

Viability signals serve to highlight that the idea is sustainable — showing that it is a worthwhile endeavour providing adequate incentives for those involved. People only buy into an idea that can realistically be implemented; therefore demonstrating the financial and practical viability idea is critical in selling the idea to others.

Examples of sentences that convey viability:

The three people behind the idea collectively have more than 50 years of experience in marketing information management across seven multinational firms, including Coke, Adcock Ingram and Microsoft. Two of the people have an MBA from GIBS, the third has an MSc from Wits. The founders have collectively committed 450 hours and R200 000 to date to get this idea off the ground.

Although some of the signals mentioned above may seem obvious, it is amazing how many people who are desperate to sell an idea neglect to cover one or more of these critical areas. Each signaling area works in a different way to help evaluators make sense of an idea and to enable them to become excited about an idea. Therefore as you try selling an idea, use this as a checklist to ensure you are doing everything to make your idea appealing.

The Research

The research behind these insights entailed the following:

  • Recording 80 pitch presentations by entrepreneurs to early stage venture investors.
  • Assessing the content (what was said) and the approach (how it was said) of each presentation and then linking aspects of content and approach to the outcome of the presentation.
  • A successful outcome in this context was a follow-up meeting between the entrepreneur and one or more of the investors; an unsuccessful outcome was no further interest from the investors in the entrepreneur’s venture.
  • Of the 80 entrepreneurs who presented, just over half (42) got follow-up meetings.
  • A combination of the ideas in this article were the best predictors of a follow-up meeting.
    At the content level a combination of signals from each category of familiarity, distinctiveness, credibility, connectedness and viability predicted success. In terms of the approach used by the entrepreneur in pitching the idea, incorporation of stories, simple visuals, use of metaphors and finishing well within the time limit were all predictors of a follow-up meeting with an investor.

How to say it…

The Approach

While the content of a presentation is important in selling a new idea, how that presentation is delivered is just as important in getting the buy-in of others. The content and approach of a presentation work synergistically to win over others. In analysing the pitches of entrepreneurs presenting their ideas to early stage investors, some revealing and interesting insights emerged about what kinds of approaches are associated with winning pitches. On the whole, winning pitches incorporated stories, visuals and metaphors, and the winning pitches were significantly shorter than the pitches that failed to generate interest. I will now discuss each of these aspects in more detail.

Stories

Stories emerged as a powerful tool for conveying a new idea. Of the ventures that attracted interest, 44% opened with a story and another 40% incorporated a story into the presentation. Of the ventures that did not get interest, only 21% opened with a story and another 27% incorporated a story into the pitch. Stories were therefore the tool of winners. Why do stories help so much in selling an idea? Stories place random concepts in context and create connections between concepts that help us interpret and understand what has been said. They are probably the most powerful communication tool of all time. Jesus Christ, William Shakespeare , Winston Churchill and Martin Luther King all used stories to sell ideas and get people to connect emotionally with their cause.

Visuals

As the old saying goes, a picture is worth a thousand words. On the whole, the winning presentations had less text and more pictures on their PowerPoint slides. On further examination it was evident that those with lots of text on their slides spent more time reading the slides and therefore failed to engage with the audience effectively. If you want to sell ideas you need to be engaged with the audience, you need to look into their eyes and let them see your passion. You cannot do this if you (and they) are reading the slides. Drop as much text as possible from your slides and use pictures to spark your thoughts and help you tell a story.

Metaphors

At the end of a presentation an audience remembers very little about what was said. One thing they are more likely to remember is a meaningful metaphor. A metaphor is a figure of speech that constructs an analogy between two things or ideas. Because new ideas are foreign, people find it meaningful to connect them with what is familiar; a metaphor can help others do this effectively. So terms like ‘on-demand art’, ‘reference based dating’ or ‘a mortgage marketplace’ can make an idea more meaningful and memorable, encouraging the others to follow up on or share the idea with others.

Length

Shorter is better. When selling new ideas many people fall into the trap of wanting to cover every last detail of the idea, causing their presentation to be long and drawn out. Mistake! When selling an idea it is better to give enough information about the idea to the audience to get them intrigued and then let them ask the questions. In the presentations that I examined, those who spent less time on one-way presenting and more time on two-way engagement were significantly more likely to get interest from resource providers. An important lesson in selling ideas is don’t say too much, rather keep it short and then spend time engaging around the questions that arise. This means that if you get ten minutes to present the idea, speak for eight minutes and use the extra time to address questions from the audience, if you get half an hour to present, speak for 20 minutes and allow the audience to interact with you for the rest.

In the end, a massive part of business is selling ideas. The sooner we become aware of this, the more effort we can make to become better at it. Becoming better at selling ideas is likely to have a significant effect on any person’s career, whether they are an entrepreneur, corporate manager, social worker or government official. Now is your time, go out and make it happen. n

PowerPoint Principles

Often, people use PowerPoint in selling new ideas. Over many years of using PowerPoint I have developed three core principles for making slide presentations more effective:

  1. Consistency. Keep the look and feel of a deck of slides similar. A slide deck with a consistent theme (look, feel, colours and picture types) signals professionalism and care.
  2. Contrast. Slides work best when the colour schemes contrast with one another. Dark backgrounds with light letters or light backgrounds with dark letters.
  3. Simplicity. Keep slides simple. I estimate that over 80% of slides are over-engineered with too much text and too many diagrams. Simple slides force you to be clear on the message of the slide and allow you the flexibility to say as much or as little as you wish to about the slide.

Alternative Idea Selling Tools

Not all ideas need to be sold with a PowerPoint presentation. Many times it might be more powerful and meaningful to get away from PowerPoint. Here are some ideas for breaking away from PowerPoint:

  1. Demonstration.  Using a model or other physical artifacts to demonstrate the essence of your idea.
  2. Whiteboard. Talking through your ideas and drawing on a whiteboard (or flip chart) as you do to illustrate your point.
  3. Tour. Taking people to a location where they can see your idea (or the potential for your idea) in action.
  4. Discussion. Sometimes it is better to sell ideas to people one-on-one in a less formal environment. Some people are prone to listen in such a context and one can address their specific concerns directly.

Greg Fisher, PhD, is an Assistant Professor in the Management & Entrepreneurship Department at the Kelley School of Business, Indiana University. He teaches courses on Strategy, Entrepreneurship, and Turnaround Management. He has a PhD in Strategy and Entrepreneurship from the Foster School of Business at the University of Washington in Seattle and an MBA from the Gordon Institute of Business Science (GIBS). He is also a visiting lecturer at GIBS.

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Attracting Investors

The Investor Sourcing Guide

How to attract and obtain investors to your established, high-growth business.

Greg Morris

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As an established, high-growth company, you may find that you need to source capital, identify a mentor, or work closely with other affiliates to prosper. In this case, partnering with an investment holding company can be a valuable growth tool.

So, what should you do if you want to be acquired by a holding company?

Read this.

1. Research everything

If you’re considering a long-term investment partnership, make sure you conduct substantial prior research. There may be many potential investment partners out there, but each has specific venture and industry directives. Get to grips with these.

Related: Is Venture Capital Right For You?

2. Be candid with yourself

The amount of capital that you need will affect which holding company you choose. In particular, you’ll need to understand what your risk profile looks like relative to the returns you expect to provide. This will also help you to source, entice, and keep the attention of the most appropriate partner.

3. Identify your must-haves

Any investment partner you choose is likely to be able to provide you with funding, a broader network, and economies of scale. Beyond these, however, you’ll need to decide on your most important benefits (must-haves), so you can target the companies that can offer you the best fit.

4. Spell out your funding plan

You’ll need to be very clear on how you plan to spend the funding you get from your investor. This plan should stipulate, in particular, how you plan to grow.

Related: 5 Key Questions To Answer For Raising Funding

5. Scrutinise each investor

Make sure to analyse your potential investors’ investment history, so you can get a clear idea of where your interests are aligned. Look specifically at things like:

  1. Where investors’ get their funding
  2. What their investment track record looks like
  3. What their investment directives are
  4. Their appetite for risk
  5. The returns they usually aim for

The crux of the matter

Research is essential, no matter which holding company you hope to be acquired by. This will help you to find, attract and retain an investor who gives you the funding you need, and lends you the support to be innovative, productive, and profitable.

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Attracting Investors

6 Great Tips For A Successful Shark Tank Pitch

Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes.

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Whilst most of us are unlikely to appear on television shows such as Dragons Den or Shark Tank there is a lot we can take out from watching these programmes. Entrepreneurs will often need to promote their businesses to prospective customers, lenders, investors, employees and even suppliers.

All stakeholders would like to know with what and whom they are dealing. They will need to assess risk and will try and evaluate the business against others who are competing for those same funds.

1Know Your Product

You should be able to describe your business within 60 seconds, in a confident and positive manner. Let the stakeholder know what particular problem your business solves which makes it viable and attractive.

Your brand and how you intend to develop it is important in determining whether they will invest or lend you money. Share critical information with them such as large customers, patents and trademarks and details of forward orders.

If you are looking for funding or investment, make sure you have the relevant paperwork to back up what you are saying.

Related: 10 Tips From The Dragons Of Dragons’ Den SA

2The Numbers

You must have your numbers at your fingertips.  A true and successful entrepreneur will know his numbers instinctively and be able to recollect and present them convincingly. Stakeholders want to know your turnover (sales) over the last couple of years, your gross profit and net profit.

Investors want to know what they are investing in and whether there is strong potential for their money to grow. Lenders will want to assess their risk — how are you going to repay the money? Moreover, you as the business owner, need to be sure that you will be able to make the required repayments.

You must know what your margin is, as this will largely determine your viability as a business. Margin or gross profit is the difference between the selling price of the goods and their cost and is usually expressed as a percentage.

3Know What You’re Asking For

asking-for-business-funding

Be clear as to the size of the investment you want to give away and how that determines the ‘valuation’ of the business. Therefore, if you wish to raise R200 000 for 10% of the business, that means you value the business at R2m — be sure you can back that up or you will get taken apart.

4Have a Business Plan

The best way to fully understand your business is by way of having a detailed business plan, which has been prepared whilst working through every facet of your business, from the original idea to the finished product.

As the business owner, you need to live this business plan and be able to use it as your daily guide to success. Develop it, change it where circumstances require it, but most importantly know it and understand it.

In this way, you will be able to deal with most of their questions, be they about marketing, research, international expansion etc. It is also a good idea to know your competition and what they are up to.

Related: Dragon’s Den Polo Leteka Gives Her Top Tips To Attract Growth Capital

5Sell Yourself

In most interactions, you the entrepreneur, are selling yourself. Whether it is an investor, lender, customer or prospective employee, it is their impression of you and your capabilities which ultimately determine whether they want to work with you.

Be confident, defend your position where required, as you will need to parry some blows but do not behave arrogantly.

6Learn From Your Mistakes

Many entrepreneurs who have presented to the Shark’s Den and not been able to garner investment have turned their business into great successes. You need to be able to learn from the experience, and if rejected, bounce back even stronger.

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Attracting Investors

3 Things You Must Have In Place To Get That Start-up Bank Finance

If you’re planning to secure funding for your start-up, you need to put the right foundations in place.

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The South African landscape for raising finance is tough for any business, with stringent lending regulations. Here are three areas to focus on as you set up your start-up to ensure you’ll qualify for a loan or equity funding.

1Securing a Market

Most SMEs I have mentored or advised start with expressing how big the total market size is for their product or service, but, while this is important to understand, the big question is: What percentage of that market will you attract and how?

Look at the ‘how’ first and work your numbers backwards. For example, if you secure a R10 million contract to supply an item that has a market size of R37 billion you are capturing only 0,03% of the market. However, if you’re able to cover your monthly expenses (including your loan repayment) and make a profit, that’s what counts. You should be able to show this contract or letter of intent to procure, which shows how and where you will find this market.

Related: The One Question You Must Be Prepared To Answer When Pitching Investors

2A Strong Team

When you’re starting out you’re likely to be the sum total of your team. If you’re going down the entrepreneurial journey alone, make sure you have identified who will mentor and guide you through the areas you don’t have competencies in and cost this into the business start-up and running costs.

Focus on who in the business is going to:

  1. Sell and market: Do they have the necessary skill, network, product and market knowledge?
  2. Control the money: Are they financially savvy and can they make sure that money is being used for the right things?
  3. Operate: Who has done this before? Can this individual manufacture the product or arrange the supply of goods or services, ensure quality control and sound human resource management?

3Compliance

Formalising your business is costly but necessary. If you don’t have a formal entity, shareholders agreements, loan agreements, financial statements, management accounts, tax compliance and so on, you will come short when looking to raise finance.

Understand these costs upfront and include them into your start-up budget — this will save you a lot of pain in the long run.

Related: 3 Ways For Social Entrepreneurs To Access Fundraising

The truth is that finance is available for women who have the right business ingredients just as much (if not more — in the South African context) as it’s available for men and just as with men. And, resources such as these help to unpack and guide the core fundamentals that are needed to make business bankable/fundable.

Then it’s all about implementation and staying on track to translate all that you’ve done and all that you wish to do in a bankable business plan, and approach the relevant funder for your needs. The right business mentor can certainly help you on that journey.

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