On the new streaming show Entrepreneur Elevator Pitch, the founders step into the entrepreneurial elevator and investors have just 60 seconds to present their ideas, products or business to a panel. Whether an entrepreneur will be invited to the boardroom or sent back to the ground floor depends on what our experts think in that first minute. Here, we break down the lessons that aspiring business owners can take from the pitches of each episode.
Entrepreneurs have many reasons to seek funding for their business. They may be willing to increase manufacturing and lack the resources to do so. They may need capital to make a sound about the new product they have created. Often, they only need access to the many valuable assets in the hands of investors.
Although for many business founders, investors bring a lot more important assets to a startup. Most investors are experienced professionals who can bring a certain business experience and insight. In the sixth episode of Entrepreneur’s new streaming series Elevator Pitch, we meet a group of founders who were in dire need of such expert guidance. Here are three important lessons that entrepreneurs can take from the episode.
Investors are advisors.
First in the episode were Jared and Kareena Robin, the Hang-O-Matic, husband and wife team behind a popular photo hanging equipment. First these two draw the “bait and switch” concern. They spent most of their pitch time talking about their already-successful products and then suddenly revealed that they wanted to invest in a new tool. Be aware that in this situation investors will usually want a piece of the original, successful product before considering anything else. They will probably send you packing otherwise.
So, investors agreed to let Robin go to the boardroom, but if the investment wasn’t specific to the original tool, they weren’t interested. After all, the couple has already made it clear that they have enough money to fund their planned new product.
Fortunately Jared and Carina quickly revealed that their primary interest was finding a business partner who could advise them as they moved their company forward. This means that investors were right to participate in the original product, not just the new one. Investors were immediately interested, agreeing to work as a team of advisers in exchange for equity in the company. It was a perfect fit for couples who were tired of working nights and weekends year after year to build their company. The success of this pitch clearly shows that investors can be extremely valuable advisors to their portfolio business. Be open to the idea that this may be the relationship you need.
Conduct market tests first.
Don Masler, author of the book Men Chase, Women Choose, approached the panel with a product called the Devotion Test. After taking a man’s saliva sample, he said, the test could determine if a man was committed to the woman he was currently with. The panel seemed a bit unsure about Masler’s product but they were curious enough to invite him to the boardroom to hear more.
Once inside the boardroom, Masala fails to win the hearts of investors. Their biggest objection was they weren’t just sure there was a real customer demand for his test. With sales history or proven market research, he may be able to debate this objection. Although he was not. All he had was actually his own opinion. The decision to discourage investors underscores the importance of keeping market data out before investing.