We’ve all seen the hit TV show, Shark Tank. An entrepreneur walks in, the dramatic music starts, and the pitch begins. While this show is a horrible depiction of the real investment world, you can learn a ton from the pitches that they choose to broadcast. It’s simple: Shark Tank only broadcasts the pitches that people want to watch. This generally results in pitches that go really well, tell a great story, or make the founder look like a fool.
You may have guessed it: the fools teach us the most about which ideas work and don’t work in the investment world. Keep in mind, these pitches are being broadcast to millions of televisions. This adds a completely different level of pressure to the presenters because most founders’ core audiences are likely viewing the show. Just like the experienced investors on the show, the public knows when a product is good or not.
Treat investment pitches as if you’re broadcasting to millions of homes and you will always succeed. When you’re creating a pitch for investors, you’re essentially trying to convince them that you are going to be successful. Regardless of what stage your business is in, investors will only fund you if they believe in the value of your idea. Here are five tips to make sure your next pitch is a smashing success.
Tell It in a Single Sentence
There is nothing investors love more than simplicity. The problem you are solving should be specific and easily identifiable. If you can narrow the premise of your business or idea down into one sentence, you’re on the right track.
It’s easy to get caught up in adding extra features in hopes of making an impression during funding, but it’s really the core of your idea that the great investors are really paying attention to. You should only need one sentence to clearly identify your mission. If it’s truly compelling, the magnitude of the idea will speak for itself.
Completely Dominate a Niche
Facebook started for Harvard students, Airbnb for overbooked conferences, and Uber for limos. Being able to identify mass markets is definitely important, but the best ideas typically start by completely dominating a niche. It’s much easier to move from dominating a niche to a mass market than it is to start as a small fish in a big pond. Getting a dedicated following is how you generate credibility and prove the validity of your idea.
When you’re seeking early funding, don’t worry about how many users you have. You should be focusing on how much your users love your product. Just like founders, investors want to see fast growth. The fastest way to generate identifiable growth is to take over a niche. Word of mouth is the most important form of advertising in early stage growth. Investors know the fastest way to spread by word of mouth is to find the people that love your product the most. If you can clearly identify and dominate a niche, you’re showing investors all the right signs of a healthy business that plans to expand.
Be Obsessed with Your Users
Investors can always tell when a founder has true passion for the idea they are working on. This is typically shown by a visible love for their users. Being obsessed with your users makes it a lot easier to get your idea development-ready.
It’s simple: you need feedback to make sure you’re building something that people actually want. Most investors want extensive validation of your idea by getting as much feedback as possible. For founders that love their users and the effect their idea has on them, this is easy. Your business has no value without the people buying your product. It’s easy for investors to see how hard you try to make your core users happy.
Showing that you are obsessed with your users goes beyond answering customer support emails within an hour––nowadays that should be a given. Becoming truly user-obsessed is about learning the nuances of their needs and iterating your product based on the value it provides for them.
Collect lots of data. This can be done through interviews, A/B tests, or simply just getting your product in the hands of your users. Even if it’s just notes on a scratch pad, showing potential investors that you truly care about what your users think about your product gives you a significant leg up.
Identify Untapped Mass Markets
Essentially, you should be aiming to create a new industry. Starting with a niche is still important to ensure the validity of your idea, but your end goal should always be to create a new mass market. Solve a problem with larger context. Identify smaller problems under the blanket of larger ones.
This is what investors truly love, and what so few founders can actually execute. You can’t use a big idea to solve a small problem––make sure your problem is worthy of solving. There are thousands of amazing ideas in this world that don’t attract the attention of investors because they aren’t trying to solve a meaningful problem. Believe it or not, the overarching problems have largely remained the same throughout history. Investors have always been particularly interested in ideas that solve basic human problems such as communication, transportation, shelter, and health.
The internet is a great example of something that started extremely niche and was rapidly adopted into the lives of the general public. Expanding communication capabilities across the world has always been a global priority. The first iterations of the internet hardly enabled open global communication, but for those willing to study up, computers and the internet offered near limitless opportunities.
The point is, your idea should present a new way to solve old problems. “Untapped” can be a somewhat misleading word. Clearly, the communication industry has been tapped quite a few times. But for example, Netflix identified the untapped market of on-demand streaming and eventually built a religious following. Untapped doesn’t necessarily mean nobody has gone there before––it more so refers to the fact that you’ll likely have to create a new industry yourself.
Venture Capital Isn’t Always About the Numbers
Numbers are important, but you can’t obsess over them. Remember, at the end of the day, you have to convince an investor based on the value of your idea. While metrics such as profit/loss and monthly active users are a great indication of future trends, the life of your business always comes down to the original idea and its execution. There’s no secret trick to nailing your next pitch with investors. If you want to impress investment firms, treat them like the general public and focus on the quality of your idea.