Imperfect Pitches You Can’t Make Them … or Stop Them

Summary

Parents know it and live it. Consultants and other advisors have to learn it. You can’t force anyone to make a wise choice or the best decisions. You can't stop
companies from making imperfect pitches to potential investors. Sometimes people have to learn the hard lessons themselves. Yes, it is painful to watch and to experience. It feels like watching an accident happen. You see the person stepping in front of the oncoming train, and you shout, “Don’t do it!” but still, they take that step.

Tough Lessons: You Can’t Make Them … or Stop Them

Parents know it and live it. Consultants and other advisors have to learn it. You can’t force anyone to make a wise choice or the best decisions. You can’t stop companies from making imperfect pitches to potential investors. Sometimes people have to learn the hard lessons themselves. Yes, it is painful to watch and to experience. It feels like watching an accident happen. You see the person stepping in front of the oncoming train, and you shout, “Don’t do it!” but still, they take that step. In my years as a consultant, I’ve encountered many clients who have made unfortunate decisions and had to learn those tough lessons. I like to categorize them into the following “Decision Archetypes.”

“It Won’t Happen to Me” or “I’m Different” – In Their Dreams

These clients believe they will be the exception and the rules and the odds will “be in their favor.” They think things will be different, even though history shows that businesses that have traveled down this road end in disaster.

Looking for Prince Charming, AKA “The Investor.”

One of the most painful “harsh lessons” I’ve witnessed is when clients seek millions of dollars in investment, but with no product or technology, and only a vague concept of a product, technology, or business. I’ve had many business owners come into my workshops believing that like Prince Charming coming to rescue the Princess, a multi-million dollar investor is going to come riding in with bags of money, through them at her feet and say, “Spend it as you wish and as fast as you want! I don’t need to know anything but that you are a “nice” person with a “great” idea. You don’t need a business plan, any experience, proof of your idea, or even a legal agreement – I’m giving you all the money you need, just LET ME get in on this incredible opportunity!”

Right.

Imperfect Pitches in the Real World – Sharks, Dragons, and Angels

Whether you are looking for a:

a shark (from the US television show),
a dragon (from the UK version of that same program) or
an angel (an individual investor without a TV show),

the only story that gets funded is the one with the business plan, patent protection, revenues and a realistically optimistic team that listens, understands, and knows their business. The ability to fund your business comes down to having the answers the potential investor wants.

I’ve had my clients watch episodes of various reality investment shows to help them understand what investors want. Some of them get it. Others still think the rules don’t apply to them.

Due Diligence Process

If you have done your homework and put your business in order, you can fly through the due diligence and deal-making process. So what does the savvy business or inventor need to do:

Develop a clear product or technology concept.
Protect that concept where possible.
Build the idea to where it is either:
1. An animated rendering of the product or technology in action
2. A functioning prototype
3. A market-ready product
4. Already in the marketplace being sold!
Identify the market niche or segment that has the problem or need your product addresses.
Become an expert in your customer and your product.
Create and validate your business model – specifically, how you will generate revenue.
Value your business – realistically
1. Revenue stream from sales made
2. Potential revenue based on market data
Identify how you want to commercialize the product
1. Sell it yourself – brick and mortar, virtual, or both
2. Contract manufacturing or sales
3. Sell the IP
4. Licensing of the IP
5. Franchising
6. Joint Ventures
Forecast the funding needs and uses, including timing.
Exit strategy – how will investors exit and get payback on investment (ROI and capital appreciation)?

Real World Example

One of my clients and I have been working on his product concept and taking it to market for around seven years. It took time to refine the product concept. It then took time and money to obtain the drawings and conduct some basic prototyping. Then it took more time and money to file the patents. All the work to develop the product concept and find a market, to create a business plan and develop a strategy for bringing his multiple inventions to market, is about to pay off.

It is paying off not only in a lucrative licensing deal but also in the speed with which the deal is being finalized. From the initial contact with our target commercialization partner to a letter of intent, it has been less than three weeks. The whole deal is expected to be completed within 30 days.

When you do your homework and understand the “rules” and the process of getting funding, things can move much quicker.