How to pitch a business idea pre-revenue
Many up-and-coming business owners are surprised when they hear about companies pitching for investment long before they’ve made a single cent.
For established female business owners with proven revenue and robust business models, it can be extremely frustrating to be overtaken by their (mostly) male counterparts in the race for investment.
So how do these company owners inspire the confidence of investors and secure hundreds of thousands of dollars in backing, without having made a single cent?
In this week’s video, I’m revealing what it takes to pitch pre-revenue.
Watch it now!
HOW TO PITCH A BUSINESS IDEA PRE-REVENUE
I'm Kelly Keenan Trumpbour, angel investor and venture capitalist. In this video, I'll show you the secrets to what you need to do to pitch pre-revenue.
Most people don't realize this, but many businesses that get investment are pre-revenue, which just means that they haven't actually sold anything yet, and yet investors are putting their money behind them. It can be really frustrating to the companies that actually have revenue, to watch all their peers get funding before they even get funding, even though they've got a proven business model.
What does it take to actually pitch a business to investors pre-revenue and be successful? What gives?
First off, you have to be ready, and ready can just be confidence at the very early stage. You don't have to have everything proven, but if you don't think you're going to make it, why should I think you're going to make it?
Reputation is really important. If you're not a celebrity, if you don't have some proven track record in an industry, and I'm not talking about just being somebody people like in your community or having a nice resume. It's got to be a little bit more than that. If you're not a well-known name, and your reputation doesn't precede you, you're going to have a harder time selling pre-revenue to investors.
Inventing something and actually having a patent or a trademark, some kind of intellectual property that you can lock up and prove is yours, that's key for getting an investment. If you can show that, that means there is something proprietary about what you've created, and other people can't touch it. As an investor, I'm interested in that.
If you have a service, this gets tricky. Your service has to do something so different than the way things are normally done. If you're just creating a service, like let's say you have a hair salon, it can't just be one of hundreds of thousands of hair salons. You have to disrupt an entire industry for it to be investible.
Your delivery method is crucial, too. If you can show that you're doing something different than the other competitors out there, you're taking a product and you're getting it to your customer in a way that's completely unique, that will speak to investors.
When it comes to the product itself, try to differentiate yourself with what's happening to the user, when they're experiencing your product. It can't just be a little bit different. It can't just be kind of like other things, but a little bit more sparkly or a little bit more interesting. The user, your customer, has to come to your product and have a totally different experience for me to be interested in you, pre-revenue.
Market is crucial. If you think you can pitch to investors pre-revenue, and you're going to try to convince us that all the people, all the customers, the entire market, wants what you're selling, we won't believe you. Niche is better when you're pre-revenue. You have to define a very specific segment, and then we might take notice.
Another way that you can get to investors pre-revenue is if you already come from an established brand. This is pretty hard for the typical entrepreneur to do, but if you're Nike or Microsoft, and you say you've got a brand new product, investors are going to be interested in that. If they're shopping it around, their brand precedes them, and that will make it easier for them to pitch.
Let's say you don't have any of those things, and it's totally natural if you don't. You're just starting out, right? There's other things you can do. If you can show us some sort of test, kind of an experiment that proves you're on the right track, we'll still take notice, even if you're pre-revenue. What are some of those things?
For instance, you could do a pop-up shop, if you're in the retail space. If you're not in retail, think about a crowd funding campaign. What's nice about crowd funding is you can prove your theory. You can say, "Look, there's a market that was interested. They paid money for it." Even if it was just donation based, you can show what the success rate was, especially if you meet your funding goals.
Momentum's crucial. Even if you're early and you don't have revenue, it's okay, as long as you can show momentum. If you can show that there's a hungry market, if you can show that people are lining up and giving you orders, even if you haven't fulfilled them yet, that shows you're headed somewhere. You can project out from that what might happen if those numbers double, triple, or go up by 100 times. That's the kind of information an investor like me is really interested in, especially pre-revenue.
Readiness to go to market really excites an investor like me, because it shows that you know what's out there, and you're ready for the reality of it. You're not just dreaming pie in the sky and wanting us to back you because you're just special. You're willing to put your effort out there and prove it with numbers, prove it with a track record. If you're pre-revenue, it's essential that those things are in place. Otherwise, we're going to walk away.
You don't have to be a perfectionist, and this is something that I see holding a lot of women, especially, back. They want their idea to be so solid and so proven that they don't put it out there. While pre-revenue pitching is risky, it doesn't have to be perfect. It's a grand experiment, and what you can prove now is important for getting momentum later.
Investors are betting on business potential. We know that you're in development. We know that you can't actually deliver the exact information about how profitable you'll be, but we want to see what you've got going on behind the scenes and see if you know how to take it to the next level. That is what we're willing to bet on, and momentum will prove that.
There you have it. That's how you pitch a business idea before you've made any money off of it.
Curious what I might think of your big idea?
Then head on over to www.seejaneinvest.com/investmentpotential to take my free quiz now, or click the link below this video.
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Until next week