Imagine the TV show Shark Tank if 11 promising contestants were chosen from 600, were given shared office space and up to 10 mentors apiece, and told to move their companies as fast and far as they could in three months. Along the way, they were given the opportunity to rehearse their business pitch over and over again, with feedback from accomplished investors and entrepreneurs. At the end of the three months, 11 contestants were invited to stand on the stage of a large music hall and make eight-minute pitches to an audience of 750 angels and venture capitalists, instead of a hard-to-please panel of four.
This, in a nutshell, is TechStars, a tech-company accelerator program that started in Boulder, Colo., recently expanded to other cities including New York, and boasts a lower acceptance rate than Harvard.
To win over hard-to-impress investors, entrepreneurs need solid business ideas and killer presentations. At the recent TechStars event in New York, Entrepreneur.com watched the presentations, talked to the participants and took notes. Here's what we learned about what makes a presentation knock investors' socks off and, more important, open their wallets.
1. Be polished.
It was obvious to venture-capital investor Geoff Schneider that the presenters at TechStars had been "coached." But he didn't care, because it made his job as a prospective investor easier.
He wants entrepreneurs to answer five basic questions:
- What problem does the company solve?
- How will it make money?
- What has it accomplished so far?
- Who are the individuals running the company?
- What are they looking for from investors?
The more entrepreneurs practice their pitch in front of other people, and the wider variety of feedback they get, the more likely they are to give a concise, polished presentation that hits all those key notes.
"You want to be able to communicate those key points in a simple, clear way," says Schneider, a managing partner with VC firm Cava Capital in Wilton, Conn. "The real test is: Can you explain what you're doing to your mom?"
2. Be personable.
Caren Maio, a co-founder of a TechStars company, says rehearsing helped her perfect her pitch, but she would race through parts she knew well.
Keep in mind that the investors you meet are hearing your pitch for the first time. They want you to be excited about it and they are relying on you to get them enthused.
"I had to work on keeping my energy up throughout the presentation," says Maio, whose company Nestio allows house hunters to collect information from multiple-listings sites in one place.
Watching videos of herself, she found that when she got tired, she would start rattling off key points too quickly.
"It's painful to watch those videos," she says. But they taught her to slow down and to make a point of inserting pauses at various points throughout her talk.
3. Be authoritative."To entrepreneurs, investors can start to become this vague, generic concept," says Marc Billings, founder of Incubate Miami, an incubator. "It's important to remember you aren't talking to 'investors,' you're talking to specific people."
Every VC firm and angel investor has its sweet spot. They prefer sectors where they have knowledge, contacts and first-hand experience. Some prefer younger or more mature companies. A presentation is stronger if an entrepreneur tailors his or her pitch.
When you have only eight minutes to tell your story, the more specific you can be, and the more often you can use numbers to make a point, the stronger it will be. For example, reporting that you save your customers an average of $500 a month or five hours a week is stronger than saying your product will generate significant savings for users.
4. Be coachable.These professional or semi-professional investors pride themselves on "adding value," to the companies they invest in. They want to know you're interested in their industry knowledge, technical savvy and contacts, not just their money.
Billings notes that several of the program mentors who introduced one of the companies "made a point of saying how receptive they were to feedback." His advice to entrepreneurs who are making an appeal to VCs and angels: "Don't be the smartest guy in the room."
"We tell the companies early on to make sure to actually ask for something in their presentation," says David Tisch, managing director of TechStars New York. This means requesting a specific sum of money to accomplish a particular goal, like expanding into new markets. It also means stating how you'd like your investors to help you.
If the investor can see you accomplishing your goal and can get excited at the prospect of helping you do it, your pitch has done what it's supposed to.