Private Equity Is Serious Business: 13 Ways To Pitch Your Idea Right
I am approached by hundreds of entrepreneurs every year pitching me their respective businesses… Some are reallypolished and focused, and others amazingly ineffective and convoluted. I thought I’d share with you some basic tips as to how you can make your pitch as effective as can be, to capture my attention and that of my team. It’s a fact that some CEOs are masters at communicatingtheir ideas with their teams, others fare less well (if not miserably). Here are some key general personal guidelines for your consideration.
1. Don’t Oversell
I understand how most successful entrepreneurs are passionate about their businesses, but please don’t bulls- hit me or sound like an infomercial. We have accumulated tons of data to call you on your bluff even before we have even met you. You won’t do yourself any favors by adopting an overconfident, smarmy persona who sounds at best like a lawyer, and at worst like a used car salesman. Just be yourself and never even think about getting away with any made up story about you or your track record.
2. Lay Out The Framework
At a high level you can probably reduce your business to asimple formula. If I’m asking about X, just show me where X fits into your overall schema, and we can go from there. Don’t beat around the bush. Be laser-like focused in your answers. I like to set traps and see how you react.
3. Assume I Know Nothing About Your Business
It is a fact that one of thetoughest parts of developing a pitch is determining the balance right between too much information and not enough information. Use your limited time to give us a complete (and succinct) overview. This is so that my team and I truly understand what your product does, why it’s relevant, and what gap it fills in the market. At the same time, please try to be as brief as possible.
4. Watch Your Body Language
Remember that a great deal of all communication is non-verbal. As humans, we pick up a lot of signals even when we don’t realize it, and you give them off in the same manner. We pick up eye-rolls, sighs, arm-crossing, boredom, etc… We know when you’re disagreeing even if you don’t verbalize the sentiment. If you disagree or don’t like what somebody says, pay attention that you aren’t inadvertently giving off this vibe via your body language. A better idea? Make a note to come back to it later. I actually think it’s important to think positive thoughts when you disagree with someone’s viewpoint. If you’re thinking positive thoughts, your body communicates positivity and you’re less likely to give off negative body language. I do this all the time- especially when somebody is pissing meoff and I don’t want it to show it.
5. Tell Me Something I Don’t Know
So many entrepreneurscome and tell us stories about the industry, their exponential growth potential, and how great they are… Frankly, this is of no real interest to us whatsoever as we can access such information- better and more effectively than any entrepreneur ever can or will. What we are mostly interested in is how you are going to execute and create “obscene wealth” for us all. Anything short of that is honestly for the birds… not for us. Very few entrepreneurs -only the real killers- are able to flesh out their “Value Proposition” in a very clear and systematic way. These are the type of entrepreneurs we usually back. Be one of them.
6. No Competition Or Inept Competition Statements
The number one way to ensure that your proposal is going to rain down from my office window onto the passersby below like confetti on New Year’s Eve is to make the statement that your business idea has no competition. While it may be true that no other company sells a product substantially similar to yours, this does not imply a lack of competition.
Any substitute product, process, or service that satisfies the same need is a competitive solution. Stating that no competition exists reveals either a lack of market research or imagination on your part. While you may intend such a statement to imply that your new product, process, or service is so unique, proprietary, or innovative that it will corner the mar- ket overnight, I have to err on the side of caution and interpret the lack of competition as evidence that there is no perceived need for your product, process, or service. If there is a perceived need, then the market is either so risky, undesirable or miniscule as to be unprofitable. Such a statement is an instant deal killer for me.
7. Labeling The Existing Competition As Irrelevant
A close cousin to “there is no competition” is the statement that the existing competition is too lazy, stupid or any other adjective you might use to denigrate your competition. This will detract from your business plan more than it adds to it. The statement offers me no insight into why your company will succeed against an entrenched company. It will tell me much about your emotional maturity and indicate a great deal about how you will react under pressure when things do not go as planned- which, by the way, is almost always the case. If the competition has failed to seize the initiative due to its organizational structure, speak to the lack of incentives implied by this type of organization and contrast how your organizational structure remedies that shortcoming. Identify weaknesses in the competition that are difficult to change (as opposed to poor leadership), whichis relatively easy to change. Offer me information that shows me you have a thorough understanding of the competitive landscape rather than hurling invectives against the existing companies. All that is going to accomplish is having me hurl invectives against you.
8. Sweat Equity Miscalculations
The next misstep is telling me that the founders of your enterprise have invested X number of hours of their time in the company, thus having X amount of sweat equity. I do like to see that the founders of an entrepreneurial company seeking funding believe in their business enough to make investment and personal sacrifice to sustain its survival, but please do not confuse the two. While forgone salary represents an economic cost of the venture to an entrepreneur, it is not an investment into the business. Investment translates to “cash” spent for costs related to starting and developing the business. If you have spent a significant amountto do this, please make sure to include the figure somewhere in the financial section of your business plan. If you haven’t putyour own Money into the venture, don’t expect me to.
9. Market Share Exaggeration and Gross Overestimation
Don’t use hyperbole in estimating your market or how much market share you project you will capture. I just shake my head whenever I see statements like, “We will sell into the $X trillion global market…” Incorrectly sizing the market tells me one of two things: You lack either the knowledge to assess who would buy the product, or you lack the integrity to delimit this statistic accurately. If it is the former, I will think that you are either too lazy or too stupid to succeed. If it is the latter, I don’t want to be in business with you. In either scenario, I’m not going to back your plan.
I operate on the basic premise that business is war and that the only way to win is to be armed with better intelligence. Let me give you a little insight- no matter what numbers you put in your plan, I am going to have my analysts and my intelligence network confirm them. If there is a variation of more than a few percentage points, I’m going to think you are not smart enough to know how to take my investment and build it into a healthy return. Pay attention to details and be honest. You are not going to impress me with your fantastical claims and wishful notions.
10. Use Of Funds
Knowing why youare raising the capital is as important tome as knowing for what usage you are raising capital. I have some experience in determining operating expenses, andI like to think I have a pretty good idea of what is required for certain businesses to succeed.
Also, if I am going to fund your business, we are partners in a very real sense. I believe that gives me the right, and more importantly, the obligation as part of my duty and service to you to know what you are or will be doing with the money. I am not interested in funding lifestyle entrepreneurs who have somehow convinced themselves that in order to be taken seriously in their business, they have to have a penthouse overlooking South Beach, a chauffeured limousine, and a private jet. I’m looking to fund a performance entrepreneur who leases a space inan office park, drives an appropriate vehicle, and, if it is a requirement, has a membership with a service providing fractional ownership of a corporate jet. I am not opposed to utilizing all of the tools necessary to drive or even force your venture into success. Just show me that you understand concepts like opportunity cost, risk and return, and deferred reward. The trappingsof success come to those who have earned them, not to those who are living on someone else’s dime. The bottom line is thatI use the old fruit stand analogy when evaluating a business plan: “Lemons ripen early, plums ripen late.” If the deal looks like a lemon early, it probably is a lemon.
11. Be Ready To Field Questions That Few People Would Ever Ask
For example, if two people are co-founders and co-CEOs, I might ask, “If you got an offer for $100 million, would you sell?” or “If you ran out of cash and one of you had to go, who would it be?” I’m just lookingto find out how decisions are made, how open you are with each other and whether there is clear leadership. Anything that can go wrong in a company can and will. I prefer to know how people respond to adverse situationsand who is empowered… I might just ask a very simple question such as “What pisses you off?” and see how you respond. Everything for me is about character… and I need and will see beyond the veneer- you can rest assured of that.
12. Be On Top Of Your Facts And Figures
I am often approached by entrepreneurs sounding like robots when doing their pitch. Funny, but true. If, for example, I’ve asked a question that they cannot answer on the spot, the typical answer is “I will get back to you on this”. To be perfectly candid, this is not only unacceptable to the Blackhawk team, but a complete turnoff as well.
If we are asking for a piece of information which isn’t very central to the way you think about your company, I’d love to learn why on the spot. If you haven’t run the test, don’t have the data handy or need to crunch the logs in order to tease out a piece of information, that’s totally cool… but don’t waste 10 minutes of my valuable time and yours looking through your inbox for the email with the relevant stat.. For me, a CEO should be in total control of all -if not, go and find yourself a job.
13. Expect The Unexpected
If your computer presentation fails, be prepared to wing it. Everyone likes a story of battling adversity and coming out ahead; it’s no different with us. If you can deliver your pitch seamlessly when the walls are crumbling around you, you do a great service to your business and you are likely to impress anyone. If your computer crashes during your presentation, be prepared to pitch without it. Don’t apologize or lose the valuabletime trying to make the technology work, and waste even more of our time and yours.
Now get your team ready… Let’s see if you have what it takes.
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Mr Odoni is President and Chief Executive Officer of Ipocampus Holding Odoni Partner, a U.A.E.-based.
Ipocampus Holding Odoni Partener focuses on originating, structuring, advising, and acting as equity investor in management-led buyouts, strategic minority equity investments, consolidations, buildups, and growth capital financings in companies and projects based both in the U.A.E. and emerging markets.
Ipocampus Holding Odoni Partener is also a trader and supplier of a wide range of commodities to industrial and financial consumers globally. The firm’s customers around the world rely upon Ipocampus Holding Odoni Partener as a source of metals and minerals, and crude oil and oil products.