Much has been said on effectively pitching your Idea to potential Investors (or strategic partners). I have plowed through a number of business plans and talked with several business owners and it appears there is still need for more to be said, particularly when it comes to having a balanced perspective on where a product fits into the venture equation.

I always enjoy an opportunity to talk to someone about their new, cool idea – particularly if it occurs over a couple of beers. An enthusiastic entrepreneur can talk at length about the details, the endless possibilities, and its global impact. Unfortunately, there are a number of entrepreneurs that have difficulty leaving their cool product discussion at the bar when they talk with investors.

Avoid the All Too Familiar Product-Focused Equation

Very often, first time entrepreneurs over emphasize their product or idea to the point where their venture and product appear to be one and the same. Their communication with investors follows what I consider the product-focused equation for attracting investors:
You can summarize these discussions as follows: “My cool thing is a game changer; it will revolutionize the industry; at a minimum it will reverse global warming. And it plays to a 20 billion dollar market. So by adding just a couple of your million to build my thing, everyone will make billions.”

The reality is that there are extremely few ideas that reach this level of “coolness”. In fact, of all the business plans I’ve reviewed in the past year, I would have to say that only two were memorable and of the two, only one would fall into the category of “game changer”. What’s more, ideas in general, are not as unique as entrepreneurs believe. Nearly every business idea I review already has one or two very similar or competing ventures one step ahead in the search for funding.

Focus On the Need, Solution, and the Management Team

A success venture requires a thorough understanding of the market and an enthusiastic, experienced team to plan and build a creative Solution to address the need. “We typically make our investment decisions based on three key areas: the size of the market, the strength of the team, and the product vision.”, states Josh Kopelman in Founders and Heat Seeking Missiles. It is key that you communicate your understanding of this equation in your conversations and presentations with investors as well as all documents that you intend for them to review.

• It is important that your understanding of the market need, solution, and management team is communicated consistently across all forms of communication. On a few occasions, I’ve reviewed a reasonable business plan. However, when I schedule a follow up phone conversation, it’s almost as if the business plan was written by someone else or in some cases, written for some other venture.
• Lead into your message with a sentence or two on the purpose or nature of your company.
• Transition naturally into your market. How big is it? What is the need; what is the problem you are solving? Consider following the traditional situation, problem, and solution outline.
• At this point, it’s time to talk about your solution. Where appropriate, continue to reference the problem or need.
• Address the experience of the management team and their ability to understand the need, build the solution, and reach the market.
• Close with why you need capital.

Prepare two introductions of your venture: a 30 second version and a one Minute Version using the outline above. The 30 second version is your elevator pitch for informal business settings and networking events. The one minute version becomes your intro for investor conversations. Practice both versions until they are perfect, then practice them again until they don't sound canned. When you are ready, present your introductions to partners and business colleagues. Ask them to tear them apart and ask the difficult questions.

Techniques to Consider When Talking With Investors

• Usually, you will be given the opportunity to provide a brief overview of your venture. Use your one minute version of the above approach to kick off the discussion. Then turn the discussion back to the investor.
• As you address each question, do so in the context of the above approach and answer each question succinctly. At times, I find that entrepreneur will eloquently circle around and around before getting to the point, particularly if the answer is, “No”.
• Once you've satisfactorily answered the investor's question, there may be opportunity to add in additional details, facts and milestones that is pertinent to the questions. Once this is done, return the conversation to the investor. Many times, an entrepreneur’s response will go on and on in various directions requiring the investor to look for an opportunity to cut in to ask the next question.

To be sure, there is much more to consider with respect to content and technique when it comes to preparing for a presentation with investors. The important thing is that you demonstrate your understanding of a successful venture. Investors attribute an over emphasis on product and company as a sign of inexperience. For most investors, the primary ingredient is an experienced management team.