[TechConnext Summit] Recap: How to Deliver a Powerful Pitch to Investors

Newbie entrepreneurs are often big on ideas but less knowledgeable about how to secure financing for their companies. Being able to communicate well and convey the value in their ideas is what separates more successful fundraising and relationship-building.

This panel provided an impressive mix of seasoned Silicon Valley veterans as well as a successful entrepreneur and investor from outside the Valley for a comprehensive overview and evaluation of what it takes to make it. They discussed early-round pitching for those totally new to this, as well as second and third round pitching for those with some experience under their belt.

Moderator Carol Sands, founder of The Angels’ Forum (TAF), one of the most respected angel groups in the San Francisco Bay Area, presided over a panel of distinguished industry peers. The panel consisted of June Riley, CEO of VC Taskforce; Charles Hudson, partner at SoftTechVC; and Donray Von, founder of Caslteberry & Co.

a) VC Taskforce addresses both sides of the investing ecosystem to connect people seeking funding with those who want to provide it.

b) Start Up Academy – workshops for entrepreneurs on how to dialogue with investors
Angel Academy – tools for investors on identifying and vetting potential startups

Charles Hudson discussed his career background in greater detail and used this forum as the opportunity to mention that he would soon be launching his own fund. Any startup founders looking to pitch should definitely add his name to their list of potential investors.

Donray Von had a successful career in the music business as a manager before becoming an investor. He explained the differences between those on the buying side and those selling. As a check writer (investor), he better understands why he didn’t always get funding—he needed to refine his ideas.

VC MATH: Funding Differences Between Big Investors & Smaller Investors
Angel Investors are usually affluent people (read that as anyone who is willing or able to take a loss in case the business fails) who receive a small equity ownership (1%-2% percent) in a company. This would likely be in exchange for a small six-figure sum invested.

An Angel may not fund you if they think your company will need a lot of money to stay afloat. Larger investors may come into play, which would reduce the chances of smaller investors making any profit.

In this example a $50M fund needs to earn at least three times the net and can often take 10 years to recoup.

Larger VCs (venture capitalists) get a greater percentage of companies and may invest as much as $10M or more. Note: Some investors don’t only want money, they may be just as interested in program related investments (PRIs). PRIs are included under the charity/nonprofit/private foundation area and are defined by the IRS as potentially covering:

  1. Low-interest or interest-free loans to needy students
  2. High-risk investments in nonprofit, low-income housing projects
  3. Low-interest loans to small businesses owned by members of economically disadvantaged groups, where commercial funds at reasonable interest rates are not readily available
  4. Investments in businesses in deteriorated urban areas under a plan to improve the economy of the area by providing employment or training for unemployed residents
  5. Investments in nonprofit organizations combating community deterioration

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$1.7 Billion Raised: Data Shows Pitch Competitions Are Worthwhile

Pitch competitions are held across the country with the sole purpose of connecting entrepreneurs to a group of investor in hopes of securing seed money or early-stage funding. Investors can spot a good pitch in roughly the time it takes to ride an elevator from the top to the ground floor. Thus, the theory behind an elevator pitch or quick summary of a business idea or project plan that one would convey to a potential investor in an attempt to gain their support.

With the rise of pitch competitions in recent years, there also is a growing sentiment in the marketplace that the return on investment of elevator pitch competitions is not what they used to be. Meaning that it is not worth the time and energy to attend big events to seek investment for your startup or find the next interesting company for your portfolio if you are an investor.

RELATED: How To Come Out The Victor At Elevator Pitch Competitions

However, new date from popular trade show SXSW Interactive is proving this theory wrong in a big way. Since its inception in 2009, SXSW Accelerator (SXSWi’s pitch competition) alumni have collectively raised $1.748 billion, with 12% (31) of participating startups eventually being acquired by the likes of Apple (Siri) and Google (WearDrobe, reMail and Apture Highlights). Additionally, over 50% of Accelerator finalists have received funding to date, giving investors who got in early, when they were in startup mode, pretty healthy returns.

As the conference season nears and investors look to add companies to their portfolios in 2015, here are some tips on how to make the most out of pitch competitions.  According to Chris Valentine, who runs the SXSWi, here are five points  on what investors look for that make a pitching company a winner:

1) Creativity (Originality and uniqueness of idea).

2) Potential (Longevity, actualization and profitability of idea).

3) Goodness (How the product or service impacts/improves the world).

4) Functionality (Usability of interface for idea).

5) Team / People (Who is your team, and how will they make you a success).

For more than a decade, Black Enterprise has awarded $10,000 to the grand prize winner of its Elevator Pitch Competition, held at its annual Entrepreneurs Summit (May 13 -15, 2015, Hyatt Regency Atlanta). Call for nominations are now open for 2015.  For more information how to submit your video presentation, click here.