How to Pitch, value & Fund your digital baby - Part 3 of the series 6-place digital operators

This is part 3 of the 6-part series where I present a set of best practices start / build / contrarian output for digital entrepreneurs.

The first part examines the processes and the people who surround the boot process / build / output. The second part was about the players: entrepreneurs, investors, investment bankers and lawyers.

The pitch, valuation and financing

This section examines how to pitch, value and fund your digital baby. This is the process necessary meat and innovation.

The pitch

I hate to start focusing on the form in relation with an implied indifference to the content, or otherwise said style over substance. But the shape and style is extremely important especially for investors who are generally more impressed with a sweet appetizer than a real meal. Snarky comments aside, it is obviously important to "throw" very well - as so many «start-up gurus" tell us all the time. Some of the advice is really very good, but some are awful. Here are the basics:

• Understand the form and content that the public expects. Ask those who have previously been presented to your audience and ask for their ideas about what works and what does not. Ask the public what they want to hear directly, and how they would like to hear (which means that you must be able to adapt immediately to requests). Ask how long has your audience. Ask for the "need to know," and always ask about what infuriates them more about entrepreneur pitches.

• Prepare for the unexpected. It is flexible. Make sure whoever made the presentation to be intelligent, articulate and aftopepoithisi- but never arrogant. If the presenter is linear-regulated presenter, find another one capable of meeting the non-linear, unexpected ideas, questions and events.

• Prototype demonstration is necessary to communicate the innovation and selling investors to the uniqueness of entrepreneurial endeavors. Everyone should "see" the project to design, develop and sell. We have to see how technology solves problems in a settlement context.

• It is one of the best ways to evaluate new business models, processes and technologies to assess their potential in context, that is, how they could solve the problems classes in multiple vertical industries and even disturb the entire business industry models and procedures. Scenarios, simulations and use cases communicate potential. For example, enterprise technologists should explain how an application can help an insurance company to reach more customers, how it works in a security tool for the company's supply chain, or how social media technology-free media can enhance the data analytics.

• You should also develop vibrant, flexible demonstrations clearly indicate how your new company's products and services can be changed and improved. For example, if a potential customer or investor wants to see how a large unstructured data-analytics technology works, he or she must connect their data to a pipe showing exactly how it works. Flexible demos are convincing. Canned demos raise too many questions - and undermine confidence.

• Municipality must "board level," that is, understood by directors and other executives who understand business models / processes and high-level technologies. Said differently, professional models / processes and technologies must be demystification. It should minimize the jargon and acronyms. Examples should be simple and easy to understand.

• Failing-fast-and-cheap is a favorite investment strategy. Investors love the idea of ​​investing very little time and money to learn a lot in a short time. Due diligence is a process that prospective customers and investors to understand and apply each time a simulation demo graduate pilot scheme. Prediction audience drift to due diligence questions - a good sign - and to bias drift with solid answers.

• The pitch, the same must be "active". There may be composed of 25 dead Powerpoint slides with tons of text and graphics to each slide. By this time everyone expects pitches to be brief and to the point-line perfect for catechism public investment strategy. It should have links to graphics and video with the integrated use of case-based demonstrations. client's testimony is also effective. (Try Prezi as an alternative to Powerpoint, but be careful that the tool does not confuse the message.)

• Always make sure you dry running your lawn. Find some strangers to inspect the words and music of your game on the field. Listen to their comments. Customize, as always, recognizing there is no such thing as a perfect pitch.

• At the end of the day, everyone wants to know:How Much Money Can We All Do?

• What is the likely ROI?

• What is the best / worst case scenarios? Quantify the win / lose scenario, noting that a 25% return on INVESTMENT would not sell ...

What is the market size?

• What is the objective problem?
• How large and profitable is the target market?
• How many competitors are now on the market?
• How fast are new competitors - and leaving - market?
• How fast their incomes grow? Or shrink?
• Are there any original can talk with customers / clients?

What is new, big idea?

• New technology?
• New services?
• Hybrid delivery model?
• Is there any IP? ID so, what is the status of the IP?
• What is the compelling value proposition?

How much money - and for what?

• How much money is needed to start?
• What is the expected monthly cash burn in the next 12 months?
• What is the expected rate of combustion, revenues and profitability over the next five years?
• How do you plan to spend the money? Why?
• What plan of total fundraising?

How experienced and successful is the management team?

• Who is the founder (s); What is the history of his / her? He / she is part of a monetizable ecosystem?
• Who is on the management team, the team of tradition, the Board and the Advisory Committee? What is their combined business history?
• What are the reports very familiar with the founding team of experiences we can contact?
• Wrap your answers in a quick, flexible, fun, visual pitch - and then go to the unpredictable flow. Imagine the perfect presenter. Bill Clinton? Donald Trump; Definitely not Lewis Black!

Valuation

There is no bigger issue - or challenge - for entrepreneurs from the valuation of the company. Everyone fights on valuation: investors, businessmen, wives, husbands, children, bankers, lawyers, former spouses, nerds, spouse - anyone.

So what’s your company worth, or, if you’re an investor or acquirer, what are you willing to pay?

• I described here before, entrepreneurs start businesses and early stage should focus on the difference between rival valuation methodologies. Whenever you decide to raise money either Angel or institutional investors, they need to develop pitches that emphasize strategy valuation, not valuations based on rigid or "standard" sales / profit for infants almost always help investors gain more the fair distribution than they deserve.

• Valuation operational methodologies is always a trap for business and always a benefit to investors. Valuation of business is the oldest trick discount startup company-up / early in the book. If you are a businessman, avoid it at all costs; If you are an investor without much vision - or so-called "professional investor" with excellent "discipline" - do they assess operational best practices and to learn to be two simultaneous minds.

• You can count greed - on both sides of the table. Why not underestimate the extent possible, invest as little as possible, and obtaining equity as much as possible, or why not ignore the sales and profitability overall and focus the big, game-changing picture and proprietary IP? It depends on where you sit.

• A further aspect of the business valuation methodology is the equation great and wonderful "comparable figures" designed to devalue any company on the planet. Why; Because it is always possible to say that, "Well, you're just like Company A, B & C ( based on another business valuation that has "set" by some investors who created the "previous") deserve only X! »« Yes, "the businessman says," but the company a is completely different from us! "" not really , "says the investor, 'in fact, you're exactly the same, and they lost their numbers last year."

• Never forget the source of fluids. Angels write personal checks. risk and realize the dream of valuation strategy driven outputs. They will risk their money and are therefore fundamentally different vested interests of capitalists (VCs). VCs spend other people's money. VCs, therefore while playing over and over again the business card valuation is relatively comfortable protection - or lose - other people's money. Obviously they want to make money for their limited partners, because this is how they make money for themselves (and produce the next Investment Fund), but there is always some other offer down the road (and getting more generous administrative expenses whatever good or poorly performing their funds). So even though they're wired for business valuation is also intelligent enough to understand the connection between the two valuation methodologies, or just walk because investment "strategic" sometimes is just too expensive.

• Also remember that valuation Business models are more understandable strategic models, which require a deeper understanding of the art of operating models, based solely on current and verifiable predictable numbers.

• Remember also that there is a correlation between what happens in the business world today and the popularity of the operational valuation. Enterprise as more and more investors are moving further and further downstream at a later stage investment opportunities, frequency of valuation strategy has reduced proportionally. Some years ago, startup and early stage entrepreneurs had an easier time starting valuation strategy discussions. Now it is much more difficult.

Financing

• If self-not fund, entrepreneurs must pursue disciplined - AKA "professional" - angels for funding. Disciplined angels understand risk. They are much more likely to accept measurement strategy, although also understand the balance between risk and strategic assessment and therefore because literally seeding a starting or assisting an early stage company expect generous assays, however strategy could.

• Angels are also willing to write more than a single control - but beware of angel investor fatigue. Over time, reduced Angel enthusiasm and entrepreneurs need to move to new angels.

• Entrepreneurs should never forget how to monetize their strategic importance: even during outbreaks of revenue and profits, they should never undersell their strategic value.

• VCs will always want to implement the operational valuation methodology no matter what the company actually does. They do so because if you turn up at the office of the VC a possibly need the money and the first "despair test" businessmen given is their willingness to accept a low valuation. VCs manage this test, because it protects their investment limited partners and, most importantly, yourself. If you are a real start, then, the valuation received from an institutional investor - if you can find one - is too low: avoid completely unless you have no choice - and then avoid them completely (even and if you have no choice).

• Corporate M & A groups are so specific strategic and operational valuation. Understand the strategic vision and operational efficiencies. Depending on the vertical industry, a value one greater than the other. For example, technology and pharmaceutical acquisitions are often driven by pricing strategy models, where retail and low-technology acquisitions end services are often based on operational metrics. Entrepreneurs must always be investors and recipients before speaking with their profile.

• Valuation determines funding and financing valuation pegs. If possible, to finance your company personally. If this is not possible, invite your group founder to invest, even in small quantities. Also "need" your founding Board to invest a nominal amount of money, such as $ 25 K. The same approach can be extended to members of your founding Advisory Committee. They do not take money from friends, relatives or dumb angels.

• Self-financing avoids a valuation fight. You can adjust the low valuation and buy many of the company for relatively little money. You and your original team can really hold almost all of the company from the initial seed funding round. It is also easy to justify a low valuation for a start-up.