.png)
Speaker: Tim Cooley
Raising capital, especially in the early stages of a startup, is a challenging endeavor. In this article, we will explore key insights from a talk by Tim Cooley, an experienced figure in the world of entrepreneurship and early-stage funding. Tim Cooley offers valuable advice and knowledge, drawn from his extensive background in the field, that can help aspiring entrepreneurs improve their chances of securing the necessary funds to turn their ideas into reality.
Background and Experience
Tim Cooley began his talk by sharing his background and how he became involved in the world of entrepreneurship and early-stage funding. He emphasizes the importance of understanding the process, having personally experienced both successes and failures. His journey includes serving as the executive director of an accelerator and becoming a part of Park City Angels, the largest angel investor group in Utah. This extensive experience provides him with a unique perspective on the dos and don'ts of fundraising.
Understanding the Goal of Your Pitch
One of the key takeaways from Tim Cooley's talk is the importance of understanding the primary goal of your pitch. He highlights that the goal is not to secure immediate funding but to secure the next meeting. This concept is crucial to keep in mind during any pitch, whether it's an elevator pitch, a one-liner, or a full presentation. The objective is to pique investors' interest enough that they want to learn more about your business during the due diligence phase.
Maintaining the Flow of Your Pitch
Cooley advises maintaining a conversational tone during your pitch. He suggests structuring your presentation as a series of questions and answers. This format facilitates engagement with investors, as they naturally ask questions while listening to your pitch. The recommended order for presenting your pitch is as follows:
Why are you here? (Problem)
How are you solving the problem? (Solution)
How do you plan to make money? (Business Model)
This order allows for a smooth and logical flow during the pitch, aligning with the way investors tend to ask questions.
What Not to Do
Cooley also provides essential tips on what not to do during a pitch:
Avoid Video: While many entrepreneurs believe that videos will enhance their pitch, in most cases, they can make it worse. Video content can be challenging to implement effectively, often requiring internet access and technical expertise. Simplify your pitch with images and animations.
No Note Cards: Relying on note cards can make you appear unprepared. It's crucial to know your business inside and out, promoting a confident and professional image.
Avoid Memorizing: Memorization can lead to hiccups or appearing unprofessional if you forget a part of your pitch. Focus on maintaining a conversational flow to minimize the need for memorization.
Problem-Solution Fit
One of the most critical aspects of a pitch, according to Cooley, is ensuring a clear "problem-solution fit." Your solution should directly address the problem you've identified. It should be so clear that even a six-year-old can understand it. Investors should grasp the problem and your solution with ease. Cooley advises entrepreneurs to ensure that their pitch correctly communicates the relationship between the problem and the solution.
The Importance of Numbers
Cooley emphasizes the significance of keeping your pitch's financial aspects simple and clear. He recommends including three key slides:
Your business model: What you sell and for how much.
Your sales projections: For the next five years, presented as a graph.
Your target market: Focused and related to the problem and solution you presented earlier.
These slides are interconnected and help investors quickly assess the viability of your business proposal. Inconsistencies or unrealistic figures can undermine your pitch.
Conclusion
Securing early-stage funding is a challenging journey for any entrepreneur. Tim Cooley's insights, shared during his talk, provide valuable guidance for those seeking capital for their startup ventures. By understanding the goals of your pitch, maintaining a conversational flow, avoiding common mistakes, ensuring a clear problem-solution fit, and presenting realistic financial data, you can significantly enhance your chances of successfully raising early-stage funding. Remember, the goal is not to secure immediate funding but to secure the next meeting with potential investors.
Q&A
Q: What are you most nervous about for your pitch, and how can Tim help you win your pitch?
I'm most nervous about my financials, especially projections. Tim suggested not to stress about it too much, suggesting doubling sales every year and ensuring the final year's numbers align with our current marketing targets.
Q: What are the most critical assumptions we should address in the financials?
Tim advised to focus on the economics, explaining the product's price, costs, and sales projections, breaking them down for each year, usually up to five years.
Q: Can you explain TAM (Total Addressable Market)?
TAM stands for Total Addressable Market. It includes everyone in the world who could potentially use your product. You then break it down into smaller subgroups to define your target markets.
Q: What are common things you should avoid mentioning in a pitch?
Avoid going into excessive technical details about your solution, focus on the problem and solution. Also, refrain from discussing markets or user groups that aren't directly related to your primary target at that stage.
Q: What should we ask for in terms of funding in the next round?
The amount to ask for in funding should align with your specific needs to achieve a significant milestone. Consider the costs of key hires, marketing expenses, and other requirements to reach your next goal.
Q: Do you recommend using a physical prototype in the first pitch?
Yes, if possible, demonstrating a physical prototype can be highly effective in your presentation.
Q: Where are good places to practice pitches?
Tim suggested participating in events like 1 Million Cups or startup competitions, as well as networking groups, which offer opportunities to practice pitches and receive feedback.
Q: How much equity do investors typically take in a round?
It's typical for investors to take between 10% to 20% equity in a round. The percentage may vary based on the stage of your company and the terms of the investment.
Q: When should you re-pitch to investors after a presentation?
You can pitch now, even if you have a year of funding left. The key is to follow up in six to nine months to update investors on your progress and growth. Building relationships is crucial.
Q: How important is a warm introduction to investors?
A warm introduction is generally preferred but not always necessary. Many investors are open to cold inquiries. Building relationships and asking for advice can be a good way to connect with potential investors.
Q: How can you tap your network to find investors?
Use tools like CIG parser to scrape your email contacts for potential connections. Also, be intentional on LinkedIn, connect with C-level professionals, and explore their networks. Networking events and introductions from your network can also be valuable.
Q: How do investors view companies that have been through accelerators?
Participating in accelerators like RevRoad or Boom Startup can positively impact how investors view a company. It often means that a company has received guidance and support to grow. However, managing your company's capital table is crucial.
Comments