To prevent any potential critiques from affecting these businesses and individuals, we will not refer to any person or business present by name or by product
Recently, the TryMyUI team attended a local CrowdPitch hosted by some friends of ours and contributed two months of our Team plan to the prize-pool. We watched as ambitious entrepreneurs pitched their ideas to a crowd of professionals, bankers, city officials, and most importantly, the panel of finance judges.
Although we are (fortunately) fully self-sustained in revenue and beyond the shark tank stage of pitching to investors, many of our customers aren’t and we haven’t forgotten that struggle.
So here’s some key points of advice that we gleaned from the judges.
Ask for the right financial assistance
Younger companies who are experiencing early success and are positioning themselves very well for the future, like our first pitcher, are probably at the most exciting point in their business’s history. They have a following, their product is in select locations, they’ve got the eyes of the industry watching them, and they’re offering a unique solution that fills an ever-widening void.
Despite solid numbers and deep-knowledge of the market, the presenter, owner, and sole-employee of the business seemed uncomfortable with her public-speaking, and her hesitance may have resulted in the first piece of advice the panel of judges gave to our pitchers: small businesses shouldn’t bother with asking for credit lines; just ask for the loan.
Asking for a credit line seems like a safe path to getting funded. After all, you’re not asking for large sums and you can prorate how much you’re borrowing. That must be more appealing for a lender, right? Wrong.
The panel went on to explain that since the business is so young and doesn’t have an established financial history, credit lines are unlikely to be opened. Asking for working capital to get your feet on the ground so that you can build a revenue stream is much more important.
A good story is fine, but hard numbers are key
In perhaps stark contrast to our first pitch, our second pitcher came to sell. He was confident, stood in front of a huge display of his materials, lots of free samples, and was able to throw around some complicated financial jargon.
His business had incurred the worst thing a young business possibly can: rapid growth. Although immediate success seems good, his business was unable to keep-up with the demand and began free-falling in production cost.
Due to some admittedly obscure financial maneuvering which included splitting his business in two, he believed his initial business was positioned to handle the rapid growth it was experiencing.
I can’t really tell you how successful his business is beyond hearsay, because he spent his entire pitch time telling the origin story, which lead to this next piece of advice: no matter how compelling an idea or speaker is, lenders want to see your numbers.
Our second pitcher opted for a more personal story of his business’s birth and early success, speaking directly to the crowd without the aid of a PowerPoint. The best show in the world can’t substitute solid market research and projections, especially for people who have endured decades of smoke and mirror pitches.
Be prepared and be prepared to be transparent
In a coincidentally perfect marriage between the styles of the first two pitchers, our third and final entrepreneur was clearly the most experienced in a pitch environment. One judge even acknowledged the pitch as “certainly the most Shark Tank-like.” He spoke clearly, quickly, used a prop, and showed his numbers to an acceptable degree.
His idea was grounded, he knew his market both in terms of audience and legality, and as many as 5000 units of his product had already been sold. He had gotten that far via online hype and crowd funding.
This pitch seemed like a clear winner on the surface. Our co-founder later mentioned that it was the sort of idea that you wouldn’t need to manufacture yourself. Instead, you’d just license the patent to larger manufactures and reap the royalties.
Then the questions came…
In what seemed like an innocuous question, one judge may have decided the fate of the winner based on the response to the following: “How much ownership would you be willing to give up [for receiving the 125k he was seeking]?” The pitcher responded with a head-roll and clearly didn’t really have an answer in mind, so he offered-up “15%,” but said he’d have to run the numbers.
Don’t just tell them what you think they want to hear.
It turns out that his off-the-cuff response was a blunder. In a similar vein to our first pitcher taking a soft approach when asking for financial assistance, our third pitcher shouldn’t have been willing to give up what is ultimately a huge chunk of his business for such a relatively small sum. Know your numbers and be prepared to field questions honestly.
Learn more: user testing better products and user testing new products
Key takeaways and the winning idea
Pitcher number 1 was the victor in what we heard was an extremely close contest between her and the third pitcher. What does she owe to her victory?
- She had a strong sense of purpose
- Her numbers were fleshed-out and her market research was thorough
- The slower and steadier approach kept her early success from resulting in rapid growth and collapse
- Answers to the questions that she fielded were honest and reflected professionalism
- Ultimately, it’s just a stellar idea and something that will be adopted very easily in the near future
Pitch events like these are a great way to get feedback on your idea (and potentially win a prize), and / or witness relevant feedback being given to people in similar situations as yourself.