So you’ve seen the Shark Tank and similar reality TV shows. What great entertainment! But would you be surprised to learn that some of the cringe worthy moments you see on these shows can actually be so close to the truth of how some innovators pitch their value proposition that it is scary?

The following represents our experience of the top 10 BIG mistakes innovators make when pitching to Private Equity Gateway. And, we do see them regularly.

1. Selling the sausage

This is without doubt the most basic fundamental mistake that most innovators make. And it is understandable; you see they have toiled so hard to produce a product or service that they believe in so much that they spend their pitch time telling us “How” their product is so brilliant. Understand this; in any pitch time, focus quickly on what the problem is, how you solve the problem (as opposed to the mechanics of how each step of the process solves the problem) and the benefit that your target market receives from the solution. Sell the sizzle NOT the sausage

2. Know your target market

Many innovators have identified a problem, created an amazing solution ………… but have not thought through specifically who will want this solution sufficiently enough to …….BUY IT! In other words, research the market and build profiles and even individual persona’s so that you can clearly articulate WHO your market is

3. Validate your concept

I once sat with an obviously brilliant mathematician who had developed algorithms that “in concept” solved a problem that for the target companies, saved them literally hundreds of millions of dollars. However when asked where he “piloted” the theory, the response was that that was not necessary because his “models” proved it. Understanding that even if your investment opportunity is conceptual, some form of validation through beta programs or client experiences will be necessary to attract investors

4. Wrong or no business model

Put some thought into what business model is likely to lead to scalable business growth. A sophisticated investor does have an expectation that you are not just bringing a “product” to invest in, but a complete business opportunity. Think about how your innovation can be best delivered to your target market AND be scalable to a large market. Get the business model right.

5. Going too early

Attracting investors is actually one of the most expensive methods of acquiring funds, even though greatly beneficial in many circumstances. Going too early means that you can be in a position of weakness and even if you are able to attract investment, there is the high probability that the equity you will have to forego will be substantial. Focus on building enterprise value and placing your opportunity in the best light BEFORE you think about attracting serious investment. Friends, family, angel investors, grants and debt finance are but some of the options you have in order to build your enterprise value

6. Poor pitch documents

Building a pitch document, Information Memorandum, Term Sheets and other documentation to attract investment is a real craft. We literally see hundreds and hundreds and the common theme is that most have far too much detail for the initial pitch. The investment attraction process is like other sales processes; get attention first, then progressively work down the chain into the detail which will come in a due diligence process

7. Numbers don’t add up

Forecasting a business opportunity is not easy. Especially where your innovation is disruptive and completely new. Investors have seen it all therefore make sure that your numbers are based on validated assumptions and even better still, validated concepts i.e. that you have “tested” in the market place and know your numbers work

8. Know your “walk away” position

For most entrepreneurs, the process of attracting investment to the wonderful thing they have created is a first time experience. Dealing with experienced investors can be a whirlwind event that can take people by surprise. Knowing your walk away position places you in a much stronger position to cope with the experience. In knowing your “ideal scenario” and your “walk away position” you are able to enter negotiations with potential investors in a very confident manner. And this confidence does shine through

9. Demo goes wrong

Yes, believe me, I have seen this on more than one occasion. All the hard work of gaining the interest of a potential investor and when it comes time to demonstrate the solution ………… murphy’s law! However, this can be avoided so easily by ensuring that you not only plan and rehearse your demonstration pitch, but that you also consider all contingencies of how you will adapt the presentation should technical hitches occur. An investor can appreciate a technical hitch but an inability to adapt shows a lack of preparation

10. Lack of branding

An investor knows the power of a brand. While you may have the most unbelievable solution, like the point on your business model, ensure that you have thought and present how your “brand” will be embraced by your target market. This is NOT to say that you have spent tens of thousands of dollars on branding; in actual fact, one of the key “uses of funds” that you highlight could be exactly that; to invest in the development of a professional branding process. But certainly come to the table demonstrating your awareness and possibly creative ideas of how you want to build the brand

To discuss your needs about being Investor Ready, contact Trevor Holmes, CEO PEGG Business at trevorh AT privateequitygateway DOT com