The final question that I asked each of the eight sharks from ABC’s Shark Tank was to give their top three pieces of advice for entrepreneurs who are seeking investors. Previously, I asked them how they evaluate a new business and how they decide when to partner or outbid other sharks. If you’ve enjoyed the series or have other questions for the sharks, please leave them in the comments section. I hope you’ve enjoyed this six part series and learned something from it.
What are your top three tips for entrepreneurs who are seeking investors?
- Do everything you can to not have to seek outside money. Most companies don’t need more money, they need more brains.
- If you do need money, know exactly how much you need, what you are going to do with it and how it will get you to profitability.
- Be ready to work your ass off. Raising money is not a destination, its a starting point. The minute you take money, you no longer are your own boss. You work for the people giving you money. Be prepared to work harder than you did before. Raising money doesn’t make things easier, it creates more pressure for success.
- Learn how to communicate. To your investors, to your employees, to your customers and to the world. If you can’t articulate your idea, no one will do it for you.
- Never lie or misrepresent yourself. And don’t exaggerate.
- Cash is king. Your “idea” isn’t worth anything until you’ve put in the hundreds of hours of hard work that it takes to build a real business with real cash flow around it.
- OPM. This multifaceted acronym is the most important tip. OPM stands for Other People’s Manufacturing, Other People’s Marketing, and Other People’s Mind-Power. A savvy entrepreneur will not always look for investment money, first.
- Learn as many mistakes and what not to do while your business or product is small. Don’t be in such a hurry to grow your brand. Make sure that you and the market can sustain any bumps that may occur down the road.
- Before seeking an investor, be able to prove that you have a product that can sell and people want to buy. This does not mean that you must have sales of at least a million units before seeking an investor; it just means that you have proof of a quality product for consumers.
- Fancy talk don’t work! Keep your pitch plain and simple, because fancy talk breeds mistrust. When you pitch your product answer the questions short and straight, and if you don’t know the answer, say so.
- You gotta have a gimmick. There are very few new things out there, but there are millions of products being sold every day. You’ve gotta figure out and angle or a gimmick that separates you from the pack. Heath Hall, one of the founders of Pork Barrel Barbecue Sauce, had a face that looked like an adorable pig. What a marketing advantage! I snapped his business up faster than I could say “oink!”
- Pushy people deliver. A pushy entrepreneur is a pain in the ass to work with, but they always deliver. Don’t be afraid to be pushy.
- Be able to quickly and clearly describe your business, concept, or have a prototype with you if it is a product and have solid numbers about the cost to get to market, or to produce the product.
- Present an analysis of the competition and explain what you have done or could do to protect your business from future competition.
- Show them the passion and desire you have for making it a success. You need to be 100% committed and excited about your product, if you’re not you will lose me as a potential investor in the first 15 seconds.
- Do you need an investor? A business has to (usually) be of a certain size before it needs an investment to jump to the next level – the first investment should always be your sweat equity – until you have invested the sweat I do not want to invest the cash.
- Have a real reason why the money will grow the business – if we had $ 100K we could buy a bigger machine to make more widgets because we have too many orders (that’s a good reason ) and there are many others – we need $ 100K to expand into a region where we have no sales and no presence because we think it would be really good (is not a good reason – and there are lots of not good reasons).
- Find the right partner – keep in mind the investment does not go to you but goes into the business – you will have to work with these folks for a long time usually.
- Establish a realistic financial valuation. Never base it on unproven projections with unproven facts. Nothing turns off an investor more than when an entrepreneur comes in with a ridiculous valuation.
- Keep your pitch short and simple. Most investors are very busy and sees these kind of pitches frequently. Stick to the facts, the showmanship and frills can sometimes turn investors off.
- Prove to the investor that you have the track record to execute your plan and give him confidence that he will make a huge return on his investment. Prove to him that he will more than just get his money back.
- Make sure that you secure your trademarks and your patents. You would see that in the course of the show. Someone would say they do in the show and then not actually have them.
- In your presentation, be organized because if you’re not organized in your presentation that’s a tip into how you run your business. Be organized and be concise. When people send me ideas, if it’s a seven page letter, I don’t even bother. Most ideas you can sum up with “this is what it is, this is what I have and this is the space it fills in the marketplace.”
- To be realistic in expectations and timetable. Most of these things take a long time to develop it to a point where you can make money off it.