By: Eric Hamilton
For the past few months, I have been in the midst of acquiring funding for my technology startup called AdSmoke. It is a video ad network that allows websites with video to make money by showing commercials. For AdSmoke, I was able to raise a small amount of money (less than $30,000) from bootstrapping/friends/small investors. I started this company with friends who were former co-workers at Yahoo!. I was recently featured in Black Enterprise Magazine for pitching my company to the Shark himself– Daymond John of Fubu and the star of ABC’s reality TV show Shark Tank.
These tips are for doing a 5 minute pitch to an audience of investors (sharks). I am hopeful that some of my lessons learned will help you in your quest.
You will be asked to present your deck. A deck is simply a PowerPoint presentation with slides. Have a deck prepared for your pitch. In your deck you should (a) use large legible fonts (24 pts or higher), (b) images which highlight your points, (c) avoid writing paragraphs, and (d) avoid adding any text that can’t be read from the back of the room.
When you start pitching, dedicate about 45-60 seconds to explaining your industry. You are the expert in your industry, not the venture capitalists. In my overview, I explain how much advertisers are spending in online advertising vs. television advertising. I use terms like “TV commercial” instead of “online digital video ad.”
(3) Pain Point
Talk about what’s wrong with the current system. How are people currently doing it? Emphasize the specific pain points that impact your solution.
(4) Your Solution
What is your solution? Why is it better? Briefly highlight your solution and explain why it is better than what is currently available. Avoid doing a product demo. Many entrepreneurs feel as if they need to prove that their product works. This is neither the time nor the place to show off all of your product’s bells and whistles.
(5) The Market
How big is your market currently? How big will your market be in 4 years? Be prepared to prove it. If your market is less than $1 billion then you are probably in the wrong business.
(6) Business Model
Explain how you will make money or grow membership. An answer such as “We will go viral like Facebook” is not a good answer. Understand your acquisition costs (which are the costs to acquire 1 user/customer) and the amount of revenue you will earn from each user/customer.
Who are you competitors? There is always competition. An answer such as “We don’t have competitors” is not a good answer. When the home refrigerator was invented, the inventor could have easily stated “We have no competition.” Actually that was not true. People ordered blocks of ice from ice houses which were stored in ice boxes in the home. Before the invention of the refrigerator, the inventor of the ice house could have stated “We have no competition.” That was not true. Before ice houses, ice was cut from Canadian lakes and shipped south via freight train to the U.S. for purchase. In summary, identify your competition. A failure to do so will undermine your credibility.
Highlight each team member and briefly explain why they are important to your business.
Talk about how much you have raised and how much you want to acquire. Investors want to know that the entrepreneur is financially invested in the business.
Venture capitalists are looking for high risk, high reward, and fast growth ventures. It could be that your business is a great traditional business opportunity. Venture capitalists are not interested in traditional businesses. You don’t want to explain everything in your 5 minute pitch. Your pitch should be enough to tease the potential investors into doing a follow up.
I wish you best of luck swimming with the sharks.
Eric Hamilton, CEO AdSmoke
In video advertising & video monetization
330 Madison Ave 6th Floor
New York, NY 10165