Seeking to fund from Venture Capitalists and Angel Investors is a heartbreaking, mind-numbing process. You can go to a dozen meetings eight days a week and still not get funded. For many entrepreneurs, this frustrating process can be more than a little daunting and has been known to shut down many an enterprise venture before it has even begun.
Does the rejection mean your idea isn’t good? Not at all – across the universe, good ideas are tossed aside every day. It will certainly feel that your idea is a non-starter, but try not to lose hope. You don’t want to get discouraged by some hurdles. With the right advice and the right partner, there is always a chance for success.
Just ask yourself – when I’m 64, will I regret not doing this? Everyone has ideas and there are more good ideas than bad; why risk missing out on the piles of money you could make. That being said, the brutal truth is that there are ideas out there that simply won’t work. Here are a couple of things you should look at before going to investors:
When an investor says “tell me why this is important,” you want to have an answer. So ask yourself a simple question: Does your idea solve a problem? This deceptively simple question frequently goes unasked by many an entrepreneur. But no idea will succeed in the business world unless it provides something of value. So live a day in the life of your target consumer and ask “does my idea solve their problem?”
This is an exceptionally important step every entrepreneur to make. Unfortunately, it is often bypassed or done incorrectly. How does one validate an idea incorrectly? By running only to their friends and family. More often than not, an entrepreneur will go to his wife and say “Julia, what do you think of this idea?” The problem with asking your wife is that she loves you and probably doesn’t want to crush your dreams.
Talk to people who don’t know you very well. Even if you get no reply, you’ll at least know you aren’t generating a lot of interest. Heck, shoot us an email and we can tell you what you’re doing right and what you’re doing wrong. Don’t worry – we’ll send you an NDA so you’re idea will be protected. Not to mention, the first hour of consultation is on us!
Already done both of these steps and you’re still getting rejected? The problem may not be a bad idea; it may be poor communication. In other words, you may not be effectively communicating your idea to investors. This could be because you don’t have a Minimal Viable Product (MVP) that is substantial enough; it could be because your presentation isn’t eye-catching enough, or it could be for another reason altogether.
Seeking financial investment is a lot of crying, waiting, and hoping. It’s a trying process known to have broken many entrepreneurs. That’s why we’ve decided to write up a quick post on why a demo is necessary. We won’t go too much into creating a perfect presentation, as we have done so before and you already know what to do.
Instead, we will discuss the benefits of creating a demo of your app, website or software to show off your idea. If you follow our advice, it won’t be long before you see the investment come rolling in. Once you’ve finished with this post, don’t forget to check out some of the excellent work we’ve already done.
The Beauty of A Demo
If a picture is worth a thousand words, then a working demonstration is worth a thousand pictures. From a venture capitalist’s perspective, they may think your idea sounds great, but they don’t want to commit without a functioning demo or MVP. Great ideas can be found here, there, and everywhere, but VCs and Angel investors need to know if you can turn your idea into an actual product or service.
Creating a demo has many benefits. You may think “all I’ve got to do is slap together a Powerpoint Presentation the night before” – a route taken by many an entrepreneur. It’s not that you can’t do that, it’s that you shouldn’t. It’s an ineffective mode of communication that leads to confusion more often than not. Let’s go over why a demo is the better option.
Do you want to know a secret? Most VCs invest more in a person than in an idea. They want to know that you have what it takes to succeed. A PowerPoint presentation shows that you can spend a few hours putting together some slides, but it demonstrates little else.
A VC pitch deck is a little more helpful when presenting to a board of investors (especially as a website), but still isn’t as good as working demo. Showing up to a meeting with Angel investors with a demo in hand shows them you are willing to work hard and commit to the project.
Obviously, VC investors want to know if your idea can actually be realized. A working demo is essentially a proof of concept. It shows investors that your idea can come together, coalescing into a functioning product or service. You’re not saying it will probably work; you’re showing them that it definitely does. At the end, you want investors to walk away secure that your idea is achievable.
3. The Ball is Rolling
In addition to showing commitment, a demo shows that work has already begun on the project. This is important for a few reasons:
i. It means you already have the tech expertise to pull off your project (or you’ve hired the right guys);
ii. Much of the conceptual work has been completed, and operational flow of your project has been established (to some degree);
iii. You’ve had the wherewithal to test your idea before coming to investors. VC and Angel investors don’t like to have their time wasted.
The last thing you want is a potential investor to say “I just don’t understand.” If you hear that uttered, you know you’ve lost the room. The best way to prevent some other guy from walking out the door with your money is to have a functioning prototype built by people who know what they’re doing.
It’s an effective way to communicate your idea and to show your dedication. It helps to convince a room full of angel investors that, in spite of all the danger associated with investing in a startup, you have what it takes to see the project through and to make it a success.
We have a few last pieces of advice:
• Act naturally;
VCs and Angel investors want to know you – as mentioned above, you and your personality are what most investors actually fund. Let a bit of your natural self-come through.
• Honesty is key;
Investors usually know when someone is lying to them, and nobody enjoys that. Investors will go over every little thing you say with a fine tooth comb – so cut out any junk, be yourself, and tell the truth.
• Investors love passion
Passion means commitment and dedication. Don’t be afraid to show how much your dream means to you – like dreamers do!
I know, I know – it’s all too much. That’s why SDI is here to help! We’ve been at this for years and know the industry like the back of our hands. We’ve pitched ideas for small business funding all throughout Silicon Valley and know how to woo investors. We can both help you develop a fantastic pitch deck, but we can rapidly build a functioning demo for you to show off.
You can call us at 408.802.2885 during normal business hours or email us anytime at all. I’m talking about you – the entrepreneur who sees the perfect market opportunity, the businessperson fundraising to grow their company, the dreamer with a great idea. We want to make your dreams real, so get in touch today – call now and get an extra 25% off your first project.