Last night, we spent an evening with South Florida’s angel community, sitting in on The Hatchery’s first Miami “Are You Serious?” event. The event gave five entrepreneurs a chance to deliver a five minute pitch before a panel of four investor judges, while an audience of more than 200 took notes.
Each presentation was uniquely its own, and had its strengths and weaknesses. I’m a big supporter of Guy Kawasaki’s 10:20:30 Rule of PowerPoint (or, in this case, 5:5:30), but aside from the visuals, the judges last night made some valuable points that are useful for any new start-up, whether seeking funding or business partnerships:
1. Never Lie. Judges advised entrepreneurs not to exaggerate, pad numbers, or tell tales. “We all know each other in the VC community,” advised one panelist. “And we will do our due diligence. No matter how compelling the lie is, the truth will eventually come out.” If you can’t answer a specific question about revenues, market size, or other factual information, always say, I’ll get back to you on that – and then follow up.
2. Know Your Market. VCs want to be sure that entrepreneurs have a firm understanding of what market they’re going after, and that they’ve identified a market that’s large enough to be “fundable,” but specific enough to be realistic, with plans for growth. VCs don’t want to hear from companies that claim they can be “everything for everyone,” and at least one start up was accused of being too bold for comparing itself to “Google, Craigslist, and the Yellow Pages.” Even the most successful sites on the Web (read: Facebook) started out with a very specific, targeted audience (read: Harvard students, then college students) that helped build the service and the buzz around it.
3. Know Your Industry. “To succeed in any venture, you NEED to know your industry inside and out,” noted one of the panelists. “You can’t come to an event like this and have someone else correct you on the details of your industry. You MUST have experience.”
4. Know Your Numbers. When asked about market size and revenue potential, VCs don’t want to hear the size of the entire industry. They want to know what chunk of that industry you realistically expect that you can capture with your company’s model, and what formula you used to arrive at that number.