Your Great Idea: Science Project or Legitimate Business?
— Real life advice from some of Arrow's seasoned startup professionals.
Among the number of pitches that venture capitalists and angel investors hear (including myself), occasionally we encounter passionate entrepreneurs who struggle with accepting that their idea is more of a science project than a promising business.
Arrow is closely involved in the technology startup community from angel investing to birthing businesses through our incubator (known as the Arrow Innovation Group) such as Hotcakes Commerce and Allocable. Therefore, we are no strangers to the importance of distinguishing upfront if a good idea is worth pursuing.
Consider some of the points below to gain a realistic perspective on your next big idea.
Is Your Vision Business Minded?
Have a relatable story.
Storytelling is a powerful form of communication as it activates and engages your audience’s mind to experience what you’re telling rather than just process a list of bullet points and facts you’re presenting.
On top of telling your story well, make sure it’s told in a way that resonates with those you are pitching to. This will take homework on your part in knowing as much as you can about them ahead of time.
As you are putting together your story, ask yourself if your passion for the idea is balanced with the problem you are solving and business value you’re providing.
Know your vision from beginning to end.
You have this amazing idea that’s going to bring tremendous business value to yourself as a founder and your future employees. Why would you want to ever envision the end of that? Because investors are.
Vision is a must, but a part of that vision which matters greatly to investors is your exit strategy. Or else they are left to worry about ever receiving a return. Investing might be a passion, and they may have a vested interested in a thriving business to invest in, but it’s also impossible to thrive as an investor without projecting returns.
Exit strategies aren’t a negative thing, they help you as a founder stay focused on building something appealing enough to be acquired or bought. Proving that you understand this brings investors much comfort.
Have You Done Your Due Diligence?
Plan well, and plan ahead.
The structure of your company, how you’ll spend investments, keen insight to your market and competition, and at the very least a working prototype of your product are among the list of things investors need to strongly consider investing in your business.
As one of Arrow’s managing partners and a local angel investor with experience investing in the technology world, I ask for these things of a company I'm evaluating:
- Organization Structure and Leadership, Bios if Available
- Sales & Revenue Information
- Burn Rate and High Level Breakdown of Where That Money Goes
- Technology and IP
- What Did You Build?
- What Protection Do You Have (patents)?
- Dependencies (Which Technologies are licensed? What are the terms?)
- Infrastructure (What is your infrastructure, is it prepared for scale?)
- Market Information
- Major Competitors
- Growth Strategy
Research your competition like you’re training for the Iron Man.
Will Strohl, Director of Product Management at Hotcakes Commerce, advises, “Know your competition really well. Assume someone else has thought of your idea already and work harder and faster than your invisible competition. Know the people, the apps, solutions and anything similar to what you’re doing intimately.”
Are You Confident About Your Idea as a Business?
You’re running the ship for your idea, so ultimately investors are investing in you. Who are you? What’s your background, who are you connected to, what are you in expert in? Your passion, your personality, your wisdom, leadership abilities, work ethic, demeanor, and level of confidence are all major factors that will influence how they feel about partnering with you.
Practice your elevator pitch.
Arrow’s Innovation Group Lead, Shaun Walker, counsels, “It’s called an ‘elevator’ pitch for a reason: Elevators are a small confined space where you spend a few moments of time before moving on to your ultimate destination. In five minutes or less you should be able to explain not just your idea but also the market size, distribution model, growth strategy and return on investment. Focus on the presentation rather than the details.”
Unlike science projects where end goals may only go as far as discovery results or proven theories, an intelligent business idea worth investing in should have financial revenue as the goal.Invite people into the excitement of your journey, but remember that in order to reach your destination you must keep your end goal in mind and never steer from that.