Have you been following our blog series on how to start a new Internet of Things (IoT) business?
The third explored financing, looking at how you can position your new business to be as attractive as possible to funding sources – read that blog here. And the fourth examined how to keep all this momentum going once your IoT start-up is more established – click here to read it.
Assuming you’ve successfully followed all that advice, there may come a point where you’re seeking investment to help your IoT business grow either further – and it’s how to pull such a pitch together that we’re exploring today.
Broadly speaking, compelling investment pitches should cover four key components:
This is all about explaining the space that your product or service proposition can fill. Who is your target customer? How many of them are there? Why will they be interested in your service or product, what will they be willing to pay for it, and how often will they need to purchase it? How will your product or service be brought to market in the first place – what is your distribution model? We’ll be asking you if you have a repeatable sales model and if other channels can sell it without substantial additional efforts.
In other words, this component of your pitch is all about taking a broad look at the marketplace, and telling an engaging story as to why there is a serious business opportunity is there.
What is the market or customer pain point you’re going to solve?
This stage is a part of point 1 but is so important I’ve pulled it out to emphasise. There’s no denying that solving a core problem for consumers is the basis of product success.
Every marketplace has its gaps or customer pain points. Any new entrant to a market will have to scour the market for existing gaps and attempt to fill them with their business. As marketplaces evolve, so do the shape and size of these gaps. New entrants need to be aware of where they exist, how it affects the consumer and how to resolve it with their business.
Collecting a list of pain points helps you understand what your prospects truly desire and therefore build a product that will be in demand. Referring to these same pain points later on in your promotion and advertising and in your one-to-one meetings with customers and prospective customers help them better relate to your offerings. It almost instantly builds rapport, which leads to a higher trust factor.
Successful companies don’t always have the best product, the biggest name, or the deepest pocket, or even the most loyal customers. Many times the business is successful because they do the best job in understanding and meaningfully addressing customers’ pain points.
We ask every company we talk to to list their prospect’s pain points. If you don’t have this information at your fingertips then go and find out the answers to these questions…
- What is the true source of pain?
- Who sees the most value in having that pain removed?
- Who will ultimately pay for a solution?
- Is there a substantive market that will benefit from your solution?
Product or service
Having established that there is a gap to fill, you need to explain how you can fill it – and fill it better than anyone else. What is unique or special about the product or service you are offering, or planning to offer? How does it compare to what is already on the market, and what are the risks in terms of competitors bringing out something similar?
This section should include nitty-gritty detail around pricing, as well as any intellectual property or patents you own – always compelling elements for investors who want to know that you’ve understood your competition.
Think, too, about how your product or service will work at scale – if you achieve the success you’re aiming at, and more, then how will you keep up with demand?
The people in your business is an oft-neglected element in investment pitches, but absolutely vital when convincing an individual or organisation to commit financially to supporting your success.
Businesses are as dependent on the individuals and teams behind them as on the product or service they offer. Why will you succeed? Why will your team succeed? Here, you need to run through all of the relevant experience and qualifications within your business, head off any tricky questions in regard to experience gaps or risk of key personnel leaving, and clearly demonstrate a track record within your organisation of exceptional people doing exceptional things.
Within each of these categories, it is vital to include as much relevant detail and as many tangible proof points as possible. Potential investors want to see that you are telling the full story, not leaving them to pick up on additional details. Additionally, they want to see that you are basing your goals and predictions on solid evidence. That evidence can be drawn from a wide range of sources: your existing financial records; external or personally commissioned market research; customer surveys and focus groups; and don’t forget the data that can be collected directly from IoT-enabled devices, allowing you to examine how your products are being used and how they are performing in situ.
It sounds like an obvious point, but it is crucial to remember that investors, above all, want confidence that your business is going to grow and that you have a clear and well-supported plan for their money. Generating this confidence isn’t just about having an exciting product or a pitch with personality; it’s about detailed data and intelligent analytics. Investment, after all, is a numbers game.