A common problem among startups when pitching is a poor understanding of their business model, according to Will Deane, managing director of Exto Partners.
Exto Partners is a diversified private investment firm based in Sydney and Deane sees about 20 pitches a month from startups seeking investment. The company has invested in Airtasker, Tuned Global and WhiteSky Labs. It typically invests in companies that are holding Series A fundraising rounds.
On October 9 and 10, Deane will be one of a number of speakers at the Australian Computer Society’s youth festival of ICT, YITCON 2014.
The conference will examine the importance of developing innovative skills for the future and the evolving nature of the ICT ecosystem.
Among those joining Deane at the conference will be futurist Ross Dawson, OrionVM founder Sheng Yeo and entrepreneur Naomi Henn.
Deane’s talk will examine some of the common mistakes he sees entrepreneurs making during pitches. Here are three ways Deane says startups can help make themselves more attractive to investors:
1. Build a great team
“You need people around you that are passionate believers in the opportunity, but also sensible and rational about their expectations of the growth aspect of the business. They should be open to collaboration and willing to work with investors.”
2. Have a validated customer need
“I think this is a key one, it is really critical. Has the startup really identified what the problem is, who the customer is, and are they getting traction with early adopters. Are they talking to customers, we love to see them getting involved with the customer.”
3. Understand the business model
“A lot of people get this wrong in startups. A lot of people don’t understand the business is not the product. I think there’s lots of really exciting ideas, and a lot of really exciting technologies being developed. But what we think is critical is the business model. Understanding what it takes to get from a great idea or a great technology, to a scalable and successful business. We’ve all seen the great hockey stick projection, and there’s nothing wrong with that as long as it comes with serious validation.
“Talk to investors early, and I mean sophisticated investors, who can really give some advice, not just around the product, but the business model. If you’re not clear about the business model, say we’ve got this great idea, help us. We spend a lot of time advising companies about ways of doing things in their business.
“They may come back a year or two later, or they may take off and find capital elsewhere, and we’re fine with that.”