Panel Write Up: Marketing to Investors
Team Rider Oasis: Kevin Bielawski, Aaron Mass, Andrew Rudzitis, Ping Gong, Jess Hamilton
We had the joy of mediating a great panel consisting of two people with a vast knowledge of the angel investing community, and an entrepreneur who is starting to seek out funding for her product. Nathan McDonald is a UW grad who is currently the CEO of Keiretsu Capital which has 315 investors throughout the northwest region and has facilitated $58 million in investment worldwide. Joshua Maher is the president of Seattle Angel which is a non-profit for educating angel investors and fund-seeking entrepreneurs, and he is finishing a book about angel investing. Stacia Pashe is the founder of itBandz which is a knee support system currently being marketed towards women. She has been working on developing the product for the past two years and is currently looking into seeking investment to finance an expansion of the company.
All three panelists were asked about how a new venture can seek its first $10K, and each gave the answer of seeking money from “friends, family, and fools.” Stacia also gave a caveat to this piece of advice, as she wanted to emphasize that you should only take money from those that can afford to lose it, and that you should try to seek expertise that comes with your first set of money.
When asked about the ideal pitch, Nathan explained that one should provide just the right amount of information to get people excited about the business and want to learn more. The company should emphasize their top three strengths, and the the business will eventually get to speak for itself during the due diligence process. Josh mentioned that he would want to know how fast the business is growing, what that means for margins and the number of units sold, when the next funding cycle is, and whether the investment will be able to fuel the next stage of growth for the business. Stacia explained that when she has pitched to retailers, she emphasizes the product and herself, but plans to pitch more of the financials and business plan when she pitches to investors.
Josh gave an excellent breakdown of the ways in which entrepreneurs and angel investors can connect. The most common methods are angel groups which facilitate interactions between startups giving pitches, then perform the due diligence and let investors choose which company to invest in. Accelerators and incubators have funding from angels and allow the angels to be heavily involved to get a sneak-peak of the company before choosing to fund more. There is also a growing secondary market which can allow an employee or investor to sell stock while the company is still private.
Stacia broke down the process she used for customer discovery and validation. She took sewing lessons to get the first product out, which enabled rapid prototyping and input from users for future iterations. She was able to sell products 10 at a time to small running stores. All of the initial input came from user feedback, and then doctors and PTs said that it mimicked the knee naturally. Upon hearing this, Josh and Nathan agreed that having the customer validation of a product is a great way to overcome what may be perceived as a lack of expertise of the founder who does not already have a product. If she had sought funding earlier, before the customer validation, angels may have been concerned that she was not a doctor and whether should could deliver on the product.
The conversation also went into pricing strategy where Stacia mentioned that she looked at what the customer is willing to pay, what can your manufacturing processes incur, and what is the competitive landscape, including peripheral products? Josh then mentioned that investors will go and talk to those same customers and ask the same questions. He has found companies who are charging 50% less than what customers would be willing to pay for the product.
When asked about crowdfunding sources, all three panelists agreed that it can be great for validation of a particular product, but may not indicate success for a business. Josh mentioned that successful businesses can have bad Kickstarter campaigns, and vice-versa. One piece of advice Nathan gave is that if a company can continue to build and deliver on crowdfunding campaigns, then the company may not need outside funding beyond the crowdfunding sources.