A few issues ago I wrote about the importance of an elevator pitch and asked small business owners to imagine being in an elevator with Mark Cuban. Turns out that exercise in imagination may have been less fantasy and more in the realm of possibility now that Shark Tank is held Hampton Roads open casting in April. As much as this is a coup for Rivers Casino as the event host, it’s truly a credit to the quality of entrepreneurs in Hampton Roads.
Shark Tank provides great exposure to new businesses and has helped many folks get more familiar with the idea of early-stage investing, but what’s an entrepreneur to do if they missed the casting call? Thankfully Virginia has a robust investor ecosystem including our very own 757 Angels, which recently announced a new mega-partnership with Venture South to bring an even deeper pool of capital and expertise to Hampton Road entrepreneurs.
It is critically important to have a solid and unique business idea that can be clearly communicated to an investor. The Shark Tank application specifically asks for the businesses unique value/selling proposition (UVP) or “hook” and this is what an elevator pitch can convey. But wowing an investor goes a beyond having a standout product or service. Equally important is the business valuation.
Even celebrity Sharks do not give their money away for entertainment value or because it’s fun to support new businesses. They and other angel and venture capitalists invest only if and when it makes good business sense. Valuation can be tricky for early-stage businesses which may not have a robust revenue history, making factors like market size, credible market research, a realistic revenue model, pricing strategy and the ever important UVP crucial to rounding out the equation.
The reason valuation is so important is because it relates to the primary question of how much money a business is seeking and the percentage of the business, or equity, you the owner are willing to give in exchange for that investment. Angels are seeking a significant return on their investment and will walk away from otherwise interesting businesses if the valuation is too high, so price accordingly.
Another important piece of the equation is the team—even if that team is just one founder. As much as angels are investing in a product or service, they are also investing in you. They will want to know what special skills and experience you have, why you are the right person to run the business and who are the other members of your team, even if that team only includes advisors or mentors. Most of all, they want to know that you are coachable, amenable to constant change and willing to give up control for success.
Angel and equity investment is great option for some entrepreneurs, but it isn’t the only option to grow a business. To learn more about access to capital, from big pitches to bootstrapping, contact the Hampton Roads Small Business Development Center. In 2023, we served more than 800 small businesses with capital formation in excess of $25 million including 15 new business starts and over 100 jobs created.
To learn more visit: hrsbdc.org