Demonstrate the Value of your IoT Startup to Investors

Demonstrate the Value of your IoT Startup to Investors

At Startupbootcamp IoT | Connected Devices we’ve spent the last three months accelerating nine IoT and hardware startups, giving a group of entrepreneurs access to industry experts and mentors to help them validate, build and grow their business.

Last Wednesday this program culminated in ‘Demo Day’ – an event for our startups to showcase their work across a wide range of applications, from the smart home all the way through to Industrial IoT, to a room of over 300 investors and partners. No easy task.

In the preceding weeks to Demo Day we spent a lot of time working with our startups on how they could pitch their companies to investors as effectively as possible. What follows is some of the key lessons we shared (it’s worth noting that this advice went to startups looking for seed rounds of investment).

Show the problem

This should really be the easiest thing for you to demonstrate… Why does your startup exist? Any investor wants to know the specific problem you’re trying to solve, how many people face that problem, and exactly how you’re helping customers overcome this problem. Of course this can include figures on the market size or customer feedback, but don’t be scared to give a personal story here (if you have one!). You should always try to avoid buzzwords though. Investors quickly see through them and you if you cannot articulate your business clearly. Using declarative statements and avoiding exaggerative adverbs helps here.

Show the positioning

It’s important that any startup knows where they sit within the market and how their offering differs from their competitors. Today very few startups can boast a genuinely unique or original business idea so don’t try to inflate your proposition. Instead, show an investor that you understand where your market is going and how your startup fits within this. You’ll then be well placed to demonstrate your value over your competitors.

Show the traction

By this stage (assuming you’ve successfully achieved the above) you’d hope that an investor will find value in the problem and market your startup is addressing. Now they need to be excited by you and your execution. One of the best ways to do this is to show them traction.

At our Demo Day many of the startups were able to showcase updated versions of their IoT device thanks to feedback from beta testers, whilst others announced the launch of corporate partnerships and pilot programs. If you’re able to illustrate such quick and concrete progress it can do two things; firstly it can demonstrate product market fit, and secondly it can show an investor that you as an entrepreneur are worth investing it.

One of our startups ThingTrax share some of their customer feedback with investors at Demo Day.

Show the team

Yes, Mark Zuckerberg was a college student when he started Facebook, and yes, there are a number of great founders with very little previous experience, but in general most investors like to see that a team behind a startup has experience in their market or on growing a successful business.

If an investor can see a strongly balanced team with all the skills needed to deliver on the startup’s potential then they are far more likely to believe in the value of it. If you’re concerned about the lack of experience in your startup then look at how you can bring seasoned mentors on board for advice. This isn’t just about looking good to investors. Any good mentor should add a tremendous amount of value to your startup.

Show the plan

A number of startups will tell investors that they are looking to raise a certain amount of money in the next six months, without telling them what that money is for or without even being able to justify it. Addressing the former is simple: be sure to say that with the money you will be looking to hire a software developer, produce a first batch of devices or generate a sales pipeline etc. In the case of the latter you must know the breakdown of your ask and be able to back it up. Speak with a mentor beforehand and roleplay that conversation. Do they think it’s realistic? Have you planned for external factors such as product certification or increased supplier costs? Make sure they really grill you so that when you’re with an investor you’re 100% confident that you’ve done your financials correctly and that your forecasts work.

A word of caution

It goes without saying that you cannot make any of the above up. These are all areas that you need to work at within your startup well before you begin speaking with an investor.

Good luck!

Raph Crouan is the MD and founder of Startupbootcamp IoT | Connected Devices – a dedicated accelerator for startups looking to validate, build and grow their IoT and hardware company.

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Raph Crouan
jem.henderson@digicatapult.org.uk

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