Five Tips from Dragon’s Den and Shark Tank on How to Successfully Pitch Your Startup to Investors

Entrepreneurs take risks to solve problems that people have, and frankly problems they don’t know they have.

Although lack of money is not always the reason why most entrepreneurs fail to start or grow a business, money is undoubtedly what most founders seek when they start their businesses.

Dragon’s Den and Shark Tank are primarily about giving entrepreneurs money. 

They are reality TV shows where entrepreneurs pitch their businesses to a panel of rich investors or angels for money. In return, these investors become shareholders in the businesses. The 16th season of Dragon’s Den is currently airing while Shark Tank is in its 10th season.

Whether you’re an aspiring business owner or an established one, you can learn a lot about pitching from these shows. So, before you embark on that roadshow to wow potential investors about your “revolutionary” product or service, be mindful of the following five tips I’ve gleaned from watching many episodes of the shows:

1.      Know the Difference Between Incubators and Accelerators

If you’ve never sold your product or service in the marketplace, then investors like those on Dragon’s Den or Shark Tank are not for you. This is because they’re “accelerators”.

Accelerators are individual or institutional investors who fund businesses that already have some sales in the market place and now want to scale (grow fast) or expand into a new market.

Therefore, while there may be overlaps in what incubators and accelerators do, the latter typically do not fund startups seed capital.

If you’re looking for seed capital, then pitching to these guys – if you can even get in front of them - could be a waste of time. Most venture capital and private equity firms are accelerators. Probably the most famous accelerator in the world is your good old commercial bank.

For startup funding, you’re better off trying “incubators”. Unlike accelerators, incubators typically fund startups - and generally businesses who don’t yet have a trading record. They can even fund you if all you have is a good great idea, provided your idea is “bankable”, which means the idea can turned into a real business – not all great ideas are bankable!

The most popular incubator in the world is “family and friends”! 

Then you have institutional incubators like Kickstarter. Angels can also be incubators, but these are rare and may want your arm and a leg for the risk.

The bottom line is that if you can’t fund your startup yourself, then seek your seed capital from incubators and only go after accelerators when your business is about to scale.

2.      Demos and Samples Always Help Your Pitch

I’ve never seen anyone pitch on Dragon’s Den or Shark Tank without a sample of the product or a demo or the service.

Naturally, no accelerator will entertain your pitch or presentation without these supporting items.

Conversely, incubators may not be as strict on this front. Nonetheless, it’s still a good idea to pitch them with samples and demos because they will give you feedback that you can use to improve your product or service before you approach accelerators.

3.      Know Your Numbers

You won’t last in business if you don’t know certain financial metrics (or Key Performance Indicators, KPIs) about your business. These basic KPIs, which you’ll find on a typical financial statement, include things like sales, gross profit/margin, and net profit/margin.

However, an investor could also ask you about some not-so-commonly known KPIs. 

Some of the ones that have stumped many entrepreneurs on Dragon’s Den and Shark Tank are Operating Profit/Margin, CustomerAcquisition Cost, and Lifetime Value of Customer.

You just never know what an investor could ask you, especially if you’ve been in business for a while. Therefore, it pays to know and track more than the usual KPIs. Tracking is crucial not only for pitching, but also because you cannot improve what you don’t track.

4.      Do Not Give Away the Farm (Dish Your Equity Wisely)

Businesses fund their growth with debt or equity.

Unfortunately, startups hardly get debt financing/loans from anywhere or anyone who’s not “family and friends”. So, when you’re starting your business and can’t solely fund it, you’ll probably have to bring others on board as equity investors.

It is at this early stage that you’ll be most tempted to give away a lot of equity to entice investors. Be careful though and think ahead.

As your business grows beyond the funding capability of you and people close to you, you’ll need more “outside” money to fund this growth. Much of this external fundraising will require you to give up more and more equity. 

If you’ve given away too much equity at the early stages, then you can’t fund your growth down the line with equity, which is often cheaper and/or less restrictive than debt financing.

5.      Be Realistic About How You Value Your Business

A business with a trading record can be valued with one of various valuation methods out there like discounted cash flow (DCF).

Conversely, valuing a startup with little or no trading record is tricky business. Therefore, founders and investors are often degrees apart on how much a business is worth. Inevitably, most entrepreneurs place a higher value on their businesses than investors do.

Some founders value their startups by simply placing a multiple on projected (future) revenues or cashflows, which means they say their business today is worth some number times predicted total revenues/sales. It’s a highly subjective and unrealistic way to value a business with little or no historical sales.

When founders like the woman in this video below do this on Dragon’s Den and Shark Tank the investors quickly rip them to shreds.

You’ll probably get a more realistic value of your startup when you get your first outside professional investment - from an angel or venture capital. Until then, you should focus less on how much your business is worth and focus more on doing everything you can to make your business attractive to investors, whether incubators or accelerators.

  

MEMO to NIGERIAN BANKS: YOU MIGHT AS WELL CALL IT GUARANTOR, INSTEAD OF REFEREE

Most foreigners will not believe I even had this problem while most Nigerians will not believe I couldn’t solve it. Well, here’s my story.

This June I applied for a current account at FCMB. The marketer who attended to me was very helpful and I was able to get an account number at the end of the meeting. Still, I had to get two references to complete the opening process.

Now, getting references to open a bank account wasn’t new to me. I did the same when I opened a savings account at First Bank a couple of years ago. Though, being a returnee, I found it weird then that a bank would ask for references to open an ordinary savings account - at the time I thought it was because I was new in the country.

Anyway, I was so sure I’d get the references for the current account within days. Oh, how wrong I was.

See, I wanted to open what FCMB called a “classic” current account, meaning a regular current account that’s not a salary or corporate account. That’s when my problem started.

For two months I searched and searched for someone with a regular current account. No luck. Shocking as it may sound, I actually didn’t know anyone who had such an account; they all had either a salary or corporate account.

Turns out many Nigerians actually have this problem of getting bank references, which typically has to be from "someone who knows you well”. And what most people do to solve the problem is to cajole strangers into giving these references. I wasn’t comfortable with doing that.

Finally, late last month I got tired of the whole search and closed the premature account. FCMB asked if I wanted to open a savings account instead but I declined. I don’t know if that would have sidestepped references but I didn’t bother to ask. Saving is for losers anyway.

So I’ve been wondering. If people now get strangers to give these references, why do banks still ask for them when it’s not a loan or credit line you’re after? Is it some anachronistic KYC (Know Your Customer) mandate from the Central Bank?

Are the references proxy for a credit reference like the one a consumer credit agency like Equifax would have provided? If so, why can’t the banks get together and set up a credit agency? If they can collectively establish a payments processor like Interswitch, I don’t see why they can’t establish a consumer credit agency.

Or, is it the typical herd mentality of Nigerian banks to do what competitors are doing rather than innovate?

All told, I’ve never heard of any bank prosecute a referee for fraud committed by an account holder they recommended. If this had happened I’m pretty sure it would have made headline news and no one would ever give a reference again.

So Nigerian banks should stop making it difficult for people to open accounts, especially since this contradicts the whole cashless economy spirit. And I’m talking about “real” accounts like savings and current accounts, not all these mobile money accounts that don’t work when you need them the most.  

UNEMPLOYMENT RATE or PAYROLL: WHICH IS A BETTER GAUGE of the JOBS MARKET?

Last week, the U.S. Fed released its monthly statement on monetary policy (http://www.federalreserve.gov/newsevents/press/monetary/20140319a.htm) in Washington, D.C. Often released the day after the Federal Open Market Committee (FOMC) meeting on interest rates, the statement created some confusion in the market about whether the Fed will henceforth consider the unemployment rate in setting interest rates.

Every first Friday of the month, the U.S. Department of Labor releases data on the health of the labor market. This data includes the unemployment rate and payrolls, i.e., the number of jobs employers created.

Soon after the Fed statement release and the following press conference it was in the business media that the Fed will no longer consider the unemployment rate when setting interest rates (http://finance.fortune.cnn.com/2014/03/19/fed-unemployment-rate/). Although i didn't listen to the press conference, I read and reread the statement and, honestly, i didn't see anything like a ditching of the unemployment rate in that statement. However, I'm not well-versed in Fed Speak, so i may be lost in translation.

Nonetheless, if it is true that the Fed will now give the unemployment rate the cold shoulder, then this is a welcome development. Other countries may do it differently but the U.S. Department of Labor uses a household survey to determine the unemployment rate.

This is an unreliable way to gauge the true health of a labor market.

For instance, if someone is not working but this person is for whatever reason not looking for a job, will the survey say this person is unemployed? I don't know if it does but it will be wrong to do so, because a household survey can't truly capture the willingness to work. Besides, people tend to lie a lot on surveys, especially when it's not face-to-face.

A more reliable metric to gauge the health of the jobs market is the non-farm payrolls, which is the number of people employers actually hired.

My Suggestion

If the Department of Labor really like surveys and insist on using one for the unemployment rate, then i suggest they survey employers for the number of employees they have and express this aggregate as a percentage of the overall working-age population. This will give an employment rate, and one minus this figure is the unemployment rate.

What do you think of my suggestion?

7 Ways To Get Rich Fast In Abuja

I'm a Lagos boy through and through.
 
However, since 1991 I've been visiting Abuja, the administrative capital of Nigeria. I wouldn't have been visiting the city so much if my mother weren't a retired civil servant there.
 
Quite frankly, I feel unless you're a civil servant or you're dead, Abuja has little to offer you. The place is full of administrative buildings and very nice places to bury the dead.
 
Anyway, I've dug deep and uncovered the "little more" Abuja offers.
 
If you've got the itch or hots for Abuja, then here's a list of seven "businesses" that could add more zeros to your bank balance:
 
1. MONEY LAUNDERING
 
Seriously? Yup, as serious as a heart attack.
 
President Jonathan once quipped that in Nigeria, "the money is generated in Port Harcourt, shared in Abuja, and spent in Lagos". What he means is that the monthly federal allocation to the three tiers of government, which has made beggars of Nigeria's state governors, is dished in Abuja.
 
If you're good with moving looted funds around the world, then relocate to base camp in Abuja. You will be handsomely rewarded for your expertise, even if you're busted.
 
2. REAL ESTATE DEVELOPMENT
 
Hotels, housing estates, government buildings. You name it. In Abuja it's like everything is under construction except prisons, many more of which Nigeria arguably needs.
 
The more connected you are as a developer the bigger the contracts you'll get.
 
3. POLITICAL LOBBYING
 
Wherever you find a carcass you'll find a vulture feeding on it. So it is with politicians and lobbyists.
 
The number of politicians from all levels of government assembled in Abuja at any given time is huge. These people are rich pickings for astute lobbyists.
 
If you've got excellent persuasion skills, then you could make a killing getting paid to persuade politicians, especially legislators, to do things favorable to whoever employed you to lobby.
 
4. PIMPING
 
Abuja has a reputation of a city flush with cash, so of course the "world's oldest profession" flourishes here. 
 
It's hard to separate money and sex.
 
Now, if you've got good organizational skills, you could get into events organizing in Abuja. However, from many indications, you could make more money faster by organizing hookers for legislators and top civil servants looking for a bit of home away from home.
 
5. CABING
 
I've heard people say that the way Abuja is built is not what the original design master plan called for. I've not seen the master plan but the set-up of the city is dumb.
 
You've got a central area of four high-affluence districts, where the minority rich live, totally surrounded by low-affluence districts where most of the city's workers live. It's like a gated community totally bounded by ghettos.
 
Anyway, the municipal authorities recently banned danfos from plying the central area. Naturally, this has been a boon for organized taxi cabs within the area as taxi fares have risen.
 
However, if you've got a car or a fleet of cars, you could get into private cabing (kabukabu) within the central area or between the central area and the outer districts. Demand for taxi is high during the peak periods - when the so-called "el-rufai" big buses are scarce or unavailable.
 
6. LAWYERS
 
Obviously, lawyers are needed everywhere. However, the administrative nature of Abuja has created huge opportunities for lawyers interested in government-related work churned by the myriad of ministries, departments, and agencies that dot the city.
 
Furthermore, wherever politicians and civil servants abound in Nigeria, sleaze festers. Therefore, you could make a killing getting these people out of trouble. Or even getting them into trouble. 

Afterall, there is a saying that if you want to create a problem where there's none, just get a lawyer involved.
 
7. DRINKING JOINTS
 
No, I don't mean clubs and bars - there are plenty of these in the central districts. I mean the low-key, indiscreet joints found mostly in the outer districts.
 
Often tucked away in villages with relatively cheaper real estate, these joints look dry during the day but come alive at night. One time I spent a whole day with an uncle who lives in Kuje just hopping from one joint to another - and I don't even drink.
 
These joints are places where most of Abuja's workers relax and mingle. And don't think drinks are the only pleasure (or leisure) you get at these places.
 
If you can buy or lease land in these outer districts, then a drinking joint could get you rich faster than a residential block.
 
So there you have it. Abuja has not grown on me. But if you're ready to call it home, at least now you know how to hustle in the Rock City.

CONFORMITY: WANTED FOR THE MURDER OF BUSINESS CREATIVITY IN NIGERIA

The most powerful religious leader in Nigeria is "conformity".

Dictionary.com defines conformity as "action in accord with prevailing social standards, attitudes, practices, etc."

In Nigeria today, you dare not start or close a public meeting without prayers; you're probably going to hell if you don't attend church on New Year's Eve; and something must be wrong with you if you don't believe "only" God can save Nigeria.

Even your social credibility and acceptability is widely accepted to be directly proportional to the extent of your involvement in church or mosque activities.

It's like on religious matters Nigerians won't think or act different from the next man, in order to not be labeled an outcast.

This group-think seems to also permeate the business arena. What got me thinking about this conformity in business thinking are some comments and reactions to a new business i just started on the "dream big and start small" tip.

ChinChin is one of the most popular pastry snacks in Nigeria. Early last month i got a brainwave to make a healthier and more nourishing type of ChinChin by using whole wheat flour instead of the usual white flour, honey instead of white sugar, and changing other ingredients.

Using three test batches, we sampled the public for opinions on the look, texture, taste, and price of the new product. I must admit that people were generally receptive to the product and a majority of the feedback were positive.

However, the most negative comments bothered me somewhat, because they were not even about any of the things we sampled. Instead, the naysayers essentially questioned why we bothered to make a new kind of ChinChin.

Were they just trying to say that people won't buy the product? I don't think so, because that's not what we asked them. In any case, how will we know that people won't buy it unless we make it?

There's no doubt that Nigerians are entrepreneurial. However, entrepreneurship and creativity are not the same thing. When you come up with a new idea (creativity), you are not entrepreneurial until you turn the idea into a service or product.

What I'm saying is that while Nigerians embrace entrepreneurship they seem to abhor creativity. Invention and innovation are the two creative processes, and we don't invent while we hardly innovate.

I don't know why we are not as creative as we are entrepreneurial, but i suspect two conformist tendencies have something to do with it.

The first tendency is the fear of failure. To most Nigerians failure is like a body odor everyone reminds you of so we are very scared to fail.

The second tendency is a hostility to locally manufactured products. I really don't understand the pervasive mentality that imported goods are always superior to indigenous alternatives. Many goods imported into Nigeria are actually nothing but sub-standard knockoffs and rejects.

So is conformity killing business creativity in Nigeria? Well, if it's not conformity then something is definitely stifling creativity. Since conformity has all but destroyed independent religious thinking in Nigeria, i suspect it's also the culprit in the murder of creativity.

Therefore, I hope Nigerians will embrace and encourage the creatives amongst us more.  We must stop this tendency to conform in thought and action like sheep in a flock.

Conformity only breeds mediocrity.

5 PRACTICAL SIGNS YOU'RE NOT READY TO BE RICH

Let's get straight to it.

1. YOU'RE NOT FRUGAL: For instance, do you still want to go to business school when your family already runs a successful business? For what?

This indicates you don't have the mentality of frugality. And you can't be rich unless you're frugal.

2. YOU DON'T TAKE RISKS: Ever heard of anyone become a multimillionaire doing just a 9-to-5? Me neither.

Now, before you shoot me, not all risk takers become rich. But you'll never become one unless you take risks. Sorry.

The corollary to this sign is when you're afraid to fail.

3. YOU CONFORM: If you always want to fit in or be like everybody else, forget it. You'll never be rich. Ask Richard Branson. Or Mike Adenuga.

4. YOU DON'T READ: I've never come across any wealthy individual who hasn't stressed the importance of reading to creating wealth.

Jim Rohn, famous American author and motivational speaker, famously quipped that "Poor people have big TVs. Rich people have big libraries". Nuff said.

5. YOU'VE NEVER THOUGHT OF TURNING YOUR HOBBY OR PASSION INTO A BUSINESS: What do Oprah Winfrey (speaking), Arianna Huffington (blogging), and Oswald Boateng (tailoring) have in common?

Yup, you guessed it. They all turned their hobbies into multimillion dollar businesses.So what are YOU waiting for?

There you have the five signs.

So have i missed any other signs?

MY EXPERIENCE SO FAR WITH MOBILE MONEY IN NIGERIA

Disclosure: No organization has either endorsed or paid me for anything said in this article.

Unlike Kenya, Nigeria is just coming of age in Mobile Money. Mobile Money was really started in Africa for the rural dweller and the urban "unbanked".

Nonetheless, as an "urban banked" in Nigeria, here are the reasons i got into Mobile Money:

1. MOBILE TRANSACTIONS: I increasingly want to do my banking transactions without using an ATM or setting foot in a banking hall - except to complain or abuse.

2. EMERGENCY USE: Sometimes i cannot find a GSM recharge card vendor when i really need one.

3. CHANGE PALAVA: I'm tired of the "no change" palava with recharge card vendors.


MOBILE TRANSACTIONS

Three months ago i signed up for FirstBank's "@FirstMonie" Mobile Money Service because i already banked with FirstBank. However, you don't have to be a bank's existing customer to have a mobile money account there.

My first goal was to link my existing FirstBank savings account with my new mobile money account. This way i could transfer funds between both accounts using my android.

Since FirstBank is always tweeting that "to link your FirstBank account with your FirstMonie account just visit your nearest FirstBank branch", i thought linking the accounts would be a slam dunk. Oh, how wrong i was.

Contrary to FirstBank's claim, my "nearest" branch didn't have any mandate forms to link accounts. In fact, one of the branches i visited had no idea i could link the accounts.

Eventually, FirstBank linked the accounts a month after i filled the first of three mandate forms at three branches. Since linking my accounts, I've successfully transferred funds between them once using the FirstMonie moblie app.

Since FirstBank was still rolling out FirstMonie when i signed up i put the frustrating start behind me and focused on the other reasons i got into mobile money.

EMERGENCY USE

While you can use the mobile money account to do many things, I use mine primarily to buy GSM recharge cards.

You see, GSM recharge card vendors seem ubiquitous in Nigeria. Yet sometimes you can't find or get to one - like late at night or when you can't go out in the rain.

Unfortunately, FirstMonie has been a huge disappointment during emergencies.

Whenever it rains in Nigeria everything goes down...power supply, ATMs, GSM networks. Therefore, I'm not suprised that FirstMonie's USSD code channel or the mobile app has never worked when it's raining.

How about during "normal times" - no rain, no labor strikes, weekdays, etc.?

Well, since the USSD channel tends to be out of service a lot, I thought the app would be a more reliable alternative access channel during normal times. However, this hasn't been the case. Both channels have often had accessibility issues concurrently.

To lessen my dependability on FirstMonie, i opened another mobile money account with @StanbicIBTC. So far, Stanbic's app has been more reliable than FirstMonie's.

All told though, for me mobile money hasn't been that reliable for emergency use.

CHANGE PALAVA

The most annoying phrase in Nigerian retail is "no change". I feel so incensed whenever i really need a recharge card and the vendor says no change.

Fortunately, there's no such problem with mobile money. Starting at N100 you can purchase any amount of recharge you want and don't have to worry about lack of change.