In a conference room at the Society for Contemporary Crafts in the Strip District, Thome Matisz goes through a carefully prepared pitch designed to interest potential investors in his company. Hes armed with a video presentation, photographs and a booklet that describes his company, Solotec Inc., and the investment opportunity that he is offering.
Matisz is hoping to land $500,000 in capital from investors who have a genuine interest in seeing his company grow. Solotecs product is a snowplow for use on cars, vans, light trucks and sport utility vehicles. In the five years since he started the company, Matisz has come to the conclusion that direct mail and e-commerce are the prime venues for marketing the product, and that the Mountain States are the primary market. To do it, though, hes going to need outside investors who believe in his product. And that means putting together a convincing sales pitch.
This run-through is a test flight in front of noninvestors who will provide Matisz with feedback to work the bugs out of the presentation.
My creation of this was pretty much what Id seen other entrepreneurs had done, Matisz says. Among those Matisz tapped for help is Jeff Pepper, chairman of ServiceWare Inc., of Oakmont, himself a veteran of successful capital raising for his company.
Matisz will be making his pitch on a road show this summer that will put him in front of potential investors across the country. He has identified what kind of investment hes looking for, how he plans to use the money and what hes willing to give up in terms of control of his company.
At some point, most entrepreneurs, unless they are independently wealthy, will have to raise capital, either through bank loans or from private investors, to move their ventures to the next level. Most, like Matisz, will find themselves looking to private investors to provide the necessary financing, at least in the early stages.
Approaching private investors requires painstaking preparation, patience and persistence. And despite the perception that money is hard to find, at least one individual in the local economic development community says there is plenty of cash to be had if you are well-prepared, know where to look and stick to it.
If youre willing to go out three, four or 25 times, the moneys there, says Douglas Goodall, president of Innovation Works, the entity formed through the combining of the nonprofit Enterprise Corp. of Pittsburgh and the state-funded Ben Franklin Technology Center. Theres a flaw in your plan if youre not getting the money.
Alvin Catz, president and CEO of the Western Pennsylvania Adventure Capital Fund, advises entrepreneurs to first tap friendly sources of capital, that is, friends and family. They are the most likely to know you and have confidence in your abilities. Ron Sofranko, founder and chairman of Red River Barbeque, used his personal savings, credit cards and a mortgage on his parents home to get him started in his first restaurant in 1987. Red River is now a $12 million company, with six restaurants in Pennsylvania and the Washington, D.C., area.
John Manzetti, a consultant who helped Matisz put together the financials for his presentation, says the numbers are what ultimately sell most ventures, which is why they must be reasonable ones you can back up. Most of the questions investors ask tend to revolve around the financials, he says, so if the numbers arent convincing, investors lose interest quickly.
Catz tells entrepreneurs to acknowledge the risks in your venture, tell how you plan to penetrate the market and describe the competition.
Dont say theres no competition, says Catz.
He also suggests that companies assemble a strong management team and board of directors.
Solotecs presentation describes the competition commercial snow removal services, snow blowers and snow shovels and tells how the company will focus on a geographic region and use direct mail and the Internet as the primary marketing channels, based on its experience with other types of advertising and marketing tactics. It also includes a description of the companys management team and advisory board members.
When looking for investment beyond the friendly sources, Catz suggests entrepreneurs identify a champion who will pull other investors along. Investors, he says, are followers.
Everyone wants to be the second investor, says Catz. He advises entrepreneurs to prepare carefully for each meeting, talk in laymans terms and make the case for the idea in the first five minutes. If the concept cant be explained in that amount of time, its too complex.
Sofranko advises entrepreneurs to learn as much as they can about potential investors and make sure theres chemistry between the parties. For example, one of his investors, an older gentleman, expects Sofranko to wear a conservative suit, a white shirt and a red tie when he meets with him.
And make sure youre comfortable with the investor.
Youre going to be married to that investor until an exit, Sofranko warns.
Sofranko advises entrepreneurs not to give up too much of the company to investors.
If youre the valuable asset, the person behind the machine, they want you, he says. If you give up too much control, your motivation may sag.
I think the proper amount to keep an entrepreneur hungry is about 20 percent, says Sofranko.
Matisz says he is unwilling to give up much control, although he holds out the possibility of adding a seat to Solotecs board to include an investor.
At the end of his presentation, Matisz asks for written comments, requesting that participants fill out a short form which asks what they thought of the presentation and how it might be improved. After reviewing the remarks, he decides it needs refinement and at least one more dry run. Ultimately, his willingness to continue to plug away to make his product a success and his unflagging belief in it may be the most important ingredients in his presentation.
Demonstrate your passion, says Sofranko. They dont want a quitter. For additional information on raising capital, contact the Enterprise Corp.s Web site at www.enterprise.org.