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Pitching Business Idea Within 3 Minutes 1.0 201005

Pitching Business Idea Within 3 Minutes 1.0 201005

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Published by Shridhar Lolla
You do not get more than 3 minutes to make an investor interested in your business idea. And if you are a new entrepreneur it would be vary difficult to precisely articulate your idea in such a short time. Therefore, you need a framework that can help you in jotting down your idea and connecting the dot to make a story that logically appeals not only to the investor but also convinces you and your team that you have thought through the idea very well. This document uses a business model framework to help start-ups in describing their business idea.
You do not get more than 3 minutes to make an investor interested in your business idea. And if you are a new entrepreneur it would be vary difficult to precisely articulate your idea in such a short time. Therefore, you need a framework that can help you in jotting down your idea and connecting the dot to make a story that logically appeals not only to the investor but also convinces you and your team that you have thought through the idea very well. This document uses a business model framework to help start-ups in describing their business idea.

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Published by: Shridhar Lolla on May 20, 2010
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11/18/2012

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Copyright © 2010, CVMark Consulting, All rights reserved
1
Pitching Business Idea within 3 minutes
Dr. Shridhar Lolla
lolla@cvmark.com CVMark Consulting
Keywords:
elevator pitch, business model, investor presentation, start ups, business idea, idea readout 
 
Investors demand that entrepreneurs pitch
business
idea in 2 to 3 minutes. While investors dohave a long queue of ideas waiting for their attention, they believe that precise articulation of the‘business’ idea is an indication of the rigorousness with which the idea has been developed.Within these 2-3 minutes an entrepreneur must present the most essential parts of the businessidea (without getting into details), that will invoke interest of the investor.Investors are primarily interested in understanding “the rationale of creating, delivering andcapturing value” in a business. And for them to be further interested in the venture, the value hasto be big enough. This ‘rationale’ is what Alex Osterwalder and his over 470 co-creators of book the ‘Business Model Generation’, call as
 Business Model 
. They have presented a tool that can beemployed to precisely describe business model and quickly win the interest of the investor for next level of discussion.Since business is a system that comprises interrelated building blocks, it is important that anentrepreneur is able to visualize the blueprint of the system and, while describing the businessidea, be able to interconnect these blocks and clearly articulate the logic of the business.The book proposes 9 building blocks comprising, [1]Customer Segment, [2]Value Proposition,[3]Channels, [4]Revenue, [5]Key Activities/Skills, [6] Key Resources, [7]Key Partners, [8]KeyCosts and [9]Customer Relationship.The process of describing business model starts with identification of precise key words thatdescribe building blocks of the business. Here is an illustration of the process for an ApparelBusiness. The keywords are entered into a template (called canvas) as shown in the below figure.
Figure: The Business Model Canvas of an innovative Apparel Business.
 
ValueProposition
A variety of designed garmentsavailable across theyear 
Channels
Access: Public mediaSales: ShowroomsDistribution: Warehouse
Revenue
Premium price round the year 
CustomerRelationship
Point of sales relshipBirthday discountPersonal mailers
Key Partners
Pool of DesignersShowroomsFabric suppliersTransporters
Key Resources
Skilled operators &managersFactory &WarehouseProcess: frequentreplenishment
Key Activities
DesignProductionStock management
Key Costs
Raw materialSalaryRent
 
Customer Segment
Smart Buyersdemanding latestfashionablegarments
123456789
 
Copyright © 2010, CVMark Consulting, All rights reserved
2
 Once the canvas is filled with key words, a ReadOut of the business model can be prepared bylogically connecting the keywords of the building blocks from [1] to [9]. Emphasis can be addedto relevant part of the ReadOut to highlight innovative elements of the Business Model.{Start}
IndoFreshGarments (IFG), offers ever availability of a large variety of garments [2] to smartbuyers [1], who aspire for latest designs.In order to ensure high availability at its show rooms, IFG has built a distribution capability toreplenish garments frequently. Overawed by a large variety of designs and sizes[2] available roundthe year, customers [1] willingly pay premium prices [4].In order to create the strong value proposition, IFG needs key skills [5] in garment design,production and stock management and therefore, it engages talented designers, skilled operators anddistribution specialists[6]; and has also made key investment in flexible and high speed machines[6].Further, in order to offer latest designs, it has built a huge library of alternative designs by out-sourcing[7] design work to creative Indian designers.On the cost side [8], its major expenses are in raw materials, salaries and rent.It uses traditional media to access its clients, however, recently, it has embarked upon a uniquecustomer relationship initiative [9] that makes its clients sticky, e.g. it offers special birthday discountsand engages customers in a personalized way.IFG’s innovation in distribution[3] and manufacturing system[6] of supply based on consumptiononly, keeps its inventory levels at less than ½ the industry standard and yet ensures highavailability[1] of garments. This also makes the end of season returns extremely low. Theseinnovations not only gives high growth to its sales and profitability year on year, it also increases itsresponsiveness to market to a remarkable level that no competitor could reach easily.
{end}After articulating the business model, a line verbalizing financial numbers and investment offer can be added, e.g. The business is projected to reach a revenue of around $100m with a profitability above 10% within 3 years and is inviting investment proposals of not less than $15million for a 26% stake.Such a description, exposes the investor to the essential elements of business in a logical way andhighlights the innovation and competitive edge built in the business. The logical connections between the elements also help the entrepreneur in foreseeing the effect of likely changes in business environment by identifying the sensitive elements and devising corrective strategy wellin time. By mapping the cause&effect of business (architecture and control system) well in their mind, the entrepreneurs will be able respond to the query of investor better (especially, whathappens if….. type of questions).Where can you get benefited by business model read-out:1.
 
Presentation in Business Plan Competition2.
 
Making Elevator Pitches to Investor 3.
 
Making yourself comfortable with articulation of your business idea4.
 
Sharing business idea within your team

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