Are You Investor Ready?

1885 BenzPitching a business idea to potential investors takes a lot of work. Content needs to be prepped, pitches rehearsed and questions anticipated.

But, when all is said and done, is it proposal investor ready? Are the investors product ready?

To illustrate the point, imagine Karl Benz, inventor of the car, before a panel of Venture Capitalists and Angels to invest in his “horseless carriage.”

It’s Germany, 1885. Now picture investors like those on Dragons’ Den or Shark Tank with all their trade-mark skepticism and snark.

While the dialog is invented, all the facts about Benz’s car in 1885 are true. They can be found here and here.

“Hi, I’m Karl. I’m an engineer with a small company and I’m here to ask for investment for an automobile called the Benz Patent Motorwagen.”

Benz then pulls off a large black cloth to unveil his invention to the investors. They all walk over to inspect the contraption more closely before sitting back down to ask questions.

Investor 1: “It looks like a bicycle with an extra wheel. Is it safe? I can see something like this flipping over at speed.” Robin Reliant flipping over

Benz: “I don’t think it would ever go that fast.”

Investor 2: “What do you mean? How fast does it go?”

Benz: “I estimate a little under 13 km per hour (8mph).”

“The same speed as a horse trotting! And a galloping horse would pass it by. How does it do on hills?”

“Yes, it would go slower on hills.”

“Steep hills?”

“It would slow down depending on the pitch.”

“How about a moderately steep hill like the one outside?”

“Eh, ah, putting more power in to the engine is something we will perfect in the next model.”

“But would it climb the hill?”

“Probably not.”

“Probably?!”

“No, it wouldn’t.”

At this stage, there would be close ups of the investors glancing at each other or throwing up their eyes. The program narrator would say things were going fine until Benz hit a bump in the road, or some similar pun. With mood music suggesting blood in the water, the questioning continues.

Investor: “What does it run on? I don’t see anywhere to store coal.”

“It uses gasoline which can be bought in any pharmacy.”

“Do you mean to say if I forget to buy fuel I cannot run this thing on weekends or in the evening? At least if I go somewhere right now, I can leave my horse outside to eat grass. I don’t have to worry about pharmacies being open.”

“This automobile represents a huge technological advance. As more are bought, an ecosystem will build up to support them.”

Amid scoffing, the next investor asks, “Is there no protection from the elements?”

“Not at the moment. But those on horse back are in the same situation.”

“And those in a carriage are out of the rain. Do you have any patents?”

“Not yet.”

“Well, people have been working on horseless carriages for years. Yours is expensive, it looks no different and you have no IP. Why should I invest?”

“This is patentable because it has the world’s first internal combustion engine.”

“But none at the moment?”

“No.”

Investor 1: “It looks difficult to control. In fact, I heard you crashed it during a public demonstration earlier this year. For that reason, I am out.”

Investor 2: “You have no IP. This could be copied by anyone. For that reason, I am out.”

Investor 3: “What happens if it breaks down while I am driving far away? My blacksmith or stable hand won’t be able to fix it. For that reason, I am out.”

Investor 4: “You already hold a number of patents? How many do you think you could sell?”

Benz: “Yes, perhaps 25 over the next six or seven years.”

Investor 4: “That’s all? I don’t think I would get a return on my money on those kinds of sales. I’m out.”

Benz went on to patent his automobile in 1886, and sold 25 units between then and 1893. He also licensed out production to a firm in France. In 1893, he built the four-wheeled Velo and sold 85 in that year alone.

Next time, I’ll look at some dubious ideas that came to market and made people a lot of money.

Image of Robin Reliant is a BBC publicity shot. Image of 1885 Benz courtesy of Wikimedia Commons.

 

 

 

 

 

 

One thought on “Are You Investor Ready?

  1. Pingback: John P. Muldoon » If Good Ideas Fail, Do Bad Ideas Succeed? In a Word, Yes

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