SMALL BUSINESS WEEK
Q&A: Mark Skapinker on finding an investor and perfecting your pitch
Last Updated: Friday, October 23, 2009 | 8:16 AM ET
Have a brilliant business plan but hungry for some seed money? Finding it difficult to punch up your product pitches and sharpen your business strategy? Many entrepreneurs in need of a little nurturing of this type have turned to venture capitalists or so-called incubators in a bid to build their business.
Finding the right "angel investor" has given many upstarts a defining edge. According to the Canadian Association of Business Incubators, the average survival rate of companies that are supported by a business incubator is greater than 80 per cent after five years.
Mark Skapinker is a co-founder and managing partner of the software development company and incubator Brightspark. "In this market, there are quite a few different models of business incubators," says Mark Skapinker, co-founder and managing partner of the software development company and incubator Brightspark. "They range from seed venture capital funds that supply dollars and lots of advice and direction; to [just] offering some money, with few services; to hosting you completely with full services; to incorporating your ideas into a larger business as a division."
There has been a definite shift away from full-service incubators, with most incubators today allowing entrepreneurs greater independence, Skapinker said in an email interview. Entrepreneurs seeking support in today's economic climate will face fierce competition for limited resources, he said.
"Right now (especially in Canada), there are … very few sources of incubator help and seed financing," Skapinker said. "Remember that you are competing with others for the same resources. You may want to think very carefully about the timing of approaching an incubator."
Skapinker took our questions about the advantages and disadvantages of signing on with a business incubator, how you should prepare for a meeting with an investor and how you should determine whether such an arrangement is right for you.
Question & Answer: Mark Skapinker
CBC: What should you have prepared before you approach a business incubator?
Mark Skapinker: Firstly, you should decide if this is the right time to approach an incubator. For example, I have met entrepreneurs who decided to first work in an existing entrepreneurial business to learn the business. Incubators and early-stage funders really like to invest in experience and known entities. So, you stand more chance of being noticed if you can gain experience and, especially, if you can prove yourself — it could be technical, sales [or] marketing experience.
'Suck up, but not too much! You need to talk about how much you want to work with the incubator, but don't sound fake.'—Mark Skapinker
Prepare your story. Remember, you are "selling a dream," so you need to be able to lay out that dream in a way that sets you apart from others.
Up front, make sure that you explain what you want to be in a simple, concise and understandable way. Many times, someone has pitched me, and it takes me so long to figure out what they want to do that I lose interest by that stage.
Make sure you (or your partners) are experts in what you are pitching. Second to experience, the seed VC [venture capitalist]/incubator will be looking for domain expertise. You can't go in and pitch why you are going to change the entire online travel industry if you have no expertise in online travel already. Show your credentials. If you don't have domain expertise, go and find a partner who does.
Try and show that you have thought this through. If you can show that you understand the existing market, your competition (or lack thereof) [and] the hurdles you need to overcome, you gain immediate credibility.
Don't plan to "boil the ocean." Show that you are realistic about resources, reach and what you can do. That is not to say that you should not be ambitious, but just show that you are realistic. Don't make wild claims. (If 10 people pay $100 each, imagine how successful we will be in the first year when 10 million people buy our product.) Show growth that can be managed.
Suck up but not too much! You need to talk about how much you want to work with the incubator, but don't sound fake. Lastly, remember that the business is all about people. Show that you are someone who the incubator would want to work with, someone who can be trusted, a team player and someone who would be fun to work with.
CBC: Can you talk about the give and take process of working with an incubator? What should an entrepreneur expect to give up? What should they expect to get?
Mark Skapinker: You are definitely giving something up by working with an incubator. Try and find out what this is as early as possible. At [the very] least, you are giving up equity for the investment and control. You need to know how much of each you are giving up and if it works for you.
Regarding equity, remember, you may need lots more money down the road, so you need to know that you will need to give up additional equity. Decide what you want to be: would you rather own more of a smaller business or less of a larger business? It is a race to try and achieve more with less money.
Regarding control, try and understand very carefully what the incubator/venture capitalist/angel investor is asking of you. What decisions can you make without them? How "in control" of your destiny will you be? Make sure there is a good balance between their needs to control their involvement and your vision of being an entrepreneur. For example: Your board — do you control decisions? This does depend on your incubator/partner, but understand their style before you finalize a deal. Do they typically get more or less involved in day-to-day operations? Do they typically let you change direction if you need to in your business? Do they typically become impatient if it all takes longer than anticipated? Do they demand that you use their services? Do they really have "value add" [aspects to offer]?
CBC: What common mistakes have you come across when approached by an entrepreneur hoping to be accepted?
Mark Skapinker: The biggest mistake is when an entrepreneur is not prepared —when it is obvious that they have not looked at their market, or they don't understand what hurdles they are facing, or it is obvious that they are in the wrong place. For example, don't approach an internet incubator about a clean-tech business. Other mistakes are entrepreneurs making claims that simply can't be supported, [such as,] "We are sure that our new internet business will put the cellphone companies out of business in two years." Arrogance is not necessarily what investors are looking for.
CBC: What types of companies are not well suited to being supported by a business incubator?
Mark Skapinker: There are experienced entrepreneurs or very independent individuals who don't work well in an incubator environment. (Bill Gates would probably have failed in an incubator.) Sometimes, entrepreneurs are focused, stubborn individuals who would be much better off going to traditional investors when they need capital.
I would suggest that, if all you are looking for is funding, don't go to an incubator. Incubators, by definition, add some level of service and advice component.
Have a question for Mark Skapinker about working with an incubator that wasn't covered in the interview you just read? Send it to email@example.com with "Question for Mark Skapinker" in the subject line. He'll be answering your questions during Small Business Week (Oct. 18-22) — check back here for answers.
Top News Headlines
- Obesity now recognized as a disease
- The American Medical Association has voted to recognize obesity as a disease, while doctors in Canada say they also treat it as such. more »
- B.C. First Nation sets fires to save bison
- A First Nation band is reviving the age-old practice of controlled burning in order to improve the health of forests and restore the population of the wood bison in a corner of northeastern B.C. more »
- 1 in 8 bird species threatened with extinction
- One in eight bird species worldwide faces the threat of extinction, according to a report released by Birdlife International. more »
- Canada buys rare War of 1812 collection for $573K
- The government of Canada was the winning bidder for a large collection of letters, maps and other papers that once belonged to Sir John Sherbrooke, the lieutenant-governor of Nova Scotia who conquered Maine for the British during the War of 1812. The collection sold for $573,000 at auction in London. more »
Latest Business Headlines
- Orascom withdraws bid for control of Wind Mobile
- Orascom Telecom Holding has announced it is pulling back its bid to buy out Wind Mobile Canada founder and CEO Anthony Lacavera and acquire full control of the company, in which it already holds a 65 per cent interest. more »
- Poloz urges 'stability and patience' in 1st public speech
- In his first public remarks since being named governor of the Bank of Canada, Stephen Poloz said the central bank will keep its focus trained squarely on keeping inflation in check. more »
- World's wealthy richer than ever
- The investable wealth of the world's richest people reached a record high of $46.2 trillion US in 2012, a report by RBC Wealth Management and the consulting firm Capgemini has found. more »
- Talking Keystone, Redford says Canada and U.S. share energy values
- Alberta Premier Alison Redford says the United States and Canada share political and environmental values and must work together to become energy independent of those who do not. more »
Lang & O'Leary Exchange
The data on this site is informational only and may be delayed; it is not intended as trading or investment advice and you should not rely on it as such.
- Sopranos star James Gandolfini dies in Italy
- Wearing a mask at a riot is now a crime
- Dozens of children seized from Manitoba Mennonite community
- B.C. teacher duct-taped students' mouths
- B.C. First Nation sets fires to save bison
- Obesity now recognized as a disease
- Richmond widow racks up $1,800 hospital parking bill
- Bob Rae quits as MP in 'very emotional' decision
- Hail, flash floods hit southeast Alberta