Pitching to investors can sometimes seem like a scary task. There they are, apparently very successful and often quite enigmatic. Not only do you have to show that your idea is worth an investment but you need to prove that you’re ready to handle that challenge. This pressure of having to prove yourself can often diminish qualities that normally shine through naturally resulting in an absolute flop in your pitch to investors.
Following these guidelines will help you deal with investors professionally and increase the odds of success in your pitch.
Always start your pitch to investors with a compelling story. Never jump into technical or financial details at the beginning of your pitch to investors. The idea is that you immediately want to engage your audience. Try relating your story directly to the investors and put them behind the dashboard of your marketplace solution. If you can make investors realize the gap or the frustration and show them how your solution fixes things, you are on the right track.
You must be able to explain to investors what is unique about your business in layman terms. As much as possible, try not to use buzzwords unless your investors are very familiar with your industry. Your value proposition should be short, memorable, and easy for the investors you’re talking with to share with others.
Investors (especially in these modern times!) aren’t keen on business plan entrepreneurs. It will never be enough for investors that you’ve simply built a prototype and written an executive summary. Earn some credibility for your entrepreneurial abilities by demonstrating what you’ve done independently. If your bootstrapping capabilities combine with feasible traction, investors are more likely to be persuaded that you’re a good investment opportunity. Impress the investors with what you and your team have accomplished to date (marketing stats, key hires, product launches, etc.).
Investors will perceive you as an insufferable time-waster if you say that everyone in the world is potentially your market (even if it may one day be true). Be realistic about who you’re initially building your product for, showing that you’ve carefully carved out your market. This will not only win points with investors, but it will help you think more strategically about customer acquisition. In general, doing everything to understand all aspects of the industry you are in will make conveying the message to investors that much easier.
You must be able to communicate your value proposition over your competitors’. One of the biggest mistakes is for entrepreneurs to tell investors, “We really don’t have any competition.” All this tells investors is that you haven’t done your research thoroughly. If you’re venture is so advanced and innovative, even if it doesn’t have a marketplace counterpart it has competition in the form of traditional ways of doing things. More philosophically, even if you’ve discovered the philosopher’s stone some people still want to find natural gold. Ideally, you have to show investors where your competitors are lacking in key areas and thus your competitive advantage.
How will you make money? This is the piece of information investors tend to care about the most. Make sure you’re specific about how you break down your pricing schemes and demonstrate with emphasis how your market is ready to pay and anxiously awaiting your arrival.
Show a detailed projection of revenue (per product) over the next three to five years. It’s imperative that you back-up your numbers by sharing your important assumptions. In fact it’s a good idea to show investors at least 2 versions of your projections: (1) a standard projection, and (2) a worst-case scenario projection. If your worst-case scenario can illustrates feasibility, investors will see that you’ve made prudent calculations and know the nature of the territory you are stepping into. Experts argue that your financial chart is better off showing a worst-case scenario than showing “hockey-stick growth”. However, if this is truly the case for your venture, preempt any discomfort and doubt by thoroughly explaining what happens to cause those inflection points.
In our interview with Richard Reed he continuously emphasized how important the team was. Investors invest in people first and ideas second, so be sure to share details about your rock star team and why they are the right people to lead your venture into success. Don’t be shy about talking about the skill-sets you may be missing on your team. Often new companies’ teams are missing key talent. Let investors know that you’re savvy enough to be aware of what your weaknesses are. The team is extremely important and Charlie Mullins, who became a millionaire plumber, says that a good team should show enthusiasm.
Finally, you must be at the top of your game when it comes to spelling out to investors how much money has already been invested in your company, by whom, ownership percentages, and how much more you need to go to the next level (be clear about what level that is). What kind of investment are you seeking? Remind investors why your management team is capable of managing their investment for growth. This is the level of detail you want to include: how much you need, why you need the money, what it will be used for, and the intended outcome.
It’s infinitely important to know how to pitch to investors. Even with the rapid growth of alternative finance, whenever you find yourself in a fundraising situation you are pitching to investors of some sort. It’s always good to learn the ropes and how to express various aspects of the business you are in. Do you have any more tips on how to pitch to investors? Please let us know in the comments are send us a tweet at @bizfundingshow.
Entrepreneurs, investors and other finance providers are coming together at Business Funding Show ’16 to bilaterally learn the most important elements for business funding. If you want to become a veteran at business funding to better navigate the financial situations your business may find itself in, sign up now!
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